Each winter, BC Hydro issues press releases asserting unprecedented demand for electricity by consumers, a claim corporate media repeats with little or no examination.
The strategy is have ratepayers and taxpayers conclude that massive capital spending and higher electricity prices are necessary to ensure growing needs of consumers can be met.
BC Hydro has been saying for the past two decades that demand growth is inexorable. I took these words from BC Hydro’s website on March 6, 2020:
As B.C. grows, so does energy demand
From the 1960s through the 1980s, we built six dams to meet the energy demands of a province whose population almost doubled in 25 years.
Electricity demand in B.C. is expected to grow by another 40% over the next 20 years. And while we will continue to lean on conservation as the first and best way to meet demand growth, we must reinvest in our aging assets and prepare to invest in new assets like the Site C Clean Energy Project.
Because citizens assume that population growth translates into demand growth, they readily buy the corporate spin.
But, BC Hydro has been using the line about 40% growth over 20 years for a very long time, even though their financial records show that sales to residential, light industrial/commercial, and large industrial consumers in BC have been essentially flat since 2004.
Despite no demand growth, BC Hydro’s capital spending has been immense. The evidence is provided by the company’s financial statements.
To survive over the long term, successful businesses need management that adapts to changing conditions. Easier said than done apparently, because only 14% of companies on the original 1955 Fortune 500 remain there.
Some of the once wealthy corporations that disappeared from the list:
- Blockbuster Video,
A significant factor in the degradation or destruction of those companies was organizational inertia, something influenced by:
- Successful past,
- Limited competition,
- Unaccountable management,
- Timid, inexperienced or unqualified boards of directors,
- Excessive loyalty to workplace silos,
- Lack of situational awareness.
BC Hydro had success throughout its first four decades. It has had little competition but that is changing because self-generation is becoming economic.
During the last decade, top management has been appointed by the Premier’s office and politics has ruled the choices. Similarly, directors have been subject to tests of political loyalty or the needs of a smooth-running patronage reward system.
The utility has powerful operational silos, including the engineering and design group whose members might be working elsewhere, but for the company’s intensive capital spending.
Lack of situational awareness is best demonstrated by BC Hydro’s massive and long term commitments to private power, given with the expectation of high export prices. Private power suppliers (IPPs) enjoy inflation-protected contracts paying prices substantially above market value.
Additionally, the utility’s failure to embrace modern renewables as prices of the technology dropped steadily is further proof senior management lacked perception of industry directions. Even worse, they denied the trends, even when obvious to anyone paying attention.
Serious storm clouds lie ahead. The only customers that create positive cash flow for BC Hydro are the residential, light industrial and commercial consumers.
Political commitments have been made to sell power to heavy industry, including oil and gas operators, at a fraction of the average price BC Hydro is paying to buy electricity.
That means individuals and small business operators will be paying ever increasing electricity prices because someone has to suffer for corporate incompetence and it won’t be managers or large customers with political influence.
Site C will be losing additional amounts when delivery of its costly power is made to gas producers and processors. Since the prices will be below actual cost, BC Hydro’s vulnerable customers will suffer. Of course, residential and businesses that consume comparatively small quantities of power will pay significant price increases.
Some people believe the BC Liberal strategy was to weaken BC Hydro so that it could be privatized. That is not a goal of the present government but in almost three years, John Horgan’s administration has steadfastly clung to energy policies put in place by their predecessors.
There is no reasonable explanation for maintaining bad policies and excusing BC Hydro’s misdirection. These were well understood by the NDP before May 2017.
Probably, the Horgan Government lacked courage to change direction on matters financial and is determined that voters see their party as a kinder version of the business friendly Liberals. NDP leaders hope that is a ticket to electoral success.
Categories: BC Hydro