BC Hydro

Billions lost – bad luck, incompetence or fraud?

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.

27 replies »

  1. Now is the perfect time for current provincial government to use the “Force majeure” to get rid of these crooked expensive contacts! or at least renegotiate them on more favourable terms for the publicly owed asset that the BC Liberals used as a free ATM for their buddies! DO IT NOW!

    Liked by 1 person

  2. According to your article ” because most IPP contracts cannot be suspended or ended ”

    Is that really true or can a legal team hired by taxpayers ( government ) take these contracts and rip them up ?
    Or at least can the current government find a way to tax IPP’s. And I mean tax them heavily.

    Guy in Vic

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    • Didn’t Campbell find a way to rip up teacher’s conrtracts? Do it to the IPPs.
      By the way, I AM an IPP. I have 14 solar panels on my roof. But I’m NOT PERMITTED to sell the excess to BC Hydro! How stupid is that!
      One wonders how long before the government (us?) decided to build Site D (for Dumber)!

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      • Ultimately the courts held Liberals were wrong to have ripped up contracts.

        The IPP contracts are secret but occasionally information leaks out. One example was Altagas bragging publicly about its deals in northwest BC being 60 years duration.

        When the Horgan Government took office, they supposedly intended to address the private power situation. Their efforts have been rather meek. They stopped growth in IPP purchases and proceeded with only a few new deals. Those may have been justified by special circumstances, such as local service for remote areas

        But, they have gone forward with renewals of expiring contracts. Of course, the contracts might have penalties for non-renewal.

        Both sides of the IPP contracts were determined to make a success of private power so I assume they were drafted to be unbreakable, preventing any new government from messing with the privatization plan.

        Normally, contracts can be terminated only for reasons contemplated in the agreements. There are other possible reasons but they are fairly narrow. An example: If one side did not have sufficient reasoning capacity, the contract may be held unenforceable. While many of us think this might apply to Liberals who started BC down this road, it would be hard to prove to a judge.

        Erik Andersen thinks the deals could be attacked on the basis of unconscionability, which means something inherent in the agreement was so shockingly unfair that the contract simply cannot be allowed to stand as is. But, arguing that one side had grossly unequal bargaining power would be near impossible, in my opinion.

        If evidence of fraud or kickbacks ever surfaced, that would likely support a legal claim of unfairness. But, Canadian political culture generally dictates that new governments don’t put much energy into uncovering illicit acts of predecessors.

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  3. Every time media mentions anything about B.C. Hydro all this needs to be brought up. People just don’t know. Sound bites about BC Hydro just doesn’t cut it.
    @J Horgan, @ all media sources. Stop Site C ! Stop LNG!
    Tear up these ridiculous contracts. Make the pigs at the trough of their creation pay for it.

    Liked by 1 person

  4. Thanks for you continuing Hammer for truth an accountability Norm. Every electrical rate payer of BC Hydro (if they understood this reality) would hopefully raise pitch forks and demand a proper addressing of this economic ruse.

    Thanks for your dedication to reporting reality.

    (Rich Campbell = Rich Coleman?)

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  5. Years ago I went to a Rafe Mair talk and he ranted on about how the Liberals under Campbell had changed the laws to aid the private power. I remember him mentioning Bills 25, 35, 75 and 85. These acts allowed the act of theft to be legal. As far as I’m concerned all Liberal MLA’s under Campbell and C. Clark should be charged with theft, and any other offences that some fancy-pants lawyer could find. And as a footnote I heard the other day that Site C is now estimated to cost $20 billion

    Liked by 1 person

    • Yeh, that’s the new “On budget, on schedule” figure. But it’s not halfway finished! Look for a new ‘figure’ in the weeks to come! Did you ever wonder why ‘The Biggest. grandest Project in the province’s history generates so little news headlines? Why no photo updates, project progress, etc.
      Its almost as if we are ashamed of the project! (We should be)

      Liked by 1 person

  6. How many times has Norman written essays on this theme? How many times has Vaugh Palmer and/or his buddies in the press gallery made a headline of this data found in BC Hydro reports and in the accounts of BC’s government

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  7. We must realize, first off, that the Gordon Campbell regime was a massive grift to transfer the provinces wealth to corporate and political friends. Premier Photo-op’s brief reign, was nothing more than pursuing Campbell’s political philosophy of raping the province for private gain, without any pretending of honesty.

    We must further realize that the mainstream media including the likes of “Vague” Palmer and “BS” Baldrey sides with the political right and the theft of public assets.

    Thus the BC Liberal party, Gordon Campbell and all his ministers of the crown, Post Media, Corus and the rest of the mainstream media are guilty of actual theft of public assets or abetting the theft of public assets.

    Again, we must realize that the NDP will not do anything because they firmly believe in the divine right of government and that they too want to reward their political friends, the major unions, with the most recent example, union bus drivers, guaranteed full wages for driving buses.

    With the NDP, their union friends do not deserve to be treated like us mere mortals, but are now privileged.

