BC Hydro

Demand forecasting: foolishness or falsehood?

BC Hydro sold less electricity to this province’s residential, commercial and industrial customers in 2018 than in 2005. The total of 50,472 gigawatt hours in 2018 was also a decline from 2017.

Despite buying less in 2018 than in 2005, consumers paid BC Hydro 85% more, an extra $2.2 billion.

BC Hydro’s sales records show a long-standing record of incorrect demand forecasts. Yet, the utility continues to spin mistruths to BC citizens. This statement — similar to claims made for years — was taken from a BC Hydro webpage on March 2, 2019:

One thing is clear: the demand for electricity is expected to grow –almost 40% over the next 20 years.

Reality is shown by comparing the company’s Electric Load Forecasts to sales noted in its financial reports:

Miscalculation of demand is not accidental. The industry knows better. Despite our new electronic gadgets, North Americans have been using less electricity.

The culture of BC Hydro was established by BC Liberals who used it as a vehicle to reward insiders, friends and financial contributors. The company may be under different direction today, but the utility is like a freight train travelling at speed. Even if a new direction is wanted, the track is laid.

However, with shared norms and values, many in the utility’s senior management desire only incremental change and fiercely resist material transformation. Overcoming organizational inertia is a difficult task.

With thousands of high-paying jobs at stake and billions of dollars of spending each year, resistance to change is natural, inside and outside the company.

But with technologies enabling, even compelling new directions, power companies will alter more in the next decade than in the last century. Only utilities that adapt to a new style will succeed and only utilities that embrace disruption will adapt.

According to the Climate Policy Initiative:

Wind and solar have become established resources for low-carbon electricity around the world. Cost declines for those technologies now allow us a tantalizing vision of the not-too-distant future where electricity is supplied almost exclusively by renewables…

Unless BC Hydro chooses decentralized approaches to supplying energy, market forces will do it for them.

This will not include hundreds of independent power producers scattered throughout BC wilderness areas selling power by very long term contracts at triple market value.

Micro-grids, efficient wind turbines, small-scale solar and new power storage systems will allow production of energy closer to where it is used. Individuals, institutions and businesses will choose more locally provided, sustainable and cost competitive energy.

BC Hydro has become financially inefficient. Root causes include costly private power contracts, wasteful capital expenditures and debt incurred to pay $8 billion to governments in the past ten years.

In December 2005, BC Hydro’s total assets were $12 billion. At the end of 2018, the total was $35 billion and the company has capital spending plans for more than $10 billion in the next few years.

Despite 13 years of flat demand by its regular domestic customers and 17% more capacity to generate power at its dams, BC Hydro bought 77% more electricity from independent power producers (IPPs) in the 12 months of 2018 than in the same 12 months in 2005. The cost of IPP purchases increased $814 million.

Because it was forced to buy private power and export markets were at times non-existent, BC Hydro couldn’t use its own generating facilities efficiently, even though it spent billions on upgrades.

These statistics and other writings here at In-Sights reinforce what expert Ken Davidson concluded in Zapped, A Review of BC Hydro’s Purchase of Power from Independent Power Producers. From his Executive Summary:

Government provided clear direction that moving forward, BC Hydro would not increase its internal generating capacity and was no longer allowed to rely on importing power to meet demand (also known as load).

To add urgency to the process, Government directed BC Hydro to apply new parameters to its energy planning processes. These parameters created the appearance of an urgent need for 8,500 gigawatt hours (GWh) per year of new Firm energy.

As Government had removed the options for BC Hydro to increase its internal generating capacity or importing power to meet demand, this need for new energy could only be met through procurements to elicit proposals from independent power producers. The demand for energy volumes (that was not actually required) and price signalling presented to the market drove prices higher.

This report draws three conclusions:
• BC Hydro bought too much energy and energy with the wrong profile,
• BC Hydro paid too much for the energy it bought, and
• BC Hydro undertook these actions at the direction of Government.

Although the Horgan Government has changed all but three of BC Hydro’s directors, the board has no one bothered by paying an extra few hundred dollars a year for electricity.

Consumers need to demand representation in the boardroom. It has long had an excess of technical expertise and a severe shortage of common sense.

17 replies »

  1. “Despite buying less in 2018 than in 2005, consumers paid BC Hydro 85% more, an extra $2.2 billion.”
    Words can’t communicate the anger and absolute disgust the above fact brings….and our latest Premier and NDP government is just as guilty as the previous Liberal one. They both knowingly took advantage of taxpayers with reckless abandon. To what end? As per usual to join their corporate friends at the trough. The answer? I don’t have one.

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  2. All the movies show if their is a run away train either a very brave couple of guys stop it or you blow up the tracks, if there are no chemicals on it. I’d suggest they blow up the tracks, where ever they are, and the best way to do that is get rid of a lot of senior people who were appointed by the B.C. LieberCons who started the train on this track. They won’t know how to stop it even if they tried. Its not part of their DNA.

