Booming economy forces Hydro to hike capital spending

Scott Simpson
Vancouver Sun
March 09, 2005

British Columbia's rapid economic growth is forcing BC Hydro to boost capital spending to keep pace with soaring demand for electricity.

Hydro plans to issue an open call to the private sector for 1,000 megawatts of new power in the upcoming fiscal year -- but also plans to spend $686 million on incremental improvements to its existing heritage electricity system.

That's $86 million more than Hydro expected last year when it did its 2005 outlook, Hydro power planning manager Mary Hemmingsen said on Tuesday. Since then, she said, B.C. has taken off and now leads Canada in economic growth.

"We're responding to the province's strong economic conditions which result in more load we have to serve," Hemmingsen said.

Details of Hydro's spending plans are contained in a 'resource expenditure and acquisition plan' submitted Tuesday to the B.C. Utilities Commission.

The plan pegs 2004 economic growth at 2.8 per cent -- and expects it to average 3.0 per cent over the next five years. It was 2.2 per cent from 1999 to 2003.

The Canadian average in 2004 was 2.6 per cent, while the United States grew at 3.0.

"Quite frankly, B.C. is leading the pack. It's at the top relative to the rest of the provinces in Canada," Hemmingsen said.

Growth in B.C.'s gross domestic product is also expected to strengthen -- 2.8 per cent over the next 10 years compared to 2.6 per cent in 2004.

"Although this is a small annual difference, the cumulative effects are significant over the forecast period," says the plan. "The markets for B.C.'s main commodity exports including pulp and paper, wood and wood products, copper and coal all continue to be strong.

"This improved outlook for the external and domestic economic environments has positive implications for electricity demand and sales in British Columbia."

Hemmingsen said the "lion's share" of the additional capital sought by Hydro is "driven by growth due to economic conditions."

For example, the Lower Mainland's thriving condo market has pushed Hydro to spend more on distribution -- poles and wires -- to deliver electricity to new customers.

Hydro and other agencies last year forecast modest growth for B.C. "Then we experienced a really significant uplift last year, about 1,000 gigawatt hours more than we had anticipated," Hemmingsen said. "That uplift has continued this year.

"Factors like the Canadian exchange rate typically put a damper on the forest industry or the mining industry but we're not seeing that happen because the commodity market is so strong because of China."

Hemmingsen said the additional spending won't lead to a rate increase of any consequence because the cost of additional capital improvements will be amortized over decades.

POWER HUNGRY:

B.C.'s mining sector is forecast to account for the largest growth rates in electricity sales among BC Hydro industrial customers over five years.

BC Hydro industrial sales, growth rates 2003-04 to 2008-09
Metal mines: +6.6%
Coal mines: +5.4%
Wood: -0.2%
Paper: +0.2%
Chemical: +0.1%
Other: -0.1%
Source: B.C. Hydro

© The Vancouver Sun 2005