Liberals wary about the politics of power

Vaughn Palmer
Vancouver Sun
Tuesday, November 26, 2002


VICTORIA - For the long-term well-being of the province, the most
important aspect of the new B.C. energy policy is probably the push
to develop non-hydro-electric resources.

The B.C. Liberals want to exploit an estimated 100 trillion cubic
feet of natural gas and billions of barrels of oil.

They are looking to the barely-explored possibilities of coal bed
methane, having hatched nine pilot projects to begin tapping into an
estimated 90 trillion cubic feet of methane reserves.

In a province where the petroleum resource already delivers more
direct revenues than the forests, those sources represent the greater
significance for growth and change.

But the year-long furore over Hydro privatization ensured a focus on
hydro-electric power when the Liberals took the wraps off their
energy policy Monday.

The Liberals expected as much. And, given all the controversy, they
pulled back from their most sweeping proposals in that area, opting
for change that was more incremental.

The contrast between what the Liberals considered and what they
approved was highlighted in two reports.

The first was that of the government-appointed energy task force,
delivered last March and kept confidential until now.

The second was the cabinet-approved energy plan, a 26-point,
watered-down translation of the task force recommendations.

The task force wanted to address the province's long-term power needs
by moving toward a free market in electricity. It envisioned an end
to cheap power and the breakup of B.C. Hydro into seven, privatizable
pieces.

Recognizing that might ruin them politically, the Liberals went for a
more cautious approach.

Their energy policy promises a "Heritage Charter" to insulate
provincial ratepayers from paying the full market price for at least
a decade, perhaps longer.

I'm guessing the electricity rates may increase 10 to 15 per cent
over the next three to five years. But nothing like the 30 per cent
envisioned in the shift to the marketplace.

As for Hydro, it will remain largely intact. The government will
establish a smallish (maybe 400 employees), publicly owned company to
operate the transmission grid.

The transmission lines, distribution network, generators, dams and
reservoirs will continue to be owned by the one, big publicly owned
utility, still known as B.C. Hydro.

The Liberals decided to leave all the assets under one roof for
simplicity's sake, if nothing else. The transmission grid makes
contact with native land at an estimated 200 locations. Any change of
ownership would have embroiled the province with First Nations, the
federal government and probably the courts.

At the same time, the Liberals want to maintain Hydro's lucrative
power sales in the U.S. But some American operators have expressed
concern about hidden subsidies in the rate structure.

The Liberals also want to encourage private companies to build power
plants in B.C., something the previous New Democratic Party
government tried to do as well. But some private firms have balked at
risking their money, claiming Hydro would deny equal access to the
grid.

The separate transmission operating company is supposed to address
both export and domestic concerns, bringing transparency to the cost
of operations while ensuring the grid is run independently of Hydro.

The Liberals may be overly cautious in trying to protect access to
the U.S. market. But given the potential returns -- $100 million a
year, on average -- caution is in order.

As for private power, I doubt the Liberals will be able to attract as
many takers as they expect.

This government talks a good line on the marketplace. Indeed it has
talked itself into a whole mess of political controversy.

It has yet to deliver on most of its reforms, and private investors
would be wise to exercise their own degree of caution before risking
their money.

Even if private operators were persuaded by the policy changes, they
would still face a long, frustrating approval process.

The current mix in the system is 90 per cent public power, just 10
per cent private. Even in a best case scenario it is hard to envision
much of a shift -- 85/15? 80/20? -- over the next decade.

So the end result of the Liberal direction on electricity policy is
nothing like privatization.

Not now, not for the foreseeable future, which will be shaped by
other aspects of the Liberal energy policy in any event.

vpalmer@direct.ca