Run-of-river has had its run

Former B.C. premier Gordon Campbell’s plan for run-of-river generators was a mistake. It left BC Hydro in debt and with power it can’t use. The NDP government plans to let some of those independent contracts expire.

image: Energy BC –
A 1 MW run of river generator.

B.C.’s auditor general, Carol Bellringer, found that BC Hydro has accumulated $5.5 billion in deferred expense accounts. The government plans to write down $1.1 billion of those accounts on BC Hydro’s books.

While BC Hydro rates will increase, the increase won’t be as much as expected says Minister of Energy Michelle Mungall:

“We were committed to finding the best possible reduction, as much reduction as we possibly could from the existing plan under the B.C. Liberals, and we have looked in every corner to find every penny that we can pinch,” Mungall said at a news conference. “We have found that and were able to reduce the rate increases by 40 per cent (Globe and Mail, February 14, 2019).”

The NDP government has also pledged more oversight over BC Hydro by the utilities commission. That will include less interference by government, I hope.

Lack of oversight is what got BC Hydro in trouble when Campbell decided in 2002 to push his ideology of privatization on BC Hydro. It was a clever move in some respects because he could carve out some of BC Hydro’s public generating facilities to privately run generators while claiming to promote “green power.”

BC Hydro was forced to pay a higher rate for electricity generated which included run-of-river hydro, wind and biomass power.  According to a report commissioned by the government entitled “Zapped,” those contracts are expected to cost the utility $16 billion over the next 20 years.

One problem with run-of-river hydro is that it generates power in the spring when rivers are full and not much in the winter when electricity is needed for heating.

We don’t need all the 131 independent power projects that BC Hydro has signed on to. In the past 12 months, BC Hydro has let three energy purchase agreements expire without renewal and more are targeted.

One of those targeted is with the Hupačasath First Nation on Vancouver Island. They are still in debt from the $14 million investment made in their run-of-river facility in 2005. It was supposed to be a model for Indigenous clean-energy opportunities. Now, BC Hydro says it may not renew the contract in 2025 – just as the project is expected to finally deliver profits to the community.

The NDP will face a lot of flack by changing the course of BC Hydro, including protests from some Indigenous communities, from conservatives like the BC Liberals who believe that private companies can do a better job, and from environmentalists who think small is beautiful and that BC Hydro is a corporate monstrosity.

It makes sense to me that a public utility can deliver electricity at a cheaper rate than a private one because no profits go to external shareholders. We are the shareholders of BC Hydro and barring government interference, we should be the beneficiaries. It’s our dam power.

Pipelines are good politics, bad economics

New pipelines get politicians elected. However, they will remain empty; much like election promises that remain unfulfilled. There are good environmental reasons not to build new pipelines but the economics are rarely discussed.

broken-pipeline

First the politics. Workers in the resource extraction industry like new pipelines because they symbolize well-paying jobs. NDP leader Adrian Dix learned that bitter lesson in 2013 when he opposed the proposed Kinder Morgan pipeline and regular unionized workers flocked to the BC Liberals.

Prime Minister Trudeau understands the politics of pipelines when he approved three pipelines and placed one under review (Trans Mountain, Enbridge Line 3 and Keystone XL approved and Energy East under review.)

However, approval of pipelines does not guarantee that oil will actually flow. Thomas Gunton, Director of the Resource and Environmental Planning Program at Simon Fraser University, has done some number-crunching. His analysis suggests that we are going to end up with a lot of empty pipelines:

“Building all four projects would therefore result in 2.4 million to 2.7 million bpd [barrels per day] of excess capacity in 2025, equivalent to about four Trans Mountain expansion projects worth of empty pipeline space (Globe and Mail, January 12, 2017.”

To put these numbers in context, our current capacity for pipeline and rail is five million bpd. The Canadian Association of Petroleum Producers (CAPP) forecasts that the current capacity will fill needs up to 2025. Note that this prediction is not coming from some environmental group but the very industry that produces the stuff.

Even existing pipelines may remain empty. The National Energy Board (NEB) projects that the price of oil price will drop by $17 a barrel. New climate policies that could further reduce production further.

Empty pipelines are expensive. Guess who’s going to pay for them?

