LTAP: B.C. Utilities Commission ruling creates uncertain future for private power
COMMENT: Earlier this week, Minister Lekstrom announced royalty reductions to attract drilling investment in BC's northeast. Now he's raising the dreadful spectre of a "green energy" investment exodus if the BCUC's rejection of BC Hydro's Long Term Acquisition Plan (LTAP) is not dealt with. Cue: rumblings from the upset bowels of MEMPR.
But there's something else disturbing about this news article, and that's the parroting of the fear tactic - that capital will flee the province if enviros (or others, apparently now including the BCUC) don't stop whatever they are doing which might impede environmentally harmful projects. The threat is is usually a gambit employed by government. This time it's coming from Tzeporah Berman of PowerUp Canada. It's an eerie echo of the drum-beating she and other enviros were doing for the Liberals during the election.
The LTAP decision had created uncertainty with the Clean Energy Call, but it didn't reject it. And all the Chicken Little reaction from various corners of the energy discussion in BC is certainly shrill and heartfelt. But it isn't helpful.
Besides, investment capital does not have a lot of glamourous opportunities to rush to these days, and it's very clear that BC is a safe place to be doing renewable energy. "Capital" may be whining, but dollars to donuts it isn't going very far.
By Scott Simpson
Vancouver Sun
August 7, 2009
‘Surprise’ decision nixed BC Hydro contracting-out plan of 3,000 gigawatt hours
 A worker inside a water pipe at Plutonic Power’s run-of-river project in Toba Inlet north of Powell River on the Sunshine Coast. (Photograph by: Handout photo, Vancouver Sun files) |
VANCOUVER — A new layer of uncertainty has been added to the business plans of green energy proponents in British Columbia.
Billions of dollars of potential investment are at stake, according to Energy Minister Blair Lekstrom, and some commentators worry that any misstep by the B.C. Liberal government or BC Hydro could chase jobs and revenue right out of the province.
There is no quick fix.
The Liberals, BC Hydro and independent power producers are still pondering a “surprise” June 27 decision by the B.C. Utilities Commission that rejected Hydro’s plan to contract about 3,000 gigawatt hours of new private-sector power supply to meet future demand for power on the B.C. grid.
It had been widely assumed that the commission would approve Hydro’s “long-term electricity acquisition plan” — or LTAP in the abbreviation-focused world of utility regulation.
A favourable decision would have conformed with directives from the Liberals to Hydro and BCUC to expand B.C.’s green-power sector in order to meet presumed growth in domestic use and demand from utilities in the western U.S. for B.C. renewable power exports.
Two previous Hydro LTAPs were granted perfunctory approval by the commission.
This time, despite thousands of pages of documentation and months of public hearing and deliberation, the commission told Hydro to come back in a year with better estimates for future electricity demand.
The commission also denied Hydro’s request for $2 million for ongoing work to refine its 2008 Clean Power Call — which has attracted 68 bids from independent power producers.
Projects already contracted with Hydro, such as Plutonic Power’s ambitious set of run-of-river power projects in Toba Inlet, can continue, as will about 40 other run-of-river projects around the province.
It’s fair to describe some sections of the commission’s ruling as confusing.
On one hand, the commission suggests Hydro should consider moving more quickly to bring new power resources on the grid, in the interests of assuring customers a secure supply of power.
But the commission also suggests Hydro engage in a paper exercise in which the aging and unreliable Burrard Thermal generating plant be accorded even greater responsibility as a source of backup power in the event of demand spikes.
The decision apparently fails to consider the risk that independent power producers, who have already invested $40 million to compete in Hydro’s 2008 Clean Power Call, may simply pull their projects.
Hydro customers have been well-served by the commission since the Liberals moved the Crown corporation back under the BCUC’s authority in 2003.
The BCUC has overwhelmingly focused on the impact that any Hydro action will have on the province’s electricity rates, and a number of Hydro program applications have been revised or even rejected when the commission sniffed out an opportunity to shave even a hundredth of a cent from a proposed rate increase.
The commission’s decision last week appears to continue that practice, saying Hydro can still bring independent projects to the BCUC for final acceptance or rejection based on the cost of the power they will provide, albeit in a more protracted, regulatory forum.
BC Hydro president and CEO Bob Elton said the Crown corporation will bring new power projects forward on that basis, but acknowledged he is “very interested” to know what the government may choose do to about the situation.
The decision raises questions about the commission’s interpretation of recent government revisions to its mandate. Those revisions require the BCUC to incorporate environmental, social, economic and aboriginal concerns into its deliberations.
The intent of the government’s order was to instruct the commission to facilitate greater green-power development.
However, the decision appears to double the amount of regulatory scrutiny — and paperwork — to which independent power producers, or IPPs, are subject.
Most projects are already reviewed through B.C.’s environmental assessment office, a process that can last several years.
Now, IPPs may face additional months of preparation and scrutiny in the context of a BCUC regulatory review that could be as protracted and in-depth as the ones in which Hydro itself is regularly involved.
Groups worried about the environmental impacts of run-of-river projects have apparently gained an opportunity to debate their merits in a quasi-judicial setting.
But that extra work could raise the cost of developing small-scale generation projects, and ultimately rebound onto the price their proponents charge for the electricity they sell to Hydro.
“We’ve got grave uncertainty now in British Columbia about the future of this industry. If we are not careful, what we are going to see is investment and jobs and Canadian companies heading south,” PowerUp Canada executive director Tzeporah Berman noted.
The industry needs certainty to attract investors, and last week’s events are disrupting that process, said Steve Davis, president of the Independent Power Producers association of B.C.
“Investors don’t like this situation,” Davis said. “IPPs need a buyer, and we’ve continually urged BC Hydro to be a more steady buyer. The last call was in 2006, and here we are three years later in 2009. It’s tough, not just on suppliers, but on other stakeholders in the industry, whether it’s first nations or other interested parties, to have this boom and bust stuff — a big call followed by silence for years.
“That’s awkward.”
Lekstrom perceives a genuine risk that some IPPs will balk at additional regulatory review.
“I think that’s a reality. I’m not directly receiving the calls from the CEOs, but I think their concern was reflected in the share prices that [fell] significantly [after the decision]. There are billions of dollars of potential investment that our province could reap, through jobs, through capital investment.”
Lekstrom said there are some “mixed messages” in the BCUC’s ruling, and he believes that the government may have to provide some clarity to the industry — and to the commission.
The government could respond with a revised directive to the commission or to Hydro, but Lekstrom would not divulge any specific actions.
“We are right in the middle of those discussions right now. There are a couple of options open to us. I’m just not sure where we are going to go,” Lekstrom said.
“There are some mixed messages [in the BCUC decision]. They’ve done a big job going through all of that [deliberation] but there are some things ... that we’ve got to be clearer on.
“What I have made clear in every discussion I’ve had so far is that our commitment to a clean and renewable energy industry is there, and we are not wavering from it.”
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Posted by Arthur Caldicott on 08 Aug 2009