October 29, 2005

Privatization of BC Hydro

Having privatized a third of BC Hydro's operations by contracting various customer services to Accenture, and having severed responsibility for transmission by putting it under the BC Transmission Corporation, the Campbell government probably couldn't take the heat if it admitted that it was also privatizing Hydro's generating capacity, yet that is precisely what is happening. The evidence is found in Hydro's "service plan" which shows that 40% of BC's electricity supply will be privatized by 2020.

According to BC Hydro's service plan, updated September 14, 2005, the crown corporation has 15 long term (20 year) goals including: "Electricity self-sufficiency (energy and capacity) in B.C. for meeting all domestic needs." Unlike service plans for every ministry in government, the BC Hydro plan does not specify performance measurements and timetables for most of its goals, and thus it appears that Hydro's plan fails to satisfy Section 13(4)(b) of the Budget Transparency and Accountability Act. Hydro recognized that it is not in compliance with the Act when it wrote in the updated plan that: "BC Hydro is currently developing new performance measures and setting new targets that are more directly linked to the long-term goals. This will be completed by the end of fiscal 2006 and incorporated in BC Hydro's Fiscal 2006/2007 to Fiscal 2008/2009 service plan." It then went on to provide tables with former measures. The promise to update performance measurements by fiscal 2006/2007 contradicts the statement that the work will be completed by the end of fiscal 2006. The Act requires the fiscal 2006/2007 plan to be tabled in the legislature in February 2006; the end of fiscal 2006 is March 31, 2007. Dealing with Hydro, and the government's energy plan, is like tackling a greased pig.

The few words that are devoted to expanding on Hydro's long term goal of self-sufficiency (page 17) include the statement that: "BC Hydro will continue to add domestic resources to satisfy 100 per cent of the province's power needs. Energy self-sufficiency will minimize supply price volatility and open up new economic development opportunities for B.C.'s Independent Power Producers." That's misleading. Hydro is forbidden by government policy from adding any new domestic resources for the generation of electricity. The energy plan, which is referenced throughout Hydro's service plan, states that "The private sector will develop new electricity generation, with BC Hydro restricted to improvements at existing plants."

The September 14th service plan offers two very useful graphs that show projections of energy and capacity through to year 2020. The planning exercise assumes that Burrard Thermal will be "retired" in fiscal year 2015. A gap of approximately 25,000 gigawatt hours will exist between supply and demand by 2020. Under the Campbell government's current policy, as articulated in its energy plan, that gap will be filled by private power producers, which will give them 40% of BC's energy supply. It can be argued that electricity provided under contract to BC Hydro by private producers is reliable and meets the goal of self-sufficiency, but the contracts with independent power producers (IPPs) are not like the 990 year term that CN rail enjoys with its purchase of BC Rail. The power contracts typically expire in 20 to 30 years, after which the IPPs have an asset acquired largely at public expense with a lifetime of many more decades. As they become "free agents" the IPPs can sell their power to the North American grid; whether BC is purchasing power from an IPP in central BC or from a producer in Texas will be irrelevant. Either way the province will have no reliable supply that will protect consumers against price fluctuations. The September 14th service plan states:

There appears to be a major contradiction between "the reliability goal" and the requirement of the energy plan that essentially privatizes 40% of BC's electricity supply by 2020.