BC Hydro

What BC Hydro is today and why…

In-Sights reader Bruce has been thinking about BC Hydro and asked important questions, I offer my answers but with a broader picture of what BC Hydro is today and why.

Hydro spent a billion dollars on smart meters. They are spending billions on Site C and billions on IPP’s.

After spending so much on all those other things, how can hydro survive buying high off the IPP’s, selling low for years and not go bankrupt?

Campbell brought in this fiasco and it is still going on and will for years more. Any company running a business like this would have gone under years ago. Can hydro just keep going like this without any consequence?

First, a comment about smart meters. They made sense since time-of-use billings are facilitated. That system of charging for electricity is used elsewhere to reshape demand peaks. Had consumer purchases of electricity not gone flat in 2005, BC Hydro would almost certainly have used this billing method.

Time-of-use remains a possibility for the future but having surplus power capacity makes that unnecessary. Politicians worry about consumer resistance to this method. But overall, the issue of meter types is relatively minor. The devices must be changed periodically anyway and meters that communicate provide advantages to the utility.

Can BC Hydro continue? Yes, but not with the present level of rates. The company is guaranteeing years of low prices to large industrial users, so the future burden of rising prices will fall largely on small to medium sized businesses and residential consumers. BC Hydro has been using accounting trickery for years to create phantom profits and look stronger than it is.

Fortunately, BC’s public utility has a great deal of very low-cost power from dams built decades ago. The company could have been allowed to stay focused on delivering electricity across BC at the best prices possible. If that had been the case, our electricity bills would be far lower than they are today, Hydro would be continuing to move large sums to the provincial treasury and its long-term debt could be at zero.

Of course, neoliberals like the BC Liberals never saw a successful public enterprise they didn’t want to privatize. Politically, it would have been difficult to dump BC Hydro as they did with BC Rail. Instead, Liberals chose to privatize a large part of BC Hydro’s profits.

There is a huge variation between the cost of electricity generated at old dams and the cost of new private power purchases and electricity from Hydro’s recently added capacity, such as at the joint venture with SNC-Lavalin near Campbell River. Profits from the old cover losses from the new.

Ignoring John Laxton’s Hydrogate, the failed effort to export utility expertise to Pakistan in the 1990s, the seeds of harm at BC Hydro were sown by Gordon Campbell in 2001. BCH had made huge profits selling into California when Enron’s “Smartest Guys in the Room” were fixing the marketplace by creating artificial shortages. Smart guys in BC looked at big export dollars going into the public utility and plotted to put their hands on that flow.

Premier Campbell obliged. He opened just about every river in the province to proposals for private power and he moved bulk power transmission facilities from BC Hydro to a new company, thereby ensuring private producers could access lines to ship power into U.S. markets.

The plan imploded when the market-fixing scheme in America collapsed and Enron executives went to jail. Suddenly, potential BC producers were facing export prices that were a fraction of what they anticipated.

Campbell and his BC Liberal colleagues aided the profiteers. BC Hydro was required to contract with Independent power producers (IPPs) at prices that ensured immediate and continuing profitability. Prices initially offered by Hydro to IPPs bore no relation to market value or even to fair investment returns. Those prices even had inflation escalators. I estimate $10 billion or more above market value has flowed to IPPs but many of the original promoters cashed out early by selling to companies outside BC that had actual power production credentials.

Major unions were unhappy with IPP deals. In most cases, union members were neither building nor operating the facilities. Unable to lobby government to improve or cancel secret bulletproof deals, they lobbied aggressively for continuation of Site C, even though it was unneeded without growing demand for electricity in BC or profitable export markets.

I have been told unions made major financial support to NDP for the 2017 election contingent on continuation of Site C. The party had few options because it was not in great shape. Had they not sold their headquarters building, the BC NDP would have been in a deficit position at the end of 2015. That would have been disastrous 15 months before the next election campaign.

The die was cast for Site C even before April 2017 so the constrained review by BCUC was just the opening act of political theatre that continues today.

What we have seen with BC Hydro is that political parties on both left and right see conversions of public assets to private interests as normal ways of doing business. The only difference is who gets the money.

Categories: BC Hydro

11 replies »

  1. The theme of this drama is the unreliable narration from each Premier. Each one has a fundamental lack of knowledge or competence regarding electricity markets or grids. They incorrectly make decisions that they are informed will solve their short term problems.

    These misinformed and stupid decisions all ultimately end up creating larger problems for the Premiers and for BC.

    We are all living in a really bad Seinfeld episode where George is always in charge.

    Like

  2. Great piece Norm, it should be required reading in schools. Campbell Liberals were really pernicious. I’ll try to post a link to it on Twitter tomorrow.
    J

    Like

  3. I think the whole mismanagement by the Liberals of Provincial Crown Corporations and Government run operations (BC Hydro, BC Ferries, ICBC) is to run them into the ground. Then sell them off for pennies on the dollar. Proof; remember BC Rail? The Liberals tried to sell off the Liquor Distribution Board and privatize the Liquor Control Board. They tried to make an excuse why management for our BC Medical Plan was sold off to an American corporation.

