Friday, August 07, 2009

What I think the utilities commission was saying about private power

The B.C. Utilities Commission deserves a slap upside the head for its ruling on B.C. Hydro's plans to sign deals with private power companies that will cost consumers billions of dollars.
Not for its substance. As far as I can tell, the murky, acronym-laden swamp of a decision makes sense.
But it's incomprehensibility - not just to dabbling journalists or interested readers, but to energy experts - is appalling.
The utilities commission exists to protect the public interest. B.C. Hydro is a monopoly. It sold $2.8 billion worth of electricity within the province last year - about $650 for every person in the province.
The commission, among other things, scrutinizes B.C. Hydro's operations and plans to make sure it isn't making mistakes that result in unnecessarily high electricity costs.
This decision ruled on B.C. Hydro's long-term plan to meet energy demand in the province.
And the utilities commission had some big doubts.
It had to look at several components of the plan, starting with B.C. Hydro's forecast of future energy demand. That was OK.
Then it reviewed B.C. Hydro's plans for reducing demand, through increased efficiency and conservation and off-peak power. Curbing demand can be cheaper than adding new dams or wind turbines.
Those didn't pass the commission's scrutiny. The corporation wasn't doing enough, it ruled.
Next the commission looked at how B.C. Hydro proposed to meet the province's energy demands in the coming decades. That matters because wrong decisions mean unnecessary costs for consumers and companies. If B.C. Hydro enters into a long-term deal to buy electricity from a company developing a big power project on a B.C. river system, for example, when it's not needed, consumers pay the price.
The utilities' commission rejected B.C. Hydro's long-term energy acquisition plan.
The Crown corporation, acting on government direction, has set three criteria for new power. It has to be green - hydro, wind or burning wood waste. It has to come from private companies, not B.C. Hydro's own projects. And the capacity has to be so great that no imports would be needed.
That's consistent with the government's decision, two years ago, that climate change was an over-riding issue.
But it comes at a cost. New, green energy from private companies is expensive. If B.C. Hydro commits to paying too much, or buying too much, energy prices will be higher than necessary.
The commission - based on my reading of an opaque 200-page decision - thought B.C. Hydro could be planning to buy more power than was necessary, building a large cushion into its plans.
And the corporation had reduced the potential capacity of Burrard Thermal, the gas-powered plant in the Lower Mainland. Burrard is old and inefficient and produces a lot of greenhouse gases. But it can provide cheap standby insurance power, an alternative to costly contracts with private power corporations.
The ruling baffled everyone. It didn't order a halt to the current call for new green power projects from private corporations. But it did reject B.C. Hydro's plans to reach power deals with those companies.
Plutonic Power, one of the big IPPs, saw its share fall 19 per cent on the day after the decision's release, making it worth about $35 million less.
The bottom line, I would say, is the utilities commission judged that B.C. Hydro is trying to buy too much expensive energy from private companies, at consumers' expense.
The Crown corporation is in an interesting spot. The government and the well-connected private power companies want it to go ahead with more long-term deals.
But the utilities commission has served notice that B.C. Hydro will be taking a risk if it goes ahead.
The commission might not allow those costs to be passed on to consumers, which would threaten the $500 million - more or less - the government expects in profits from B.C. Hydro.
Unless, of course, the government abandons its commitment to an independent utilities board and opts for political interference.
Footnote: Energy Minister Blair Lekstrom called some of the analysts for the big investment houses who track the private power companies operating in the province in the wake of the ruling. The ministry won't say who got the chats with the minister. No transcript exists of the briefing, the ministry says.


Dawn Steele said...

Paul, I actually sat down and waded through the report myself one morning, prompted by curiosity about some of the assertions being made.

You're absolutely right that the Commission does itself, and the public to whom it's supposed to report, no favours by issuing its decisions in such an opaque and unaccessible manner. I fully understand that they need to deal with the complex technical issues at stake in sufficient detail. But surely they could find someone to translate the key points into a brief, plain English summary for the benefit of the rest of us?

The part about BC Hydro being required to buy all new energy from private sources, whether or not this is in the public interest, also went over my head. Frankly, if this is accurate, it's shocking. On what grounds did Premier Campbell and the BC Liberals justify requiring BC Hydro to acquire new energy resources from private providers, even if this is not in the public interest, and aren't there checks and balances (Auditor General, Ombudsman, Opposition)in place to ensure at least a semblance that the public interest is considered in the drafting of public policy?

