Nelson ordered to stop exporting electricity
By Scott Simpson
Vancouver Sun
May 13, 2009
City was turning profit on BC Hydro generation
An alleged electricity arbitraging operation by the city of Nelson has been halted by the British Columbia Utilities Commission after protests by BC Hydro.
Since July 2008, the city, through its Nelson Hydro subsidiary, had been exporting electricity generated at its Bonington Falls generating station on Kootenay River, then using power derived from BC Hydro to backfill local electricity needs.
Nelson Hydro was employing Fortis, the primary electricity utility in southeast B.C., to deliver the power to buyers outside the province, and also contracted a power-trading company to assist.
Hydro is obliged to fill all electricity orders placed via Fortis for the benefit of B.C. consumers -- but argued that its obligation was never intended as a mechanism to allow third parties to buy cheap power from the Crown corporation and then turn around and sell it at a profit to somebody else.
The city was making $50,000 a month, but Hydro said it could balloon into a $17-million-a-year enterprise -- with Hydro ratepayers ultimately bearing the cost.
Nelson was using the money to minimize electricity rate increases for its customers, and to finance local initiatives to cope with climate change.
Hydro asked the utilities commission for clarification on its obligations to provide power to Fortis, fearing that Nelson's actions could set a precedent.
On May 6, the commission released a decision that favoured Hydro, saying Nelson can only sell power where it can demonstrate that it is holding a surplus beyond the demands of its own customers.
Nelson Hydro general manager Alex Love said city officials are still reviewing the decision.
But he said the BCUC's ruling "makes it difficult for us to make the energy sales that we were doing."
"Basically, it says that while we are exporting energy we can't at the same time be consuming energy that was supplied by Fortis or through BC Hydro.
"There are a lot fewer times of the year now where we are able to export energy -- and a lot less energy."
BC Hydro media relations manager Susan Danard said Hydro recognizes that municipalities are cash-strapped and searching for revenue sources.
"The problem was that we felt -- and the commission ruled in agreement with us -- that they were raising revenue, which ultimately was coming off the backs of Hydro ratepayers province-wide. We have to keep in mind that the value of our low-cost energy is supposed to benefit everyone in the province."
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BCUC Decision"in the matter of British Columbia Hydro and Power Authority and Application to Amend Section 2.1 of Rate Schedule 3808 Power Purchase Agreement"
Posted by Arthur Caldicott on 13 May 2009