    Liked by 1 person

  4. I’m not surprised at the decisions John Horgan is making concerning site c, fracking etc.
    I am profoundly disappointed at the rest of the governing party going along with the decisions being made.
    You can’t support drug treatment and housing on one hand and throw people off their land, pummel First Nations people into submission with the other and think no one sees the glaring contradiction.

    Like

  5. 1 billion for new meters to stop hydro steal for grow ops but when you look at demand,after, it didnt really pick up .

    BC Hydro has defended its power theft savings after NDP energy critic Adrian Dix questioned them. In a recent letter to BC Hydro CEO Jessica McDonald, Dix said the company’s estimate of power theft by marijuana growers was “magically” inflated by then-energy minister Rich Coleman in 2006, then increased again in the utility’s 2011 business case for the wireless system.

    https://www.merrittherald.com/smart-meter-system-finishes-under-budget/

    Like

  6. I have come to the conclusion that the vast majority of politicians are corrupt. They lust for power and in return, sell the taxpayer to deficit hell. money means nothing, other than to buy votes.

    BC Hydro is a mere pawn in the BC politic, used, abused by politcal parties and the result is a now $16 billion (try $20 billion) dam, built on shifting shale, in an age of cheaper wind and solar power.

    obsolete from day 1, this dam will forever change BC in ways far more disastrous than we could ever imagine.

    Horgan could have stopped this slow moving fiasco in 2018 and now in 2021, he folded like a cheap deck chair in favour of union jobs and union pensions.

    Horgan has now spent his politcal cred on a damn on shifting shale, a vaccine roll out based on race, billion dollar transit lines to nowhere, and has been weighed, measured and found wanting.

    The NDP, won the last election because the Liberal leader was akin to a walking corpse, a yesterday’s man living in his yesterday’s bubble. The trouble for the NDP is that they did not wipe out the Liberals, in fact their base is solid, far more solid than the NDP’s.

    (At this time I must mention that 46% of the eligible voters did not vote, thus the base for both parties are on somewhat shaky ground)

    In 2001, the NDP voter did not vote leaving the NDP with a 2 seat rump, now with a more established Green party and the definitely unGreen NDP policies, 2024 could be a disaster worse than 2021. Not that they will get only 4 or fewer seats, rather their base of older members is diminishing daily and that the youth in BC, faced with high taxes, a crumbling education system, lack or nonexistent affordable housing and a score of more ills, may abandon the NDP for Green or what ever Pied paper of Neo Liberalism, that is elected Leader of the Liberal Party.

    Horgan could have dealt with that, but his dam (and it is his dam now) will suck monies from education, healthcare, housing and a lot more.

    Adios BC, your time in the Sun was short, sweet, but alas gone. horgan will go down in history as the premier who should’ave, could’ave, but didn’t have the moral fibre to do so. A hell of an epitaph.

    Liked by 1 person

  7. It pains my sense of equity and balance to say this, but I can still hold my nose and understand why our political masters operate (or choose to operate) far beyond their level of competence. One such set of profoundly foolish decisions, ie. initiating the Site C boondoggle followed by the equally foolish decision to continue with the Site C construction in the face of all of the evidence, were made by political operatives who were tasked with making decisions far outside of their skill sets. The Cabinet Ministers most involved had neither engineering degrees nor experience in designing, construction, or operating complex electrical generating facilities, much less in overseeing large power generating and distributing organizations like BC Hydro.

    However, understanding the “Peter Principle” in operation in the BC Legislature is not the same as justifying the resulting Site C debacle. I certainly and specifically hold the BC Hydro Board of Directors and senior management to a much higher standard with regard to their duty to the public to provide thoughtful and competent advice to their political masters.

    BC Hydro is one of many (albeit one of the largest) electric power generating and distributing organizations on this continent. At the very least, its Board of Directors and senior management would be expected to be fully aware of all relevant matters/trends that will effect both current and future operations. Alas, even this basic level requirement does not seem to be met by the BC Hydro management.

    A superficial internet search will, for example, reveal that power generation and management is in the early stages of a profoundly important period of technological change. One report on the changes now underway in the electrical generation industry was released earlier this month by RethinkX, a US think tank (https://www.rethinkx.com/). Their report, “Rethinking Energy” is but one of many confirmations that BC Hydro management, notwithstanding their salaries, is far behind the leaders in the power generation/distribution industry.

    BC Hydro was, in decades past, an industry leader. Today, it will take a management revolution simply to catch up with the pack.

    Where are the “Young Turks”, both in the BC Legislature/Cabinet and in BC Hydro management?

    Like

Leave a Reply to Lawrence Fast Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s