Hydro rate increase looms

Scott Simpson
Vancouver Sun
03 Jan 2004

Three-per-cent hike predicted to help pay for new Island power plant

BC Hydro customers should learn in a few days the full cost they will pay for a new Vancouver Island electricity supply after the B.C. Utilities Commission ruled Hydro cannot keep secret the details of a $280 million deal with a private sector power company.

Industry stakeholders and other Hydro watchdog groups began this week to pore over financial details of a contract between Hydro and Pristine Power, and their preliminary estimates suggest a new gas-fired generating plant on the Island will boost electricity costs for all Hydro customers by about three per cent.

Hydro's own estimate, based on information provided to the B.C. Old Age Pensioners Association, is that consumer prices would have to rise 2.2 per cent in the first year of operation.

Hydro is seeking a secure supply of electricity for the Island and announced in November a deal with Pristine to buy electricity from a 252-megawatt gas-fired generating plant to be built at Duke Point, near Nanaimo.

Hydro and Pristine had sought to keep certain details of the deal confidential, particularly those that set out the price Hydro will pay for electricity from the plant, for what are described as competitive reasons.

But the BCUC rejected that stance in late December and critics of the project are now examining documents that set out, in complex fashion, the pricing formulas that will apply to Pristine's electricity sales to Hydro.

Hydro power planning manager Mary Hemmingson declined to comment on the commission's decision, saying the appropriate forum is before the BCUC.

A public hearing on Hydro's selection of Duke Point is scheduled for Jan. 17 in Vancouver. The deadline for interveners to file written evidence on the project is Thursday.

"We are still committed to the fact that the Duke Point award is the most cost-effective solution to meet the needs on Vancouver Island," Hemmingson said on Monday.

She said other options don't offer the same standard of reliability as Duke Point.

The Joint Industry Electricity Steering Committee, which represents Hydro's major industrial customers, expects it will take a few days to calculate the actual cost to consumers.

Dan Potts, the steering committee's executive director, said recently that Hydro customers should "brace themselves for higher prices" if the utilities commission approves the Duke Point plant.

Hydro plans to use Duke Point only on a part-time basis, to bump up electricity production when demand is strongest.

Potts says the net effect of that plan will push the production cost of Duke Point electricity to $200 per megawatt hour -- more than three times the amount Hydro residential customers now pay for electricity.

"We were frustrated that we didn't have access to the kinds of details that we think the public deserves to see," said steering committee spokesman Brian Battison.

"The public can only make informed decisions or comment if they have all of the facts. Those facts were not forthcoming, and so we welcome the utilities commission's decision to make the details of that contract public.

"With that information we can now make a determination on the cost impact for all electricity consumers in the province, from the VIGP project."

Meanwhile, the industry steering committee and other groups continue to express concern about Hydro's selection of a project relying on natural gas as fuel.

Natural gas has tripled in price since the Duke Point project was first announced in 2000, and there is a strong belief among market watchers that gas is no longer a cost-effective fuel for electricity generation.

The National Energy Board has been warning for two years that the maturation of the nation's gas patch, the Western Canada Sedimentary Basin means a permanent tightening of North American gas supplies.

In November, the Canadian Energy Research Institute described natural gas as "an unattractive option for baseload power" if gas prices remain high -- a scenario it portrayed as likely.

"That is consistent with our concern with respect to this project -- the vulnerability that ratepayers have in terms of their exposure to gas prices," Battison said.

JIESC wants the utilities commission to reject Duke Point.

© The Vancouver Sun 2005