The B.C. government will bail out BC Hydro to the tune of $1.1 billion to limit rising electricity bills in the face of money-losing deals with private power producers.
As a result, BC Hydro bills are scheduled to increase by 1.8 per cent on April 1 and 0.7 per cent April 1, 2020, as part of an 8.1 per cent price hike over the next five years.
The NDP government said that compares with a 13.7 per cent cumulative price increase for the same period under a rate plan proposed by the B.C. Liberals when they were in power.
Energy Minister Michelle Mungall acknowledged that the NDP government pledged to freeze electricity rates, but said that’s become impossible because the previous government signed contracts with private power producers that resulted in BC Hydro paying too much.
The concerns were laid out in a government-commissioned independent report that found BC Hydro purchased an estimated 8,500 gigawatt hours of energy from private power producers amid pressure from the B.C. Liberal government for the corporation to use clean energy sources.
Those contracts will “cost ratepayers an estimated $16.2 billion over 20 years, the estimated period during which BC Hydro will likely not need the energy government directed it to buy,” according to the report’s author Ken Davidson, who worked with B.C.’s Treasury Board in the 1990s. Davidson said $16.2 billion is a conservative estimate.
The impact of the surplus energy is estimated at $808 million annually, costing residential BC Hydro customers $200 per year or $4,000 over 20 years, the report says.
Some contracts with power producers were for 30 years, which means the Crown corporation will be stuck overpaying for decades. Much of the contracted power comes from run-of-river projects, which generate most of their power during spring thaw, a time when BC Hydro already has a large supply of such power.
“The report made it clear that due to decisions of the previous government, ratepayers have overpaid billions of dollars for power,” Mungall said. “The B.C. Liberals’ [independent power producer] scheme was a sweetheart deal for some, but it was not a good deal for British Columbians.”
Liberal BC Hydro critic Greg Kyllo said Davidson’s report is a “gross miscalculation” of what the previous government was trying to achieve. “We need to take into account that British Columbians largely were looking for B.C. to have self-sufficiency when it comes to the provision of electricity,” he said. “We had to look at solar and run-of-river and sustainability with respect to the provision of power in British Columbia.”
Kyllo said solar and other renewable energy is more expensive, about $100 per megawatt hour, than traditional power sources such as coal-fired plants.
Mungall has said BC Hydro’s energy costs should be about $25 per megawatt hour, but Kyllo said at that rate, the ministry’s clean energy plan is impossible to achieve.
In an effort to do damage control, BC Hydro will immediately suspend its standing offer to buy small-scale power from independent producers. Mungall acknowledged this will affect dozens of Indigenous communities that have used small-scale power to create economic development opportunities. The ministry will work with these communities to find other opportunities, Mungall said.
The B.C. Green Party said it’s concerned that the standing offer was cancelled without consultation with First Nations. “We do not build any trust when we ask First Nations to spend their money and time on partnerships with government, only to abruptly change course,” said Adam Olsen, Green MLA for Saanich North and the Islands.
No changes will be made to existing purchase agreements, as the report found that it would be more expensive to break contracts than to let them continue.
The government also plans to expand the oversight powers of the B.C. Utilities Commission, which were curtailed in 2010 under the Clean Energy Act. The act exempted most energy acquisitions and other major BC Hydro initiatives from being reviewed by the commission.
B.C. Green Leader Andrew Weaver applauded the government’s efforts to depoliticize BC Hydro and strengthen the commission’s oversight role, which he said “will help ensure future governments base their policy decisions in evidence, rather than what is politically expedient at the time.” However, Weaver expressed concern with a lack of planning for BC Hydro’s future.
“The economic strategy Clean B.C. announced late last year relies heavily on the electrification of buildings, transportation and industry,” Weaver said. “We need to be having a serious conversation about what changes need to happen to BC Hydro to accomplish our goals. The future is no longer big dams; it’s time our utility evolved.”
Mungall said Davidson’s report is the first phase of the government’s review of BC Hydro, which focused on reducing electricity rates. The second phase begins this year, she said, and will look at finding efficiencies through technological advancements.