Norman Farrell said...

I too spent considerable time wading through the BCUC decision and agree that it is written so poorly that any but the most dedicated of readers will end up frustrated and uncertain that all points are understood. The inclusion of a 3-page appendix of acronyms was a clear warning.

The BCUC is in an untenable situation. The Liberal Government is serving different masters and the aims conflict. In part, there is a sincere awareness that green energy sources are necessary and that time to make substantial change is growing short.

But Campbell and his imperious cadre are opposed to public ownership and keen to continue transferring common assets to a favored few.

So BCUC needs to reconcile regulations and directions based on sound public policy with antithetical directions that are ideological.

BC Hydro is caught in a similar bind. For decades, the company has operated effectively, delivering billions to the public purse from distribution of substantially clean energy. Now, it is directed to deconstruct itself, not to gain efficiencies but to satisfy Campbell's vision of who should own our province's most crucial assets.

Paul, I think you might also comment on the more than 20 former Liberal insiders and government associates that made the rules for private power then leaped the counter to stand first in line to take advantage as members of private businesses.

Anonymous said...

Add my vote to the list of those who are both bewildered and disappointed with the BCUC ruling for its lack of consistency or common sense.

I am somewhat conflicted because I have long believed that the mandate of the BCUC is strictly to ensure that power is delivered at the lowest possible cost to the public. If that is solely the criteria and concerns such as environmental impact are not taken into account than the ruling makes perfect sense. But I have since been informed that the mandate of the BCUC was broadened and enhanced at some point over the past few years. I have yet to find evidence of this (admittedly I have not researched this matter very thoroughly) so I am going to look into that further.

If we are to pursue “green energy” than indeed it will carry significantly higher costs to develop regardless if said “green energy” is developed privately or publicly. Given Government’s track record of building fast ferries or convention centers I submit potentially even more costly if done publicly.

Not wanting to engage in the ideological debate over how power infrastructure is best constructed I would rather focus on future energy needs. Here I would have liked more clarity from the BCUC on precisely what the forecasted energy demands are and what can be achieved through conservation. I am one of those who supports the idea of “smart meters” and believe they can significantly help our energy conservation needs by helping to better educate the public. Unfortunately I am certain like everything else in B.C. when it comes to power the idea of smart meters will also result in some ideological idiocy by the usually special interest groups.

Norman Farrell said...

Anonymous is aligned with BCUC in thinking about smart meters. The Commission found that BC Hydro was trying to contract for new power without sufficiently considering conservation measures. Friends in southern France avoid peak energy times because it is expensive to use electricity then compared to off-peak hours. The pricing difference is quite significant and the people are very aware, not only of the time of day they use energy but their total consumption too. Awareness encourages conservation. Here, I know someone who touches one button and his entire 2 story house lights up. If he's not home to touch the button, the system is programed to light up anyway. Our society is wasteful and the dual pricing used by BCH now is far too timid to have much effect.

Beverly said...

You all seem to miss (my opinion) the loss of well paying jobs by using smart meters.
Surely we can save the jobs and also have smart green initiatives (community ownership of new energy) plus many other ideas in BC

Dawn Steele said...

THE BCUC doesn't develop conservation plans or make forecasts about future requirements - it can only comment on the plans and projections presented by BC Hydro. And it found BC Hydro had not done enough homework, particularly re potential savings that could be gained from more aggressive conservation measures, so it ordered the utility to go back and come up with something better.

If the ruling seems conflicted, it's because the BCUC mandate is conflicted. The Commission's mandate, as I understand it, is to review plans and proposals and comment on whether they are in the public's best interest. It must also consider whether BC Hydro's plans are consistent with the policy directions set by the Province. The real problem seems to be that the Province's own policies are contradictory and not necessarily in the public's best interest, which leaves the BCUC in something of a Catch-22.

I think where they really failed was in explaining themselves to the public, and I think they'd have strong grounds to issue a plain-language follow-up statement, or even just an FAQ on their Website, to clear up the misconceptions and misinformation out there.

Anonymous said...

BC Hydro currently has contracts to purchase over $30 billion worth of private IPP power per year, for up to 40 years. So after 30 years that's getting close to $1 trillion for private power. This doesn't include new contracts yet to be signed. I think that may be what BCUC is concerned about.