Pursuit of self-sufficiency 'means higher energy prices'

Critics warn BC Hydro consumers should be prepared to pay more for electricity

Scott Simpson
Vancouver Sun
July 10, 2007

BC Hydro customers should brace themselves for higher electricity prices as a result of British Columbia's pursuit of energy self-sufficiency, critics warned on Monday.

They say a recent B.C. cabinet directive instructing the B.C. Utilities Commission to make self-sufficiency its top priority, even ahead of price, means Hydro customers will be stuck with the bill for surplus power that will be sold to electricity utilities in the United States.

"There is no question it is going to raise BC Hydro's costs, and the commission presumably won't be able to do anything about that," said economist Marvin Shaffer, author of a recent critique of the government's new energy plan.

The plan calls for B.C. to be independent of U.S. imported electricity by 2015 -- and sitting on a net surplus of at least 3,000 gigawatt hours of power by 2026.

Energy Minister Richard Neufeld defended the government's action, saying the energy plan serves B.C.'s best interests in the long term and it was important for the utilities commission to reflect that objective.

Shaffer says the plan is flawed because it's founded upon B.C.'s electricity requirements in years when Hydro's reservoirs are at critically low levels instead of their average volume.

"In an average water year under this policy we will always have at least 4,000 gigawatt hours of surplus power. That's a lot of electricity. That surplus will just be sold in the marketplace and if most forward price forecasts are correct, it will be sold at a loss," Shaffer said in an interview.

B.C. at present has the third-cheapest electricity rates in North America due to the province's abundance of low-cost hydroelectricity.

The BCUC regularly reviews Hydro's rate applications and plans to add new sources of power -- and frequently orders Hydro to cut back on the rate increases it proposes.

New independent power projects approved by Hydro in 2007 are expected to cost 25 per cent more than existing residential rates.

Shaffer said the commission may be forced to accept projects it might otherwise turn down.

"The commission won't be allowed to ask Hydro, 'Why are you buying that? What value do you think it will provide? At what price do you think you are going to be able to sell the surplus?'"

The B.C. Public Interest Advocacy Centre disagreed, saying the utilities commission will retain its ability to make decisions that consider the price of power.

Advocacy Centre executive director Jim Quail said the government was "flagging some issues" for the BCUC by issuing the directive.

"It doesn't state that self-sufficiency overrides other normal considerations that the commission would be taking into effect," Quail said.

Steve Davis, president of the Independent Power Producers association of B.C., sees the directive as a straightforward follow-up to the energy plan announced earlier this year.

Davis said higher prices for new power sources are a matter of economics -- Hydro has retired the debt on its older assets so they are comparatively cheap, and rising construction costs mean new power sources will cost more.

Lori Winstanley, campaign director for Canadian Office and Professional Employees Union Local 378, said the directive erodes the public policy process the government established when it brought Hydro back under the authority of the utilities commission in 2002.

"As a union we support an open and transparent policy process and if anything, increasing the BCUC's vigilance -- not finding ways to make them weaker," Winstanley said in an interview.

Minister Neufeld said the province needed to "make it clear" to the BCUC that electricity self-sufficiency is a government decision, as set out in the energy plan.

"It's a directive from the government to the utilities commission, which is not uncommon," Neufeld said in a phone interview. "We're saying that electricity has to be generated within the provincial borders and we want some insurance on top of that."

Hydro critic David Austin said hydro power carries a fundamental risk -- drought -- that requires some kind of backup.

Austin said in a phone interview that the present backup, the 40-year-old Burrard thermal generating plant in Port Moody, is no longer reliable and that the government's commitment to green energy means development of new independent power sources is a prudent alternative.

Special Order No. 10 to the BC Utilities Commission, 25-Jun-2007
(Section 3 is the important language in this directive.)