    Do not expect the NDP to do anything, as they been cuckolded by major unions and the jobs provided by mega projects, such as Site C, TransLink’s $4.6 billion SkyTrain expansion plan (both extensions are being built on routes with nowhere near the ridership to justify them); illegal money laundering and the investing of illegal monies in BC housing; and the list goes on and on.

    BC Hydro is in a mess and I am afraid, the weak kneed Horgan will once again screw the taxpayer, rather than face his big unions.

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  8. Until he had to step aside due to sexual assault allegations, Gordon Campbell was conducting an economic review of the decision-making process behind the Keeyask Generating Station and the Bipole III power transmission line projects in Manitoba. No better way to get to the bottom of a multi-billion dollar screw-up than to ask a guy who created one elsewhere to have a look at yours, right?

    https://www.cbc.ca/news/canada/manitoba/manitoba-hydro-review-campbell-reax-1.5026815

    The current BC Hydro press release is interesting in that it does not get into financial considerations. It strives to leave the impression that the main consequences of reduced demand are environmental, and concludes with the statement that, “BC Hydro is confident these measures will address the risks associated with its excess supply due to the drop in demand and help to avoid potential environmental risks and impacts to plants and facilities that would be created by excessive spilling.”

    Okay, so why the press release if everything is in hand? Would it be too cynical to suggest it’s part of a strategy to plant seeds of justification for the huge rate increases which are inevitable for other reasons?

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  9. We could end this boondoggle by expropriating and reclaiming the land. This year we could not “spill ” from BCH own dams – but run it through the generators and produce Hydrogen. Hydrogen is not expensive if the electricity is free. Next we press charges against all those IPPs with illegal operations. Many “run of river” IPPs are actually water diversion or small dam projects. The Campbell cronies have made enough. Reclaim these projects. Site C and LNG are quite simply Horgan and the BCNDP insiders way of paying off their own lobbyists and cronies. Neither project will ever pay for itself; much less make money. Shut them down.

    Liked by 1 person

  10. Evil Eye says “…… and the rest of the mainstream media are guilty of actual theft of public assets or abetting the theft of public assets.” A sentence that bears repeating.

    I submitted a formal complaint to the CRTC and the CSBC, stating that the word “news” should not be allowed to be used by Global do describe their nightly entertainment program at 6pm on the television.

    I specifically recounted a long and glowing report (on site) by Deborah Hope on how great it was that IPP’s were generating green electricity for use during the Olympics. The Fitzsimmons Creek project she was touting produced zero (confirmed by FOI) power during the first three months of that year. It was cold and the water went too hard to flow through the turbine. They did start selling to BCH again when freshet came….just when we did not need it! Ms. Hope was in a long line of “journalists” that did not publish one iota of evidence presented by Norm, Rafe and others of the folly of this ruin of river program. They were truly an arm of the industry, and if not…..I challenge them to respond here.

    How about Gillian Shaw teaching a seminar to IPPs how to win against “tech savvy” online bloggers?

    It was only Christmas before last (I believe) that we were told by said TV personalities how much we were contributing to domestic use at Christmastime by staying home so much. Which is it, staying home uses more, or less???

    “Do not expect the NDP to do anything…..” of course not, same deputy ministers and same bureaucrats employed. Hopefully the NDP are noticing a drop in monetary support from people who expected different.

    Liked by 1 person

  11. The financial affairs of BC Hydro are not and never have been accidental since the beginning of this century. When Enron did its fraud in California a list of electricity producers, including BC H, were rightly held to account as willing and knowing participants in the fraud. This experience permantently coloured/contaminated the business culture at BC Hydro.

    At a BC Hydro briefing in Victoria in 2011, the Manager of the BC H so called forecast, privately admitted to me that they at BC H did not have control of the projections of population and provincial GDP. BC H took future vales for these outlooks from a designated private sector consultant. My reason for taking up the issue with him was because the projection of population was for annual increases greater than double the population projections of Stats Can, BC Government Statistics and the values used by the province’s credit rating service. This manipulation was for residential and commercial/ light industrial customers only. The Director would have nothing to do with projections for the heavy industrial sector because it was all Howe Street fantasy.

    When working with Rafe, I used the term “financial illiterates” to describe people in charge of crafting the public narrative used to support the IPP program and the building of Site C. I know you, Norm, were on the same page at the same time. A few times, in certain clubs around Vancouver, I felt a social chill from those with big bucks to gain from the IPP contracting etc.

    Historically the NDP were Government when some of the fraud was being conducted so it was never a Liberal deal alone. Our political establishment lost their moral compass at the end of the last century and have never found it since.

    The legacy of all of this greed is now seen in the provincial financials. Arthur Hadland has recently rounded them up for us and they amount to $40,000 for every man, woman and child in BC.

