BC Hydro abandons Duke Point plant; $120M investment lost

Scott Simpson, Vancouver Sun, 18 Jun 2005
Chronology, Vancouver Sun, 18 Jun 2005

Scott Simpson
Vancouver Sun
June 18, 2005

Board of directors decided to avoid another battle with project's opponents

BC Hydro abandoned its trouble-plagued Duke Point electricity project Friday, walking away from a $120-million investment and raising doubts about the supposed "risk" of blackouts on Vancouver Island.

Hydro's board of directors decided to notify its private sector partner in the $285-million project that it was quitting, rather than face another legal battle with project opponents -- this time in the B.C. Court of Appeal.

The project has been steadily opposed by community and environmental groups, as well as the province's major industrial consumers of electricity -- mainly on the premise that it was costly and unnecessary.

It would have added about three per cent to each Hydro customer's monthly power bill.

Earlier this week, the appeal court granted Duke Point opponents leave to appeal the project, albeit on narrow legal grounds.

The court's decision opened a window in Hydro's contract with Duke Point Power of Calgary, enabling the B.C. Crown corporation to abandon a process that began in 1994 and racked up $120 million in regulatory and equipment costs.

These costs were all borne by B.C. taxpayers via writeoffs entered into Hydro's financial books.

"Under these circumstances, the provincial government has to take a close look at the way this was handled by BC Hydro and the B.C. Utilities Commission," said Hydro critic David Austin.

Until the board of directors' decision, Hydro senior staff had steadfastly defended the project -- portraying it as Vancouver Island's best defence against potential failure of aging transmission lines that deliver electricity from the mainland.

Hydro vice-president Bev Van Ruyven is confident it can provide reliable service to the Island by 2008, when a new high voltage cable is set down across the Strait of Georgia from Tsawwassen.

In the interim, it will ask industrial consumers including NorskeCanada to scale back their consumption of electricity during peak winter demand -- which is what Norske had long proposed as the cheapest alternative to building a new power plant.

Dan Potts, who represents B.C.'s major industrial consumers of electricity, said he suspects the Hydro board killed Duke Point because rising natural gas prices made it too expensive.

"I think over time it became apparent that, really, it is not a sound economic choice to proceed with this plan," Potts said.

Duke Point Power president Jeff Meyers said he was "shocked" that Hydro had exercised its right to terminate the contract -- he said the appeal was confined to "narrow legal grounds" and was unlikely to succeed.

He also took issue with Hydro's claim that the appeal process would prevent the Duke Point plant from being completed on time for the winter of 2007.

"We would have been happy to demonstrate to Hydro that we can meet our schedule," Myers said.

Nanaimo Mayor Gary Korpan, whose city welcomed the jobs and taxes the project was promised to deliver, expressed outrage. He called the entire process a "total waste of everyone's time" and said Hydro "lied" to residents when it stated that the project was urgently needed.

"If there is any vestige of decency left at BC Hydro, those executives who did this need to apologize to the citizens of Vancouver Island and then resign," Korpan said in a prepared statement.

He called on the provincial government to launch a public inquiry into Hydro's handling of the entire process -- with the aim of recovering the money that was "wasted on this travesty."

Hydro spent $50 million on preparations -- later abandoned -- for a natural gas pipeline from Washington state to Vancouver Island to feed Duke Point, and $70 million on turbines and other equipment for the plant itself.

In addition, Hydro pays $5.5 million to Duke Point Power, and loses the opportunity to sell the turbine equipment to the company for the comparative bargain price of $50 million.

Community opposition to the project was led by GSX Concerned Citizens Coalition whose president, Tom Hackney, said he was not surprised by Hydro's decision.

"There have been times in the past when it looked like BC Hydro had a very strong momentum to get their project through but we have been very close to the evidence for and against the power plant -- and we were always very confident that we had a strong case against it," Hackney said.

B.C. Energy Minister Richard Neufeld blamed the New Democrats, who initiated the Duke Point process and committed most of the $120 million before the Liberals took power in 2001.

He said he supported Hydro and noted that as the process to build Duke Point dragged on, through BC Utilities Commission hearings and then the courts, it became obvious that it would be just as expedient to run a new high voltage cable to the Island.

Opposition leader Carole James acknowledged that the NDP had initiated the project, but noted that it was the Liberals' decision to privatize it and to persist with it despite four years of widespread public opposition.

"They continued to waste money on it. In my mind it's another example of this government's ideological drive to push privatization. It was another example of another project, like the Coquihalla Highway, until people complained too loudly and then had to back off.

"That shouldn't have to be the only way you get the government to recognize a mistake."

ssimpson@png.canwest.com

Duke Point points
- Project cost: About $285 million
- Plant: Would have produced enough power for 252,000 homes.

© The Vancouver Sun 2005

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Scott Simpson
Vancouver Sun
June 18, 2005

Chronology of the Duke Point gas-fired electricity generating station project:

1994 A request for proposals for independent power producer projects is issued.

1995 BC Hydro raises concern about Vancouver Island's critical supply issues.

1996 A gas strategy was developed and included: Natural gas-fired co-generation plant at Campbell River; second natural gas-fired co-generation plant at Port Alberni; other potential gas-fired generation on the Island; and, new supply of natural gas to Vancouver Island for these plants.

September 1998 BC Hydro and Port Alberni Cogeneration Project sign a key agreement to build the plant at Port Alberni.

[NOTE: an important part of the story is omitted in this interval from 2000 to 2002]

Jan. 2002 A rezoning proposal to accommodate a plant in North Cowichan faces overwhelming public opposition and is defeated.

Jan. 31, 2002 BC Hydro and Calpine announce that the Duke Point area is the preferred location for the plant

April 10, 2002 BC Hydro announced agreement of the Vancouver Island Generation Project at Duke Point.

Sept. 20, 2002 U.S. federal regulators (Federal Energy Regulatory Commission) approved the U.S. portion of the project.

March 12, 2003 As required by the provincial energy plan, BC Hydro applies for a certificate of public convenience and necessity for the B.C. project.

Sept. 8, 2003 BC Utilities Commission denies application.

Nov. 28, 2003 The Canadian National Energy Board approves the application to construct and operate a natural gas pipeline to Vancouver Island, subject to regulatory approvals for the Vancouver Island Generation Project.

Dec. 15, 2003 The National Energy Board authorizes construction and operation of the Canadian portion of the project.

Dec. 22, 2003 An unconditional environmental assessment certificate is granted for the project.

Dec. 20, 2004 BC Hydro abandons Georgia Strait crossing project at a cost of $50 million.

Feb. 17, 2005 B.C. Utilities Commission rules that $285 million Duke Point Power project can proceed.

June 14, 20005 B.C. Court of Appeal grants opponents of Duke Point power project leave to appeal the BC Utilities Commission decision in favour of the project.

June 17, 2005 BC Hydro board of directors votes to abandon Duke Point power project, at a cost to taxpayers of $120 million.

© The Vancouver Sun 2005

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