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  3. Excuse my naivety, but what if we let BC Hydro go bankrupt and shed all it’s (IPP) obligations?
    I know, it also has obligations to it’s ratepayers too. And I suspect all obligations are backed
    by the Province, which put it in this position. But was this legal?
    I’m okay Jack. Here it is in the middle of winter and I’m producing more Solar than I’m using!
    Yes, I do know that I’m very fortunate. And smarter than the average (Hydro) bear.

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  4. Maybe John Horgan needs to re-read the partnership agreement between the Chinese company that is to build the generating station and spillways for the Site C Dam.
    According to the Tyee:
    “A notorious Chinese state-owned enterprise now has a 30-per-cent stake in a consortium building Site C dam infrastructure after buying Canadian construction giant Aecon last year.
    The China Communications Construction Co. Ltd. has a history of corruption and workplace safety issues in projects around the world.
    If Aecon is acquired by CCCI, profits from this taxpayer-funded initiative — would go directly to the government of China.”

    Adding to the stupidity, if we allow SNC-Lavalin (with all of their convictions) in the Site C Dam construction we will never be out of debt.
    It is still possible that the Site C Dam will be proven as “unnecessary”, will never be completed and there may not be any major customers who need the over-priced electricity.

    China could declare that they no longer wish to purchase B.C.’s fractured/frozen LNG for example.

    BC taxpayers will still be obligated to pay the angered Chinese government and the very rich BC Hydro executives. Future Site C Dam electricity bills will be shocking.

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    • What do you suppose the consequences would be if ‘someone’ came to their senses and finally shut down Site C? Beside the remedial coasts (which I believe would be minimal), what would be the exposure to cancellation costs on contracts awarded? Does anyone know? Has anyone seen the contracts? Has a contract been awarded to Aecon/CCCCL?
      So many questions, so few answers. If it weren’t for ‘transparency’ we would all be mushrooms.

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  5. Site C is nothing more than massive fiasco waiting to happen.

    I am now installing LED lighting and it uses a fraction of the power what the old incandescent lighting used.

    As modern technology enables power storage, small wind and solar systems will greatly improve.

    There is now a modern tram in operation that uses quick charge capacitors, which are recharged at every station the tram stops, providing more than enough power to reach the next station.

    Hydro’s forecasts are based, like transit in metro Vancouver, on 1950’s thinking, using 1960’s technology. problem is, it is 2019 and there is a completely different operating philosophy for both.

    Sadly, Horgan and the NDP haven’t the guts to stop site C or the BS Line because they love jobs,jobs, jobs, for their union friends. Again, so 1960’s.

    Horgan and the rest of them in Victoria, including the Liberals and Greens haven’t the wit to think 3 minutes into the future always believing the taxpayer has plenty of cash to bail them out.

    Hydro needs to be blown up and rebuilt for the 21st century, as the 20th century operating model will bankrupt us.

    Liked by 1 person

  6. The first step in problem solving is to identify and correctly understand the problem.

    This situation is rife with problems, and Norm identifies many through his research. But problems can also be symptoms. How do we drill down to identify the keystone? The problem that gives life and support to all the rest?

    I believe the answer is in plain sight within Norm’s article.

    “BC Hydro undertook these actions at the direction of Government.”

    “The culture of BC Hydro was established by BC Liberals who used it as a vehicle to reward insiders, friends and financial contributors.”

    Did the symptoms that are vexing us predate government direction? I think not. Government direction was and is the problem, which is that public interest consistently gets second prize.

    The solution to this problem is to identify the individuals responsible and hold them properly accountable as a message for those to come. A public corruption inquiry. The symptoms can then be tackled by properly motivated problem solvers, freed from having to look over their shoulders for a pink slip.

    Mr. Horgan, you wanted the job. Do it.

    Liked by 1 person

  7. I took the BC Hydro challenge last year and cut my annual consumption by 27 percent and got a $50 credit. How many others are doing the same?

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    • I have switched all the lights in the shop to LED.
      Changed Thermo-stats to Smart Thermostats that can be remotely accessed to change the temp up ( if I’m heading to work in and hour)or down( if I forgot to bump the temps downs)
      Outside lighting changed to LED.

      Saving hundreds of $ per year… although this Feb was…. cold my bill compared to last year…remains the same.

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  8. My belief is that Site C is part of the IPP power package. Note that in the Clean Energy Act (2010) both Site C and additional power from IPPs are exempted from BCUC oversight (see Part 7 quote below):

    Much of the run of river IPP power comes in spring and is intermittent. Meaning it needs capacity back up from dams such as Site C.

    So not only is BC Hydro losing $billions on overpriced, un-needed IPP power, it has been forced to spend $10 billion for Site C for back up for that IPP power.

    Publicly-owned BC Hydro gets screwed both ways, for a massive amount of $$.

    All that IPP power, and Site C, represent $multi-billions in costs, and they’re both unnecessary. It’s a blatant, massive rip off.

