BC Hydro wants BCUC to allow renewal of Electricity Purchase Agreements (EPAs) with Independent Power Producers (IPPs). Project No. 1598969 involves existing facilities controlled by Innergex of Quebec and Capstone of Ontario.
Prices BC Hydro pays for private power, based on costs of service plus guaranteed rates of return, have been high above market values. Deals that disadvantage ratepayers could be altered at contract renewal times, but, despite cautions in the Davidson Report, BC Hydro is disinclined.
People can raise objection with BCUC, but important analyses produced by the public utility and the regulator are confidential. This policy aims to obstruct intervenors and others concerned about billions of dollars wasted by above-market payments.
In his 2019 review of BC Hydro’s IPP purchases, expert Ken Davidson criticized secrecy:
There is a need for more transparency respecting non-commercial transactions BC Hydro is directed by Government to undertake. These projects have now aggregated to the point that the financial stability of BC Hydro has been impacted.
Commercial Energy Consumers Association of BC (CEC) is one group objecting to renewable of Electricity Purchases Agreements (EPAs) with conditions BC Liberal apparatchiks established. One sensible CEC submission includes:
Energy has only one value and that is the market rate it can be traded at, the Mid-C rate. The financial issues described in this report will continue if BC Hydro adopts an EPA renewal strategy for IPP projects generating Intermittent energy at any price other than the existing Mid-C market rate.
BC Hydro has no obligation to this investor and certainly no obligation to pay more than the power is worth to ensure the future viability of the investment.
The current renewal strategy (that has been used on the first set of renewals) considers an IPP’s cost of service, including rate of return. This approach will not deliver energy to ratepayers at its real market value.
BC Hydro is a Commercial Crown corporation and should do nothing more or less than act in a commercial manner. Any offer of a renewal rate that is negotiated based on the IPPs cost of service and a rate of return, rather than the market value of the energy produced, is a non-commercial act; it is somewhat equivalent to a guarantee of future profit for the out of province investor who now owns the project.
…if any Intermittent generation facility cannot make a profit being paid the full market value of the energy it produces, it is by definition not viable and should cease operations.
BC Hydro should offer to buy the Firm energy at the appropriate Mid-C price for Firm energy… and the Intermittent and non-Firm energy at the Mid-C spot price.
Term of the EPA should be in the range of 5-10 years.
[BC Hydro should offer to] a. buy all energy at the appropriate Mid-C market rate, or b. have the investor trade its energy directly in the market.
If the investor believes the project is not commercially viable, BC Hydro should offer to buy the assets for a small fraction of their original cost. If the project is not commercially viable and the asset sale offer is not acceptable to the investor, BC Hydro should allow the project to fail and the province should enforce remediation obligations.
BC Hydro seems set on renewing these private power deals for a further 40 years, not the 5-10-year range suggested by CEC.
Rather than using historical wholesale market data, which showed the median Mid-C price in 2018 was 3.6¢/kWh, BC Hydro produces secret worksheets to justify prices based on the company’s “opportunity costs”.
This is like saying the province should be willing to pay $150,000 for a pickup truck built in BC, rather than paying $50,000 for one built out of province.
Political and industry insiders dictated terms for the original IPP schemes, but corporate inertia keeps them alive.
BC NDP enjoyed the short-lasting attention paid Ken Davidson since his report highlighted BC Liberal incompetence and/or malfeasance. But government officials quickly put the ZAPPED expose into archival storage.
The bureaucracy continues as it has done for years, ensuring plus ça change, plus c’est la même chose.