In the year ended March 2021, BC Hydro bought 14,630 gigawatt-hours of electricity from independent power producers (IPPs). The utility paid $1,403,000,000 for that power, an average of $95,899 per gigawatt-hour.
Meanwhile, BC Hydro sold surplus electricity on trade markets. It realized $42,520 per gigawatt-hour on those sales, a per-GWh difference of $53,379.
BC’s private power scheme was constructed after Enron’s market manipulation had driven wholesale electricity prices in the California toward $400,000/GWh.
Gordon Campbell’s Liberal government required BC Hydro to spin off its transmission system to a new company that would provide facilities to all, including nascent independent power producers. The IPPs expected to profit hugely by selling low cost power to American markets.
However, order was restored to electricity markets in the western USA. In the first quarter of FY 2002 BC Hydro’s trade sales realized $376,518 per GWh. In fiscal 2003, revenue was down 95% to $20,268 per GWh.
If BC’s IPPs had to sell on the open market, their returns would be modest. So Liberals decided that BC Hydro would contract for the private power, based not on market price, cost of production, or the utility’s need for electricity. BC Hydro would pay prices that guaranteed successful privatization of public wealth, something that made Gordon Campbell’s heart beat faster.
To promoters, the arrangement was spectacular. Unbreakable contracts backed by British Columbia allowed the fortunate few to finance projects with minimal equity and almost zero risk. For many, that presented the opportunity to begin a project and quickly flip it to one of many long-term energy investors. The result? Instant low-tax rewards.
So the deals with BC Hydro were great for IPPs. How were they for the province’s electricity consumers?
In ten years, BC Hydro paid Independent Power Producers more than $5 billion above the price it was selling equivalent amounts of electricity through trade.
Categories: BC Hydro