In 2001, newly installed Liberal Premier Gordon Campbell named campaign advisor Larry Bell chairman and chief executive officer of BC Hydro. The Globe and Mail reported on an immediate priority for the crown corporation:
…encouraging generation from independent power producers [IPPs] and refiguring its transmission network to allow such producers to sell to multiple customers.
“The government wants these [independent power producers] to be businesses, and wants them to have capability to sell to a variety of buyers, not just B.C. Hydro,” he said.
The plan for IPP sales to a variety of buyers soon fell apart because export prices collapsed after fraudulent market manipulation was halted in the USA.
Private producers had a dilemma. They could abandon projects, terminate production, sell power at a loss, or have political friends impose a helpful solution.
BC Liberals obliged by forcing BC Hydro to sign long term contracts to buy IPP electricity at inflation-protected prices well above market and by prohibiting the publicly owned utility from adding materially to its own generating capacity.
The choice was made, not for the benefit of electricity consumers or BC taxpayers, but to satisfy the Liberals’ preference for private enterprise over public. That partiality was universally shared by editorialists, media commentators and political writers. Government energy policies were roundly applauded.
But an important aspect went unmentioned. The new power deals assigned financial risks to BC Hydro and guaranteed revenues and profits to IPPs.
Indeed, the provincial utility has lost massive sums because of these contracts.
Since Campbell’s friend Larry Bell promised to assist private producers, BC Hydro has purchased almost $14 billion in power from IPPs—most at 2x to 4x market price—and is contracted to buy more than $40 billion worth of additional electricity.
Naive, stupid or dishonest politicians reasoned that demand for electricity would continue rising steadily in British Columbia and in the usual export markets. They ignored the potential for change.
Change did come. Industrial growth sagged because of globalization and more efficient consumer technologies arrived. Alternative energy became feasible and affordable. BC Hydro’s demand growth slowed and has been flat since 2005. Returns from export markets stayed low.
Change was anticipated and risks recognized by people outside government and corporate media. Will McMartin, writing for The Tyee made an accurate analysis, included in my 2012 article Taxpayers carry financial risks for IPPs.
BC’s Energy Independence? Don’t Believe It, Will McMartin, The Tyee, May 31, 2010:
…[Blair Lekstrom, Liberal cabinet] minister, moreover, thinks it’s “tremendous” that small businesses — even those with little experience and virtually no capital — are competing against larger, more experienced electricity providers to obtain long-term supply contracts from BC Hydro, the province’s publicly-owned utility giant.
It all sounds great, doesn’t it? Self-sufficiency. Entrepreneurial risk-takers. Why, you can’t get more small-town that that.
Except, it’s all a sham. British Columbia under Gordon Campbell’s BC Liberal government has become increasingly dependent on non-B.C. owned corporations to produce high-priced electricity, which BC Hydro is forced (by government edict) to buy, and in turn sell at inflated prices to captive residential and commercial consumers…
Rafe Mair was another IPP critic. He raged about financial and environmental damages occurring under government policies that had numerous buccaneers working on waterways around the province.
In the 2009 election campaign, reading from Liberal talking points, candidate Brenda Binnie blamed Rafe Mair for spreading fear about IPPs.
Of course, BC Liberals had a stake in the industry’s success. Some of the people involved with private power companies were former Liberals or friends of the party. Money changed hands in amounts large and small.
So, why do I bring up old news today?
The private power fiasco is so bad in 2020 that even BC Hydro is singing the IPP blues. Remember, this is a company that prefers to hide faults rather than disclose them. May 11, the province’s main utility issued a press release titled Demand Dilemma.
In addition to soft demand that has plagued BC Hydro for 15 years, the coronavirus recession has severely cut amounts of electricity used in western North America. BC Hydro admits it is now experiencing “unprecedented decline” in electricity demand.
The IPP deals create a large problem, one that critics have known since the beginning. The press release says:
…this time of year is when the majority of the Independent Power Producers (IPPs) BC Hydro has agreements with are producing the greatest amount of energy…
The provincial utility’s reservoirs are receiving large quantities of incoming water and because most IPP contracts cannot be suspended or ended, BC Hydro has to reduce internal production and spill water without generating electricity.
So, expensive private power replaces cheap public power, a financial disaster for a crown corporation that is already troubled.
Even as the economy begins to recover after the pandemic resolves, low power demand will create additional problems.
LNG prospects are dim and large scale manufacturing has gone elsewhere and is not returning. Micro grids and self-generation will keep power loads from growing.
Site C, over budget and behind schedule, will someday be complete. But it will be expensive electricity, 2x to 3x the price of alternative energy. It will simply add to the utility’s operating losses.
It’s time to bluntly lay blame for the billions of dollars BC Hydro has lost through mismanagement, particularly by the continuing IPP fiasco.
Gordon Campbell and his cabinet colleagues designed the damaging schemes. Christy Clark, along with Rich Coleman, Mike DeJong and others accelerated it. John Horgan, Michelle Mungall, Bruce Ralston and other NDP members failed to contain it.
Corporate media, particularly pundits in the BC Press Gallery, deserve a large part of the blame. With few exceptions, they did not miss private power problems, they chose to ignore the issues and ridicule the critics.
Vaughn Palmer, Bill Good and Keith Baldrey scorned “Nincompoops ranting in their underpants.”
Electricity ratepayers, mostly residents and small to medium sized businesses, suffer because of failures by politicians and major media. The public was badly informed and that has resulted in losses that will ultimately measure in the tens of billions of dollars.
This should be British Columbia’s largest ever political scandal but the people responsible for it will never be held to account. On the contrary, the scoundrels have departed or will one day retire in unsullied comfort.