ADVERTISEMENT

The British Columbia Utilities Commission issued a stunning rebuke to B.C. Hydro Monday, rejecting a new generating plant that was key to a $710-million plan for Vancouver Island's future energy needs.

The provincially owned utility was told to look for a cheaper way to keep the lights on the Island burning, perhaps by attracting private-sector investment.

A BCUC panel ruled that Hydro failed to prove the $370-million gas-generating plant proposed for Duke Point near Nanaimo was the most cost-effective way to address the looming electricity shortfall for the Island's 700,000 residents.

The fate of a planned $340-million gas pipeline falls into question as a result of the decision.

Hydro says the failure of aging transmission cables carrying electricity from the B.C. Mainland to the Island is imminent and says population growth could mean rolling blackouts on the Island within five years.

But while the BCUC lauded Hydro's efforts to secure a new, autonomous electricity supply for the Island well in advance of any potential problems, it ordered the crown corporation to seek private sector bids for alternative projects.

The panel felt the Duke Point project was, in the short term, an overkill solution to the Island's power needs. It would have generated 265 megawatts, enough energy to serve approximately 200,000 households.

In the most significant development since the B.C. Liberals introduced their new energy policy last November, the BCUC ordered Hydro to solicit private sector bids for alternatives to Duke Point.

That's in keeping with the Liberals' vision for private sector involvement in B.C.'s electricity supply.

It is also indicative of the government's commitment through the BCUC to write a new chapter in the history of the province's electricity supply, which has been dominated by B.C. Hydro since then premier W.A.C. Bennett turned it into a public resource 42 years ago.

The task now falls to private sector competitors to prove that they can meet the Island's energy needs more cheaply, but as reliably, as B.C. Hydro.

The decision was handed down in late afternoon and Hydro officials had few comments, saying they need time to study the ruling.

In Nanaimo, Mayor Gary Korpan was not pleased with the decision. He said the city will lose out on $1 million a year in property tax revenue and hundreds of construction jobs.

"I still need to see the reasons, and I sure as hell hope there is an explanation as to how we're supposed to deal with the shortage of electricity," Korpan said. He said the need for a secure and dependable energy supply on the Island is acute.

"We've known that since we've had the brownouts and blackouts over the last two winters."

The panel rejected Hydro's assertions about the size and urgency of the problem, concluding that the Island's near-term electricity needs are only about half as large as Hydro claims them to be.

It said Hydro must prove that Duke Point "is the most cost-effective project to meet the needs of the ratepayers of B.C. Hydro" if it wants to proceed.

The panel recalled that a senior Hydro executive, in testimony during the Duke Point hearing, asserted that Hydro felt no further investigation of alternatives was necessary and that it was time to get on with the job.

In rejecting that claim it encouraged Hydro to issue a call for tenders to seek alternative projects from the private sector -- NorskeCanada has already indicated a strong interest in bidding for a contract to sell electricity to Hydro.

Hydro has only recently been returned to the scrutiny of the BCUC, after spending several years as a public agency outside of regulator control.

The BCUC acts as a public watchdog and regulates pricing and other activities by publicly and privately owned utilities in British Columbia which are likely to have an impact on consumers.

Hydro was cut loose from BCUC regulation in the mid-1990s but put back under the commission's control last November by the provincial Liberal government.

Hydro has already spent about $100 million on the purchase of equipment for the Duke Point plant.

Duke Point was to be sustained by a new $340 million seabed pipeline that would deliver natural gas from Washington State to Vancouver Island.

A federal joint review panel of the National Energy Board and the Canadian Environmental Assessment Authority approved the pipeline proposal in July. But its future is now unclear as a result of the BCUC decision.

Duke Point attracted criticism from a number of sources, including former BCUC chair Mark Jaccard, and from NorskeCanada, Hydro's biggest industrial consumer and the largest user of electricity on Vancouver Island.

Jaccard and a number of Duke Point opponents argued that low-impact energy projects such as run-of-river hydroelectric projects would give the Island a secure source of power that would not be dependent on volatile natural gas prices.

NorskeCanada, which operates three paper mills on Vancouver Island, testified during the Duke Point hearing that it could meet all the Island's needs more cheaply by adding generation equipment at its mills -- burning waste wood rather than natural gas -- and could add to the Island's electricity capacity in stages as needs grew.

Hydro critic David Austin said the jury is still out on whether or not Hydro will relent on Duke Point, saying that the Crown corporation could structure the call for tenders in such a way as to render rival projects uncompetitive.

Georgia Strait Crossing Concerned Citizens Coalition director Arthur Caldicott said the anti-Duke Point group was pleased by the BCUC's decision, and believes Hydro will be obliged to accept an alternative project that will have fewer adverse air quality impacts.