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  12. In the BCUC report of 2017 advising the BC Government of the financial picture concerning Site C and the need for the project, when it was still proposed to come in around 8.7 Billion, and Hydro claimed costs, including rehabilitation of the valley if the dam were turned down, of 4 Billion dollars, the Commission found that even including those four Billion, a seriously inflated number, that the Province could be equally served by a combination of wind, geothermal, and conservation at the same 8.7 Billion dollar total cost.

    With the price going to 10.7 Billion and Hydro admitting that they are hundreds of millions over the new budget, we shouldn’t accept that the dam will be built. Hydro has now spent perhaps 5 Billion dollars, leaving still more of a gap within which alternatives, which are still getting cheaper can fit to meet the needs if any of increased demand, as we need it. That also would reduce costs for ratepayers.

    The other aspect that is still bandies about is the idea that if we stop the construction destruction now we end up with nothing to show for the money spent. That may be true, but we do end up with a very productive river valley that is worth more to BC than the electricity that we are going to lose money on with every Kwh.

    Liked by 1 person

    • Site C can never even pay for itself, much less make money. The only way to address this is to STOP NOW. Besides the agricultural, environmental and Indigenous values; stopping will “stop the bleeding” . What we have spent so far is not ever recoverable. Every day we spend money on that dam is another day of waste.

      Liked by 1 person

  13. Here is something to think about…..

    The “Eye” has his eye mostly on transit issues and TransLink, but this little item came through a UK transportation news group.

    Within 10 years, households in the UK will have the opportunity to purchase an dependent power generating unit, that could meet the needs of over 75% of a household power needs.

    At the time of writing, the estimated cost for this combined, wind/solar/storage unit would be around UKP 7,500 to 10,000. Over a 25 year period the device could save the homeowner UKP 5,000 to 10,000 after investment.

    The transportation angle is that, the device would include, recharging electric vehicles at a far less cost than using the “mains”.

    This is the new technology that will make Site C a financial Albatross. This is the new tech that will see the collapse of BC Hydro.

    Liked by 1 person

  14. As has been stated many times by Norm and several others, the business case for the twice rejected site c dam has never existed. BC Liberals deliberately introduced legislation to bypass the only layer of protection ratepayers have, the BCUC or the project would have been rejected a third time. NDP, while campaigning, were against the project, caving to special interests once in a position to govern. Going ahead with the project against the advice of the BCUC Inquiry under a very limited terms of reference.
    By falsely claiming $4 B would be “lost” if terminated the NDP thought they got away with the prize. Sadly, not so as ratepayers will be caught trying to pay for a dam they never needed and IPP contracts that never should have been signed.
    BC Hydro has been in negative cash flow territory for several successive reports from bond raters, without hardly any accounting for site c expenditures, which are escalating by the hour in a self imposed race to divert the Peace River. Money is no object in several untendered works going on in the valley around road re-location. Report #18 to the BCUC is months behind release date and safety on sites is not good with one contractor being levied fines in the $1.5M range and a couple workers seriously injured on a bridge relocation.
    All unnecessary and harmful to ratepayers long term. Higher rates will not attract consumers or job creating industry.

    Liked by 1 person

  15. If these contracts were made by sleaze bag lawyers they can be broken by sleaze bag lawyers but I fear John Horgan (Liberal Light) either agrees with this BS or hasn’t got the balls to turn all these contracts upside down and tell these IPPs that we will take their power at the going price after, we the people, sell ours.

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    • John Horgan is not “Liberal Light” – He is “neo-con Heavy”. The only reason that Site C is continuing is to give payoffs to BCNDP Insider cronies and lobbyists. Ever nickel we spend at Site C is a loss that will never be recovered.

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    • Good point Norm. Unfortunately the likelyhood is high that the lawyers who origonally framed these contracts on behalf of the IPPs were very competant.

      There is a court in Paris that does deal with international ,commercial disputes and that would be a good place to test if they are breakable.

      If the NDP wanted, they could follow the recomendations of the BC Law Insitute and make changes to contract law for BC. Unfortunately the NDP have wanted to ignore the findings that contract Law in BC is unfair and has been ever since 2011, when the report was finished and made public.

      I have tried several times to get MLAs intrested but so far only Paul Manly and E. May have paid it any attention. I did use the report as evidence in the Federal Tax Court this March and that maybe was enough to cause the judge to reserve his decision.

      This study/report maybe a useful tool for others who read this blog, I hope.

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      • I think, Erik, that the government could expropriate the land back from these IPPs (shades of WAC). Secondly, Many of these projects were specified as “Run of River” but were built as “diversion” or “small dam”
        projects which would justify seizing and demanding reconstitution and compensation. Of course, getting John Horgan to perform like a progessive is pretty unlikely. His own crony enrichment projects – (Site C and CGL) are as neo-con as the Campbell/Clark rakings.

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  16. It’s interesting to see the names Baldrey, and Palmer pop up once in awhile and other names here and there of the media world. Although i realize what their profession is in media and the Press Gallery. I was never quite sure who they actually represent. The public good. The government and corporate good. Both, or WTF.

    Like

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