For years, BC Hydro has reported profits that did not exist. The company’s Statements of Comprehensive Income (Loss) have been coloured with crayons, like ones used by late Ponzi schemer Bernie Madoff when he reported fictitious returns to investors.
As a result, BC Hydro’s financial statements carry billions of dollars of worthless “Regulatory Balances” as well as a whack of intangible assets. While kilowatt-hours delivered by the utility to residential, commercial and industrial consumers were less in 2020 than in 2005, assets employed to provide service grew in that 15 year period from $12 billion to $41 billion.
Site C and other projects will see BC Hydro assets top $50 billion within a few years.
Regulatory balances cannot grow continuously. Used properly, these do not create counterfeit results; they rise and fall over short periods to smooth operating costs. Unrestrained capital spending and needed write-offs of valueless items will result in major rate increases. But that presents a critical problem.
In earlier times, electricity demand was relatively inelastic. If a utility raised prices beyond the rate of inflation, consumers had little choice but to pay.
However, large consumers have an alternative today. Simply put, it is self-generation. As efficiencies rise and generating equipment prices fall, dependency on major utilities drops as well.
Corporate Clean Energy Buying Grew 18% in 2020, Bloomberg NEF
Corporations purchased a record of 23.7GW of clean energy in 2020,.. The increase came despite a year devastated by the Covid-19 pandemic, a global recession and uncertainty about U.S. energy policy ahead of the presidential election.
… Clean energy contracts were signed by more than 130 companies in sectors ranging from oil & gas to big tech. Underpinning the market is surging stakeholder interest in corporate sustainability and expanding access to clean energy globally.
To discourage heavy industry users from turning to self-generation, BC Hydro knows it must keep their electricity prices low and limit extra charges such as those for transmission equipment and service modifications.
Yet BC Hydro needs more revenue. In the near term, residential consumers and small-to-medium enterprises (SME)—who already pay much higher prices than heavy industry—will carry the burden.
But as costs of small-scale wind and solar power generation drop and viability of battery storage increases, even residential and SME consumers will turn to self-generation.
When customers get so good at energy efficiency that they need less of it. They also find outside sources for electricity, including distributed energy resources (DERs), which also leads to a decrease in their use of utility services.
Decreasing prices for storage options and mandates from cities and states for new construction to be green construction are contributing factors. All these conditions, when presented by numerous customers, cause utilities to lose revenue. – Energy Central
This is called the utility death spiral. Sadly, BC Hydro executives and BC’s politicians have demonstrated they are not prepared to adapt. Inevitably, they will move on and leave the serious problems for other people to solve.