    Exempt projects, programs, contracts and expenditures
    7 (1) The authority (BC Hydro) is exempt from sections 45 to 47 and 71 of the Utilities Commission Act to the extent applicable, and from any other sections of that Act that the minister may specify by regulation, with respect to the following projects, programs, contracts and expenditures of the authority, as they may be further described by regulation:

    (a) the Northwest Transmission Line, a 287 kilovolt transmission line between the Skeena substation and Bob Quinn Lake, and related facilities and contracts;

    (b) Mica Units 5 and 6, a project to install two additional turbines and related works and equipment at Mica;

    (c) Revelstoke Unit 6, a project to install an additional turbine and related works and equipment at Revelstoke;

    (d) Site C, a project to build a third dam on the Peace River in northeast British Columbia to provide approximately

    (i) 4 600 gigawatt hours of energy each year, and

    (ii) 900 megawatts of capacity;

    (e) a bio-energy phase 2 call to acquire up to 1 000 gigawatt hours per year of electricity;

    (f) one or more agreements with pulp and paper customers eligible for funding under Canada’s Green Transformation Program under which agreement or agreements the authority acquires, in aggregate, up to 1 200 gigawatt hours per year of electricity;

    (g) the clean power call request for proposals, issued on June 11, 2008, to acquire up to 5 000 gigawatt hours per year of electricity from clean or renewable resources;

    (h) the standing offer program described in section 15;

    (i) the feed-in tariff program described in section 16;

    (j) the actions taken to comply with section 17 (2) and (3);

    (k) the program described in section 17 (4).

    (2) The persons and their successors and assigns who enter into an energy supply contract with the authority related to anything referred to in subsection (1) are exempt from section 71 of the Utilities Commission Act with respect to the energy supply contract.

    (3) The commission (BCUC) must not exercise a power under the Utilities Commission Act in a way that would directly or indirectly prevent the authority (BC Hydro) from doing anything referred to in subsection (1).

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  9. Norm, your thoughts on the electrification of cars and trucks and what this will do to the demand for electricity?

    I’m thinking that, at last, Hydro’s forecasters may get lucky on their predictions — if there’s a wholesale change to how we move about. Thankfully, it won’t be overnight and we now have the ability to ramp up solar and wind generation (and storage) much more quickly and cheaply than building dams.

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    • There are a growing number of pure electric cars in BC but far more hybrids. Many factors prevent people from turning away from internal combustion engines. Lack of available style choices, range anxiety, initial cost, home charging capabilities, battery replacement costs, etc. Most drivers are choosing conventional power, some choose hybrids and a small number buy plug-ins.

      Modern cars using ICEs are far more efficient and cleaner than ten years ago and some companies – Mazda, for example – are betting that other significant improvements are coming soon. I worry more about the heavy vehicles and ships that contribute large volumes of pollutants. Those should be priority for electrification. Norway is proving it possible:

      https://corvusenergy.com/marine-project/

      I read a paper recently on expected loads from pure electric vehicles in BC. At the predicted levels of adoption, the burden is modest and impact on peak time consumption is rather little.

      But, it will happen and you’ve identified the ways to deal with it: wind and solar. Add to that a commitment to conservation and efficiency. Some people think the rising price of electricity has been moderating demand and while price elasticity is a factor, I am convinced that a changing industrial segment, and improved efficiency of lighting and electric motors are the greatest factors in reduced per capita consumption.

      BTW, electrification of cars is another reason we’ll be seeing time of use billings for electricity. That would encourage people to help reduce demand in peak times. Smart meters make this possible but there’s a lack of will to adopt the system. Because we have surplus electricity, there is probably no need at this time.

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  10. The article’s last paragraph deserves attention. It appears that officers and directors were swept up in a build, build, build atmosphere. They were impressed by their own expertise and so involved with the how, they lost sight of the why.

    Surplus power because B.C. Hydro was forced to buy private power was a reason not to flood more Peace River land. But the technocrats kept saying we needed more electricity (40% more in 20 years) and their unsupported statements were taken as fact.

    Too bad one of the directors didn’t remember the tale by Hans Christian Andersen about the Emperor’s clothes. He or she might have spoken up before B.C. Hydro began borrowing yet more billions of dollars.

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  11. “The gas and valuable gas liquids like condensate that are “saved” by electrifying natural gas plants don’t remain in the ground. They flow to the surface along with all the other hydrocarbons that are drilled and fracked from the earth.

    The government wants us to believe that using hydro power to electrify LNG production somehow reduces emissions. But all that electrification actually achieves is to save gas from being combusted in BC so that it can be piped out of the province and burned somewhere else.”

    Quote is from the Vancouver Sun this morning:

    https://vancouversun.com/opinion/op-ed/ben-parfitt-site-c-dam-to-electrify-lng-industry-is-far-from-clean

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    • Refrigeration plants are HUGE power consumers.
      Converting Nat Gas to LNG is expensive and a sham.
      LNG is more economical to transport….thats the only reason we are converting Nat gas to LNG.

      So ships can carry it.

      “Clean” Nat gas is a joke.
      But I guess Nat gas powering plants in China is better than the 1600 coal fired plants they are building……

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