“The capital cost of empty pipeline space would be about $25-billion, which would be borne by the Canadian energy sector in terms of higher tolls and by the Canadian taxpayer in terms of lower tax payments to government due to lower corporate profits. If current rail capacity is included, the surplus capacity would be even higher.”

You, dear reader, will pay for empty pipelines in higher fuel costs. The pipeline builders will recover the cost through higher tolls that oil producers will have to pay in order to move their fuel to market.

Politicians like to build monuments. Premier Clark is doing just that in proceeding with Site C dam. Like empty pipelines, transmission lines from the dam on the Peace River will remain empty. The market for electricity is flat and with conservation, consumption could be reduced by twice the output of the proposed Site C dam, according to the B.C. Sustainable Energy Association . They add:

“In its 2013 Integrated Resource Plan, BC Hydro assessed Site C and other possible resource options in relation to forecast energy and capacity needs over the next twenty years. BC Hydro concluded that Site C is needed for its earliest practical in-service date of 2023.”

Like the Egyptian pyramids, new dams and pipelines will create jobs but serve no practical purpose. The difference is that tourists will not flock to see them.

The ruin of BC Hydro by the BC Liberals

It wasn’t an easy birth. The private companies opposed it. It took the vision of one man to bring BC Hydro into existence in1961. Before that, a patchwork of power companies supplied the province. The largest, BC Electric, served the lower mainland. Premier W.A.C. Bennett had a dream. He wanted a single provincial power grid but the power commission of the day was dragging their feet explains Norman Farrell in The Tyee, (September 12, 2016.)

Our dam power

Our dam power

“But Bennett, premier since 1952 and an MLA since 1941, was unhappy with the power commission. He wanted faster expansion of the electrical grid — and he wanted greater control.”

Bennett faced problems in the creation of BC Hydro. His vision included the Two Rivers Policy –the damming of the Peace and Columbia rivers –something BC Electric wasn’t interested in doing. Worse still, BC Electric was antagonistic: proclaiming that they would not buy power from the Peace River dam even if it was built.

Damming the Columbia River presented a different problem. Kaiser Aluminum wanted to build a dam on the river, not for generation of public power but for the production of aluminum. Outrageously, they wanted to control water flow so that power could be generated in the U.S. by the Kaiser’s parent company.

Bennett was not going to see Canadian water go to the U.S. for hydro power, so he negotiated a deal with U.S. Kaiser to receive 20 per cent of the power generated downstream plus taxes and water license fees. The Government of Canada, headed by PM Diefenbaker, quashed the deal citing federal jurisdiction.

By now, Bennett had enough. In 1961, with the support of the NDP forerunner (the CCF), he seized control of the private BC Electric and formed the public crown corporation BC Hydro. Bennett understood the obvious: governments can borrow money cheaper than private developers. Now he could proceed with a plan that would span generations; something that private developers, who require quick returns, would never do.

Things were falling in place at the federal level, too. Liberal PM Lester B. Pearson replaced Diefenbaker as prime minister. Pearson negotiated a deal with the U.S. that effectively restored the former Kaiser one. With the money raised from the Columbia deal, Bennett built the Peace River hydro dam eight years later.

The ruin of BC Hydro came when the Campbell government decided to re-privatize power generation. Ideology drove Campbell into thinking that privately operated generators could do a better job. To push his ideology, he had to subsidize private suppliers in order to get generators built.

Campbell’s gift to private operators was to lock in prices that BC Hydro would have to pay. Last year, BC Hydro bought power from private sources at nine cents per kilowatt hour and sold it at three cents.

It doesn’t take a marketing genius to figure that selling a product at one-third what you pay for it is not good business. Worse, the BC Liberals are pushing for more hydro production at Site C on the Peace River –power that will be hard to sell in a market with flat prices.

NDP critic Adrian Dix said BC Hydro’s errors are a disaster for domestic customers and taxpayers.

“Both the government and BC Hydro misread the market years ago and are pushing ahead hoping no one notices,” Dix said. “The company failed to admit previous errors in demand forecasting and continues similar projections without explanation.”

Fracking is a threat to B.C. dams

There are environmental reasons to stop fracking in B.C. There are political reasons to continue.

