IPPBC blasts BC Hydro over Duke Point cancellation

Jilted power producers give Hydro a strong jolt
Les Leyne, Times Colonist, 09 Jul 2005

Liberal tactics spark private-sector distrust
Michael Smyth, The Province, 12 Jul 2005

Power producers blast Hydro move
Brian Lewis, The Province, 12 Jul 2005

Power producers clarify
Steve Davis, IPPBC, The Province, 15 Jul 2005

Les Leyne
Special to Times Colonist
July 9, 2005

The same day that B.C. Hydro hiked its estimate of how much power it's going to need from independent producers and welcomed them to start bidding, those same producers delivered a strongly worded letter to the utility's boss urging him to come clean about what's really going on.

The odd conjunction of events is just another weird wrinkle in the ongoing multi-million-dollar effort to get more electricity on Vancouver Island, a project that has floundered all over the place for years without producing so much as a watt.

B.C. Hydro changed its long-term plan Friday and hiked its estimate of how many more opportunities there will be for the independent producers. But those new opportunities will come because the utility walked away from the last opportunity.

That was the Duke Point generating project that was stopped in its tracks last month when the Hydro board abruptly called off a deal with an independent producer that was days away from the potential green light in the courts.

"B.C. Hydro is confident there will be strong response to the call and healthy competition," the utility said in a news release outlining its latest plan.

Contrast that serene, encouraging message from the buyer with this one from the distrustful and resentful potential sellers: "Our confidence in B.C. Hydro and the way it conducts business is at an all-time low."

That's the message that independent producers association head Steve Davis delivered in writing Friday to Hydro CEO Bob Elton.

It's easy for Hydro to be confident about responses, because they run the electricity monopoly and control the only game that the independent producers can play. But Hydro executives won't be so confident about having partners who trust them, after getting Davis's letter.

The independent producers are "deeply distressed with B.C. Hydro's termination of the Duke Point project, the reason provided for its termination, the proposed contingencies and the very negative message the termination sends to investors and developers about operating in B.C.," Davis wrote.

A copy was made available to the Times Colonist.

The various companies that have chased B.C. Hydro up and down the Island over the years trying unsuccessfully to partner up on building a generating plant have spent more than $30 million, he estimated.

Davis wrote: "B.C. Hydro made the decision to terminate Duke Point after arguing five months earlier before the utilities commission that the project was urgently needed. B.C. Hydro also made the decision to terminate with full knowledge that it could be built on time by the developer despite an expedited appeal court challenge with little chance of success."

The project reached that stage after a $5-million hearing exercise at the utilities commission (the second one in this saga) after which the project was given the nod.

"After all this, it remains to be seen why B.C. Hydro, after extolling the virtues of the project to meet its customers' requirements, inexplicably reversed its plans and decided to kill a $285-million power project only moments from the finish line," he said.

The producers association says Hydro has offered no sound reasons for killing the project, and had no evidence that it wouldn't be built on time.

Davis warned the premature and costly decision will have far-reaching implications.

He said that while the association has a wide number of members with diverse interests, it is united in its view that the treatment of Duke Point "is tantamount to the poor treatment of all our members."

This all just sounds like a business spat, but the lack of progress, the about-faces and the air of suspicion could all add up to increased electricity costs, if not outright shortages.

The increased risk and uncertainty makes it more difficult for independent producers to do business, Davis wrote, and the Duke Point termination "has sent a chill through independent power and financial communities in B.C. and across Canada."

He suggested producers who do strike deals with Hydro will have a tougher time raising money, because there's so much more risk in the deal, given the track record. And B.C.'s record of late as a net importer of electricity will continue.

"By abandoning this project, B.C. Hydro has chosen to forego hundreds of millions in direct investment in B.C., new jobs and local tax revenue."

Just So You Know: Persons vastly more eminent than me also got copies of this rocket. They include Premier Gordon Campbell and three top cabinet ministers (Richard Neufeld, Colin Hansen and Carole Taylor).

They've stayed well away from this mess so far, but the thinking is that if Hydro doesn't arrange the meeting that producers want, maybe some cabinet clout could be brought to bear.

leyne@island.net

© Times Colonist (Victoria) 2005

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Michael Smyth
The Province
12-Jul-2005

The B.C. business community rarely, if ever, publicly gripes about the Gordon Campbell government -- and with good reason.

The last thing business leaders want to see is the tax-grabbing New Democratic Party return to power. So even when business has a beef with the Libs, they usually grin and bear it.

But even the Liberals' business buddies can be pushed too far.

In an earlier column, I told you how B.C. Hydro cancelled plans for a private contractor to build a $285-million power plant on Vancouver Island.

The Duke Point power project was just days away from a court hearing where it was expected to receive final construction approval.

