B.C. Hydro is dropping its hard line approach to the future of Vancouver Island's electricity supply.
Although Hydro says it still considers a gas-fired generation plant at Duke Point the best solution to the Island's looming electricity shortfall, it told a B.C. Utilities Commission hearing it is now prepared to yield to alternative, private-sector projects -- with one caveat.
It suggested Monday issuing a call for tenders for proposals that would render the $710-million Duke Point-Georgia Strait gas pipeline crossing projects unnecessary.
But power planning manager Mary Hemmingson made it clear that Hydro wants firm bids that address the Crown corporation's standards for reliability, timeliness and low-cost electricity.
She also made it clear that proponents of independent power projects have a major sales job ahead of them if they hope to see their projects supplant the initiative Hydro has already had under way for three years.
"B.C. Hydro remains of the view that the VIGP (Vancouver Island Generation Project) is the best alternative for its ratepayers," says the call for tender proposal submitted to the commission for its consideration.
"With the large investment already made (approximately $100 million) in the development, gas supply, siting and regulatory events, it is unlikely that other projects can be undertaken more economically than completing the VIGP."
The province's single largest consumer of electricity, NorskeCanada, and Terasen, its largest natural-gas distributor, are proposing alternatives that they claim would be cheaper and cleaner than Hydro's plan and could be delivered more quickly.
Norske, which appears before the utilities commission hearing today, proposes a mix of strategies including generating electricity at its three Vancouver Island pulp mills and cutting its electricity consumption in order to loosen up more supply for Island residents.
Terasen proposes to boost capacity of its existing gas pipeline, saying this would render unnecessary the Georgia Strait Crossing gas pipeline Hydro proposes in cooperation with Oklahoma-based Williams Cos.
Hydro has in the past expressed doubt about the proposed alternatives, saying its own projects provide greater security of supply.
However, it indicated last month on the second day of hearings that it would consider issuing a call for tenders so it can evaluate alternatives that would kill its own project.
Hemmingson introduced a document on Monday outlining that call, but indicated that Hydro needs more details before agreeing that its own project would be more expensive than that of the independents.
"B.C. Hydro has examined these alternative options and does not currently have conclusive information to make this determination," says the call for tenders.
"Alternative projects that simply propose a temporary or short-term solution for the Vancouver Island capacity shortfall will not be accepted on the basis that B.C. Hydro is seeking a long-term solution, to provide year-round dependable capacity and to meet the immediate needs on the Island, as well as to address the system requirements in 2008/09 and beyond."
But "in the event that the CFT (call for tenders) identifies a preferred alternative to the VIGP, B.C. Hydro would proceed with that alternative or set of alternatives.
"In the event that the CFT does not yield acceptable proposals for sufficient and economic dependable capacity, B.C. Hydro would revert to the VIGP project."
Hydro was reminded last week by Energy and Mines Minister Richard Neufeld that the government wants the utilities commission to determine if the Duke Point plant and the Georgia Strait crossing are the most cost-effective means to reliably meet Island power needs.
Neufeld asks Hydro to proceed "as long as it makes economic and financial sense to do so" -- and hand the project over to the private sector after the commission has indicated its approval.
But Neufeld notes that B.C.'s new energy policy makes it clear that the task of developing new electricity generation in the province falls to the private sector.
Hydro proposes to issue the call for tenders in mid-September and wants a certificate to build Duke Point, even if it does not elect to proceed, as a safeguard to ensure that additional electricity supply will get built on the Island.
Hydro estimates that an aging pair of high-voltage cables to the Island will be taken out of service by 2007, and wants assurances that a private-sector alternative to Duke Point be operational by 2006.
Intervenors for NorskeCanada and the Joint Industry Electricity Steering Committee questioned Hydro's commitment to the call for private-sector submissions, given the short time frame it's requesting.
"I believe we will be able to demonstrate that this is a transparent process," Hemmingson told commission panelists.