Friday, August 12, 2011

Hydro report raps corporation, government

The government’s review of B.C. Hydro and power rates was grim reading.
The initial attention was focused on inefficiency within the Crown corporation.
The review panel — John Dyble, Premier Christy Clark’s deputy minister, Peter Milbrun, deputy minister of finance, and Cheryl Wenezenki-Yolland, acting deputy minister of advanced education — found B.C. Hydro paid too little attention to controlling expenses.
Hydro has an admirable commitment to quality, reliability and safety. But it has been paying a high premium to achieve those goals, and passing the cost on to its customers.
The result, the panel said, has included overstaffing. It suggested about 20 per cent of the 6,000-person workforce could be eliminated. Compensation had not been properly managed — 99 per cent of eligible employees received performance bonuses — and the corporation had missed opportunities for savings in dealing with suppliers.
The frank, independent look was welcome, though it raises questions about the attentiveness of B.C. Hydro directors — five of the 10 have been on the board for more than two years — and past energy ministers.
The report also suggested the government’s policy orders to B.C. Hydro have resulted in large and unnecessary rate increases.
Gordon Campbell, for example, said B.C. Hydro must make the province self-sufficient in electrical by 2016. It was ordered to have enough capacity to meet the entire power needs of the province even in a year of record low water — and to build a big buffer on top of that.
That has proved an expensive, wasteful order. B.C. Hydro had to ramp up staffing to achieve the goal.
And because the power was to be acquired by contracting with private producers, the public corporation had to commit to costly, long-term contracts for electricity that might never be needed.
B.C. Hydro estimates its current round of power from private producers will cost $124 MWh, for example. That’s more than twice as much as the market price, and one-third more than power from a Site C dam would be.
Because of the government’s order, B.C. Hydro faces the real risk of buying expensive power from private producers and selling it at a loss on the open market.
There is little risk in adopting a more conservative approach in adding capacity; in a crunch, B.C. can buy power from U.S. or Alberta producers, as it has in the past.
There’s another major policy issue. The report indicates that the government has been, effectively, using B.C. Hydro to bring in hidden tax revenue.
B.C. Hydro pays government for water rights — the use of rivers and streams across the province. It charges twice as much as other Canadian governments charge power companies, the report found.
If B.C. charged rates in line with Manitoba and Quebec, then B.C. Hydro’s costs would fall by $150 million a year, the panel noted. That would result in an immediate rate cut of at least four per cent.
And the government also claims a larger share of B.C. Hydro’s revenue as a dividend than comparable utilities — more than $600 million this year.
Energy Minister Rich Coleman said that’s not likely to change. The government is running a deficit; it needs the revenue from water rights.
But it’s an inefficient and unfair way to collect revenue. Taxes, generally, are imposed based on some principles, with a primary one being that they are progressive — the amount paid rises with income or wealth.
Raising revenue through electricity bills doesn’t work that way. A low-income family with an older house — perhaps heating with electricity — would pay a larger share than an wealthy couple in an expensive condo.
And this approach to taxation also imposes larger costs on energy-dependent industries, reducing what should be a competitive advantage on attracting investment.
B.C. Hydro has some work ahead in improving its efficiency and cutting costs. But the government has an even larger role in fixing flawed policies.
Footnote: The review panel looked at the smart meter program and concluded it was justified based on future savings, although it urged B.C. Hydro to seek ways of cutting the $930 million cost. The panel also notes that unless the corporation introduces differential rates to discourage power use at peak periods, some potential savings under the smart meter program won’t be achieved. Government policy has rejected differential rates; that too should be reviewed.


Anonymous said...

and not a peep about northeast power

Anonymous said...

This is the right column at the right time. Many other reporters are reporting on all aspects of Hydro and the policial policies forced on it.Mr. Willcox certainly asked important question. The public are also questioning WHAT IN THE HELL IS GOING ON. The first headline I read was workers to be retired. Then, Mr. Cobb offered his comment. He should offer his resignation. Increased rates,Profits as a cash cow and smart meters forced on many unwilling citizens who do not want the cost, health problems or a peak a boo at their dialy life OOP, that should be minute by minute life. Will the baby smart meter be able to smell weed.Quick history lession, Mr. Bennett start BC Hydro because private industry was BAD. Will his son lead the revolt as was done in the case of HST. This is Big brother and family first sister policy stiffs a policy like it or not. I do not like it.

DPL said...

Sadly the majority keeps voting in a party that seems intent on making life difficult for the average person. Hydro becomes bloated with overpaid executives, then wants massive increases, a committee( government appointed) says lower the amount, and we are supposed to feel grateful for the new amount. Only when the voters complain, loudly enough does anything change. Lousy way to run a province but for the BC Liberals it seems to work most of the time

Anonymous said...

I think Rich Coleman said it all with his comments that "the government is running a deficit".

Who's fault is that ?? The BC Liberals have been in power for a decade and are still losing money through their incompetent management capabilities. Nothing has changed since Campbell was forced to resign in disgrace - preciptated by his own dishonesty !!

British Columbia will continue to go to the dogs while the BC Liberals are in charge. There will be no improvements until the right wing political party is kicked out of power and the free perks to multinational companies stopped.

British Columbia is destined to follow Great Britain with it's current fiscal plans - though Britain has far more to offer than BC ever will have.

It will be a long time before things get any better here, in the "Best place on Earth" !!!!!!!


Anonymous said...

This is what happens when you loot a crown corp.

No surprise here.

Anonymous said...

Sean Holman and RossK have both put out some interesting reading on the BC Hydro report.

Smells like 'structural deficit' all over again.

Anonymous said...

Derrick Penner writes in his Vancouver Sun blog that COPE 378 president David Black is making some smart critiques of the report.

Anonymous said...

Is Justine Hunter suggesting in The Globe and Mail that the insider's review was designed to give industrial consumers a rate relief - perhaps to make up for the municipal taxes?

Vaughn Palmer opines in The Vancouver Sun that the BC Liberal shell game being played out at BC Hydro "has lately expanded well beyond the commonplace". Palmer explains that, like Enron, BC Hydro has created aggressive accounting procedures to keep the bad news off the books for as long as possible: The review drew particular attention to Hydro’s plan to defer fully half of the estimated $1 billion cost of the Smart Meter program with no intention to commence payback until 2015.

“We have concerns, “ said the panel members. “The scheduled completion date for the smart meters component of the program is in 2012, yet no costs are to be recovered until three years later.”

Hmm... When is that next provincial election scheduled for again?

Anonymous said...

Note and note very carefully, the liberals are trying to lead the sheep down a garden path as in HST BS. Well, I see where the sheep have turned into Jaguars and as in the HST will bite the hand that is feeding them this BS samwich. Last comment was " call an election". In addition call an inquiry into the smart baby meters and other problems at BC Hydro, BC rail,and Election BC. There are more problem that only an election can cure. Chrity Lark is the captain of a ship of fools.Mr. Camp bull jimped ship in London and might be driving drunk on the wrong side of the road. He is now a leftish. Bc. needs a Mr. Fix It is Mr. Dix is our night in shining armour.

Alexis said...

One of the things I have found interesting and have, to date, seen nothing about it, is the closure of the Elk Falls mill and the amount of electricity it no longer consumes.

Elk Falls was the biggest user of electricity on the island and once it was shut completely, that power was then put back on the grid. We're talking about millions of Kilowatt hours here, sooo what happened there?