And the project's backer, Pristine Power Inc., had offered to pay $50 million for some of Hydro's mothballed turbines as part of the deal.

The cancellation of the project so angered Pristine Power president Jeff Myers that he called up Energy Minister Richard Neufeld during his recent appearance on Nightline B.C., the talk show I host on CKNW.

"Are you saying you don't want my $50 million?" Myers ranted at Neufeld.

"We played by the rules. We went through a competitive bid. We won the Duke Point bid. A lot of time and energy went into this . . . Do you not want our money? It's OK to just walk away from the process?"

Is Myers the only guy in a big industry choking on some sour grapes?

Hardly.

The association representing the entire private-power sector has fired off a blistering letter to B.C. Hydro president Bob Elton.

"Our confidence in B.C. Hydro and the way it conducts business is at an all-time low," said the letter from the Independent Power Producers Association of B.C.

Association president Steve Davis said private power companies have spent more than $30 million trying to land a Hydro contract on Vancouver Island alone.

"B.C. Hydro made the decision to terminate Duke Point after arguing five months earlier before the utilities commission that the project was urgently needed," Davis wrote, adding the decision "has sent a chill through independent power and financial communities in B.C. and across Canada."

"By abandoning this project, B.C. Hydro has chosen to forgo hundreds of millions in direct investment in B.C., new jobs and local tax revenue."

Distrust and hostility from the private sector are hardly what the Liberals promised when they launched their privatization revolution in B.C.

Don't forget the government wasted $6.5 million trying -- and failing -- to privatize the Coquihalla Highway. They wasted millions more trying -- and failing -- to privatize government liquor stores.

Now the confusion and bad blood around B.C. Hydro's plans could mean higher electricity bills for all of us.

- - -

Listen to Nightline B.C. with Michael Smyth every weeknight at 7 p.m. on CKNW, AM 980

Voice mail: 604-605-2004

E-mail: msmyth@direct.ca

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Brian Lewis
The Province
12-Jul-2005

A string of failed bidding processes for new electricity supply run by B.C. Hydro has cost B.C.'s private power producers more than $30 million and may hit ratepayers in the pocketbook as well, the Independent Power Producers Association of B.C. has charged.

In a stinging letter to Hydro president Bob Elton, the IPPBC said the Crown-owned utility's recent cancellation of the $285-million Duke Point power plant on Vancouver Island represented Hydro's "third failed attempt" to meet the Island's urgent need for power.

"Plainly, with this decision, our confidence in B.C. Hydro and the way it conducts business is at an all-time low," IPPBC president Steve Davis said in the letter.

He warned that the decision has also "sent a chill" through the independent power and financial communities in B.C. and across Canada.

Davis also said Hydro's failed bid processes will result in higher borrowing costs for independent power contractors ,who in future bids to build power supply for Hydro, may add a "B.C. premium" in their costing.

"This in turn hurts the electricity ratepayer," he warned.

The letter was released publicly just as Hydro announced a revised call for tenders to meet the province's growing demand for electricity.

The new call, which will be formally made this fall, increases the amount of power Hydro is willing to buy from independent producers due to last month's cancellation of Duke Point. It's calling for a minimum of 1,800 gigawatt hours per year, or enough electricity to supply 180,000 homes, by 2011.

It killed the controversial project after opponents won leave to appeal an earlier go-ahead decision by the B.C. Utilities Commission.

Hydro said the project was axed because a court appeal would delay construction beyond its planned start-up date. Alternate generation options for Vancouver Island are now being studied.

"We were somewhat surprised and disappointed to receive the IPPBC letter," said Mary Hemmingsen, Hydro's director of power planning. She said the utility is now changing the way it structures bidding by private power producers so that as much pre-approval as possible is done by the Utilities Commission before the bidding starts.

In its letter the IPPBC said cancellation of Duke Point also means that the province remains a "chronic net importer" of power.

"By abandoning this project, B.C. Hydro has chosen to forego hundreds of millions in direct investment in B.C., new jobs and local tax revenue," it said.

"It has chosen to export these benefits to the jurisdictions from which it continues to import power at an ever-increasing rate. This is a losing situation for the B.C. economy."

blewis@png.canwest.com

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Steve Davis
The Province
15-Jul-2005

Michael Smyth's column titled "Liberal tactics spark private-sector distrust" left the impression that B.C.'s independent power community takes issue with the B.C. Liberal government.

This is not the case.

We support the government's 2002 Energy Plan and its efforts to restructure the electricity sector to increase competition by reviving the independent power industry.

As highlighted by the column, our concern focuses on B.C. Hydro, the utility's implementation of the energy plan and its surprising decision to terminate the Duke Point Power Project.

Steve Davis,

Independent Power Producers of B.C

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