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.
Categories: BC Hydro, Independent Power Producers (IPP)
in-sights.ca 
Back in the 80’s when BC hydro had lost their first application for an energy project, (Site C) and they were trying to get the debate going again, part of the argument against the project was that there were alternatives that would cost the province less. Conservation, wind, and geothermal were suggested many times, and proponents of those options were looking for a bidding process that would allow them to compete with Hydros next, (Site C) alternative. At the time many of us opposed to big dams could see that there was a place for smaller incremental generating projects.
It is out of that scenario that the Campbell government did its best to privatize power generation in BC with some of the large independent power producers. The Liberals perverted the process allowing the bidding to become secret, or non-existent, and the goal of lessening the rate impact of new generation on consumers to become secondary to the political goal of private profit. And the Clean Energy Act Campbell introduced threw BC Hydro a bone, (Site C) as the last generating project they would be allowed to build. So we ended up with unregulated expansion of the IPP generating capacity, BC Hydro wanting to build their last megadam, and declining demand all at the same time.
I want to suggest that it wasn’t the prices paid for the IPPs, but rather the ‘open BC for business at any expense’ attitude that prevailed under the Liberals and is now being carried on by the NDP that is the problem. It wasn’t the fact that we signed contracts, at least to the extent that those contracts came in at less than a dam at site c would cost, and they have, but that we signed contracts that weren’t needed by the time they were delivered on.
There is no case where public regulatory oversight should be short circuited, but the governments for the last 20 years have consistently denied the public access to and input to the documents and discussions that should take place. ie Hydros confidentiality claims,
LikeLike
A little history that may generate a challenge .
Some few years ago, shortly after Mr. Campbell took the helm . we had an IPP apply to instal a natural gas generation plant at Duke Point.
They won BCUC approval as well as from BC H.
A few of us took issue with the deal because we got sight of the contract and got no where at the BCUC.
As we had the revenue contract our opposition was about the generous financial terms for the IPP, among other issues.
Out of discust with the BCUC we brought together our pennies and hired a lawyer to seek the right to take the contract into a real court of law.
The second we won the right to have the issue in a real court the IPP abanded the project, BC H let it die and the Government then made all contracts by IPPs secret.
It was a demonstration of how incincere was the need and how much the Government wanted what was to be paid for electricity with the IPP contracts not to be open to public examination in a real court where folks might be held accountable.
The take away for me is that expect nothing from the BCUC and to force a government to support its decisions under court oath is our only recourse.
LikeLike
“British Columbians are paying more on their hydro bills because of the previous government’s choices,” said Michelle Mungall, Minister of Energy, Mines and Petroleum Resources. “Professional staff within government and BC Hydro warned them against that course of action, but that government refused to listen. As a result, these contracts have already cost customers $3.2 billion and are set to cost billions more over the next two decades.”
“B.C. didn’t benefit. BC Hydro customers didn’t benefit. A small number of well-placed independent power producers benefited, and customers were stuck with a 40-year payment plan,” said Mungall.
https://archive.news.gov.bc.ca/releases/news_releases_2017-2021/2019EMPR0003-000228.htm
Minister Mungall owes us a fulsome statement detailing how she has handled these renewals differently to correct the situation and how much we can expect to save.
The Official Opposition and the Legislative Press Gallery will wring it out of her if it is not immediately forthcoming.
…won’t they?
LikeLike
Lew, I know you know that others know, the answer is no.
LikeLike
The Dishounarable Minister Mungal should be booted from office by the people after her cowardly turn around regarding Site C. A recall would be justified for getting shameful politicians like her out of office. It’s sick what she did. I puppet master Horgan tugged on the strings. Zero political will and integrity there.
LikeLike
Thank you Norm and thank you Evil Eye. I miss the level headed Rafe who had a fire in his belly. He gave a damn. I miss the NDP too. The ones I used to donate to until post election. Then it became painfully obvious they were just another lying political party more interested in their corporate sponsors/union voters.
LikeLike
I would say one of the most disgraceful and dirty things to witness by a politician is to turn on a dime and throw away ones integrity and moral backbone like Minister Mungal on Site C. She didn’t her ground. Instead, she turned and caved too political ambition. These kind of cowardly politicians who show themselves in this light are the worst kind in my opinion.
LikeLike
What the hell is wrong with Horgan’s NDP?
The Liberal (read Campbell’s) sweet deal with thee IPP’s deserves legal attention, but no, the NDP are again asleep at the switch.
The late Rafe Mair’s three axioms:
I. You make a serious mistake in assuming that people in charge know what the hell they’re doing.
(The NDP and Horgan clearly don’t)
II. You don’t have to be a 10 in politics, you can be a 3 if everyone else is a 2
(The NDP are a mere 3 to Wilkinson’s 2 and rapidly becoming a 1)
III. Never deliberately create an unpopular issue that will still be there on the next election day
(ICBC, Hydro, TransLink, Surrey police switcheroo are just a few of the issues that will bite the NDP hard in the ass.)
More and more, I am coming to the belief that a candidate wearing a tin foil hat is preferable to both the NDP and the Liberals.
LikeLike
“Energy has only one value and that is the market rate it can be traded at, the Mid-C rate.”
This is a guiding principal, that should be first and foremost in the minds of the government, the BCUC and BC Hydro.
LikeLike