VIGP Daily Hearing Summary For Thursday, June 26
DAY 9
The day commenced with a discussion between the Commission Chair, BC Hydro
counsel and panel No. 4 regarding the ability of BC Hydro to provide
additional runs of the Application portfolios in a timely manner. BC Hydro
responded that, assuming there were no significant changes to the elements
of the NPV model, alternative portfolios could be prepared quickly. However,
if some of the basic assumptions upon which the model is based are altered
the Commission should expect that it may take a week or more to finalize any
new portfolios.
BC Hydro entered Exhibit 4FF, which is an update of the three portfolios
filed in the VIGP application. The updates take into account new gas price
forecasts, updated $C exchange rates, reduced debt financing costs, updated
GSX capital costs and reductions in property taxes. Much of the morning was
taken over with commentary concerning the revised portfolio analysis.
Commission counsel cross-examination of BC Hydro Panel No. 4:
The aim of the Commission counsel's cross examination is to complete the
record of evidence that the Commission Panel will use to render its
decision. The Commission began its cross with questions regarding the
Levelized Unit Energy Costs ("LUEC") and Levelized Unit Capacity Costs
("LUCC"), the risk inherent in the portfolios and many questions that
continued to focus on the changes to the three VIGP portfolios as found in
Exhibit 4FF. There was a discussion regarding the sensitivity of the
portfolios to changes in the capital costs of the projects, differing heat
rates and the suitability/availability of steam hosts on Vancouver Island.
Commission counsel requested that BC Hydro perform some additional runs of
alternative portfolios. One request was for a portfolio that assumes a
different heat rate in Portfolio 3, a second requested that portfolio 2 be
rerun with the removal of sunk VIGP sunk costs and include an estimate of
TGVI costs of $.60/GJ for service on TGVI to ICP and VIGP. The morning
concluded with some questions regarding the Request for Tenders ("RFT") that
is being developed by BC Hydro and concerns that had been expressed so far
during the hearing regarding the confidentiality of BC Hydro's NPV model,
the large NPV values that were resulting from the model and the fact that
the models were based on an economic analysis rather than a financial
analysis.
After the noon break the Commission counsel continued with a series of
questions focusing on the Dynamic Simulation Comparison Study that had been
recently filed in the hearing as Exhibit 4X. There followed questions
regarding the transmission costs and the line losses factored into the
portfolios.
Commissioner Nicholls questions to Panel No. 4:
Commissioner Nicholls had several follow-up questions regarding sunk costs
and concerns around the discount rate on the sunk costs. She also had some
queries concerning the NPV of the GHG costs included in the portfolios and
the fact that this amount is essentially a zero value as there is too much
uncertainty surrounding this costs.
Commission Chair questions to Panel No. 4:
The Commission Chair had a lengthy series of questions for Panel No. 4. The
topics included potential liabilities for environmental costs (here he
referenced the evidence of Dr. Bramle, who put forth that it is likely that
financial liabilities will attach to VIGP before the end of the plants'
life). There was a series of questions regarding the NPV model used by BC
Hydro and in particular, the issue of sunk costs was again raised. The Chair
also expressed some confusion regarding the use of economic analysis and
financial analysis. The TGVI rebuttal evidence was also the basis for
further questions from the Commission Chair and in particular, the optimal
operation between the TGVI and BC Hydro systems. He views that there is
little evidence that the two systems will be optimalized. Finally, the Chair
requested that portfolios 1 & 3 be rerun without the sunk costs included.
Panel No. 4 was stood down.
Panel No. 5 (Dawn Farell, Lach Russel, Gorden Engbloom (consultant) and
DerekMcCann (consultant)) - Operation of the VIGP.
Norske Canada cross-examination of Panel No. 5:
Norskes' questions in the main revolved around the issue of the timing of
VIGP completion and the risk that the project may not be completed by 2006.
The questions also focused on comparison between the proposed Norske project
and the VIGP. The energy efficiency, flexibility, dispatchability and "BC
Cleanness"( i.e. ability to meet the Energy Policy target of 50 per cent
clean energy) of the two differing projects were debated. The reliability of
the VIGP as compared to Norskes' proposal was also questioned. The
cross-examination completed with a discussion on the performance of the ICP
and load-shedding schemes that would need to be implemented if VIGP was not
available when needed.
JIESC cross-examination of Panel No. 5:
The rest of the afternoon was taken up with the cross-examination by the
JIESC. The subject that was the focus of questions was primarily the gas
costs of VIGP and the forecasts of gas costs that BC Hydro has used in the
application and in its portfolio analysis. Mr. Engblooom is an expert
witness on gas price forecasting in Canada and responded to the majority of
the questioning. Mr. Engbloom provided a large amount of information
regarding the gas markets as they exist in Western Canada and what the
future holds for that market.
Evening public presentations:
The evening session began at 7 p.m. and was held to allow members of the
public to make presentations to the Commission Panel. Eight individuals made
presentations. All opposed to VIGP.
Mr. Bob McKechnie:
Mr. McKechnie has been actively involved in the hearing to date. His
presentation focused on the computer simulation model used by BC Hydro and
his lack of faith in its ability to provide accurate results. Mr. McKechnie
agrees that there is an urgent need to meet Vancouver Island's forecast
capacity shortfall but that the solution involves a new cable rather than
VIGP.
Mr. Albert Reid:
Mr. Reid is also opposed to VIGP. Mr Reid believes that the solution to
Vancouver Island's needs is to repower Burrard Thermal and to allow both
500kV cables to be rated at full capacity for planning purposes.
Mr. Vic Villeneuve:
Mr. Villeneuve has also been actively involved during the hearing. He is
opposed to the direction that BC Hydro is taking with the construction of
the VIGP. He has concluded that upgrading the existing transmission lines to
Vancouver Island is the solution.
Ms. Dianne Brown:
Ms Brown has been representing SPEC during the hearing. Ms. Brown's view is
that BC Hydro should be actively seeking out alternative sources of green
power such as wind energy and small hydro.
Mr. B.J. Dodson:
Mr. Dodson is opposed to the gas plant and does not understand the logic of
spending $700 million on what he terms a white elephant. He is in favour of
Norske Canada's proposal.
Ms. Jackie Howardson:
Ms. Howardson believes that BC Hydro should be examining the VIGP on a
holistic approach and not just on a economic/financial basis. BC Hydro
should be including the social and environmental cost.
Mr. Jim Parr:
Mr. Parr is opposed to VIGP. He also is critical of BC Hydro's N-1 planning
criteria and the result that one of the 500kV lines to Vancouver Island is
derated for planning purposes. He also believes that the 230 kV cable option
should be selected and that BC Hydro should have been able to co-ordinate
the retirement of the HVDC cables with the construction of the 230kV cable.
Mr. Gordon Bell:
Mr. Bell discussed many issues during his presentation. These touched on BC
Hydro's planning criteria, the BC energy policy, the Columbia River
downstream benefits, the security of pipeline delivery systems, the future
of natural gas prices. Mr. Bell concluded his presentation by saying that he
favours the TGVI and Norske proposals over the plan to build VIGP.