Powerex's right to import U.S. electricity questioned

Scott Simpson
Vancouver Sun
March 10, 2005

COMMENT: "Producers in the United States supply about 12 per cent of British Columbia's electricity requirements," Scott Simpson claims in this article. Powerex does buy a lot of electricity from Alberta, Washington and to a lesser extent from other US states. But it is in the interests of trading power for revenue that this is done, not to meet domestic needs, not to satisfy "British Columbia's electricity requirements".

We buy cheap, and sell dear. We conserve water in our reservoirs at night and during low demand periods - when power is available for purchase at rock-bottom prices. And we open the floodgates when prices on US markets are high. It's brilliant business, good for the provincial treasury, and there's nothing wrong with it.

But that's not how the story is told. Instead, we're led to believe that BC needs the power. We're told repeatedly that BC is a "net importer", that we're buying power to meet BC's "electricity requirements".

In telling the story this way, Simpson echoes BC Hydro and the provincial government, both of whom apparently want to plunge BC into an orgy of capital-intensive capacity building - gas-fired plants on Vancouver Island and elsewhere, coal-fired plants, perhaps Site C - all under the pretext that BC is running short of power. It's not true. It's manipulative and deceptive and a breach of trust with British Columbians to present the facts this way. - Arthur Caldicott


California's $1-billion electricity war with Powerex is entering a new phase with two aggrieved utilities in the state launching an attack on the BC Hydro-owned company's licence to import power from the United States.

If the utilities are successful in their attack, which came in the form of a petition to the U.S. Department of Energy, it could lead to higher electricity prices for consumers in British Columbia who are already dependent on producers in the United States.

Alternatively, the petition could be used as leverage to force Hydro to refund hundreds of millions of dollars in profits earned by Powerex during the California energy crisis of 2000-2001.

Producers in the United States supply about 12 per cent of British Columbia's electricity requirements -- an estimated $375 million worth of power in 2005 -- with Powerex responsible for bringing it in at the lowest possible cost to Hydro's customers.

Since 1998, Powerex has used an authorization from the U.S. Department of Energy (DOE) to buy electricity in the U.S. and route it to Canada when market prices are at their lowest.

The DOE export licence expired last month and Powerex is seeking what it presumed to be a routine five-year extension.

However, the California utilities, Southern California Edison and Pacific Gas and Electric, are asking the DOE for permission to oppose a routine renewal.

They want the licence modified with tough new conditions to bar Powerex from making extraordinary profits as it did during the 2000-2001 crisis.

They allege that Powerex used market power to manipulate the California electricity market during the state's 2000-2001 electricity crisis and "was buying power in the California markets where it was desperately needed and exporting it to Canada."

"Powerex has demonstrated a pattern of abuse of its export privileges in connection with the energy crisis that existed in the Western United States in 2000 and 2001 ["Energy Crisis"]," says the petition filed this week.

It says evidence that surfaced during an investigation of Enron's role in precipitating the California crisis shows that "Powerex continued to export power to Canada during system emergencies and blackouts" in violation of the conditions of its DOE export license.

The petition says that without tough new conditions on Powerex's export licence, Powerex could "impair the sufficiency of electricity supply within the United States."

The petitioners recommend a licence renewal be contingent on conditions including hour-by-hour paperwork for all import and export trades -- and a commitment by Powerex to refund profits from power sales if U.S. electricity market regulators determine it broke rules against market manipulation.

Hydro media relations manager Elisha Moreno said Powerex continues to operate in the U.S. while its application is being heard.

She said Powerex expects the DOE will renew the licence and notes that U.S. authorities have already absolved Powerex of any misconduct in its dealings with California during the crisis.

But even in the unlikely event that the licence is not renewed, it would not stop Powerex from selling B.C.-made electricity into the U.S. -- such as the marketing of the downstream benefits of the Columbia River Treaty.

As well, Hydro could continue to meet British Columbia's electricity demand with U.S. power, by purchasing it from another trading company.

© The Vancouver Sun 2005