In addition to the environmental reasons to stop fracking, there is a risk to B.C. dams. The list continues to grow: the contamination of groundwater, the disturbance of natural environments with roads and drilling rigs, the disposal of toxic water, and now the danger of earthquakes. Especially around dams, reservoirs, and tailings ponds.

earthquake

Freedom of information documents obtained by the Canadian Centre for Policy Alternatives reveals the concerns of BC Hydro officials.

BC Hydro became alarmed in 2009 when drilling started on lands near Peace Canyon Dam, downstream from the W.A.C. Bennett Dam; a dam which holds the world’s seventh-largest hydro reservoir by water volume.

Ray Stewart wrote, “BC Hydro believes there are immediate and future potential risks to BC Hydro’s reservoir, dam and power-generation infrastructure as a result of this coal-bed methane project.” He warned that earthquakes caused by fracking “may be greater than the original design criteria for the dam.”

His concerns are well-founded. Fracking is taking place in the Montney Basin which underlies much of the Peace River region, an area rich in shale gas. And fracking is proven to cause earthquakes.

Stewart also warned that fracking could “reactivate” ancient faults in the region, which could potentially set the stage for earthquakes. He also warned of “hydrogeologic impacts” on hydro reservoirs from fracking. He worried that the land might sink or that dried-out coal seams might ignite.

The land could sink and the coal dry out because the cavities that result from the extraction of gas. It occurs after water under pressure fractures the shale and is pumped out. The gas follows the pumped out water. The cavities are one thing, the toxic water is another.

To get rid of the toxic water, it’s pumped back into the earth below the area that’s been fracked. The pressure created triggers earthquakes.

Regulators have been slow to react. BC Hydro would like to stop the drilling within five kilometres of dam sites but regulators have not ruled it out, citing only “understandings” with drillers.

Even BC Hydro’s deputy CEO, Chris O’Riley, seems to be in denial. “Fracking by itself cannot generate large magnitude earthquakes.” That’s not what the U.S. Geological Survey found. While B.C.’s fracking is in its infancy, the USGS has been studying the alarming rise of fracking-induced earthquakes in Texas and Oklahoma for decades.

The USGS says that magnitude 6 fracking-induced earthquakes could occur which can damage even well-built structures. “But we can’t rule out quakes of magnitude 7 and above,” says Mark Petersen, chief of the National Seismic Hazard Mapping Project (Scientific American, July, 2016).

The political reason for fracking is that it’s the only plan we have. Premier Clark campaigned on her plan to liquefy natural gas plan and won — a plan to drill and export LNG and to power it with the Site C dam.

She’s likely to campaign on the same strategy again in the upcoming B.C. election. Even though LNG markets have dried up and the power from Site C won’t be needed for decades, it’s the only game in town.

It will be interesting to see what job-creation strategies other parties have as the campaign heats up.

In BC Hydro’s case, ideology means higher electricity costs 

When I opened my BC Hydro bill and read the leaflet inside, I thought some transformation must have taken place.  The leaflet said that Accenture was now a B.C. business.  The last I heard, Accenture was based in Bermuda.

hydro

Accenture has been blacklisted by California’s state treasurer for questionable business practices such as relocating to offshore tax havens.  The Ontario Auditor General slammed Accenture in 2001 for a deal to take over a government program that resulted in massive cost over-runs.  Apparently image problem is nothing that can’t be fixed by opening a B.C. office of Accenture.

The flyer said that “Accenture Business Services of BC is committed to building a world-class operation in British Columbia that will contribute to the province’s economic growth and provide employees with expanded career opportunities.”

Accenture, through BC Hydro, is trying to counter the growing opposition to the privatization of the publicly-owned utility.  People are angry that Premier Campbell has handed one-third of BC Hydro operations over to Accenture.  It’s a sweet deal — a ten year contract worth $1.45 billion.

Accenture will save BC Hydro money, Stephen Bruyneel told me. He’s the manger of Corporate Communication for BC Hydro.  He said that Accenture is contractually obliged to save $250 million over ten years.

“Exactly how would Accenture save that money?” I asked.  Well, it turns that we will never know.  Private businesses are not obliged to divulge such things.  But in general, “savings will result from economies of scale,” says Bruyneel, “by having a larger customer base.”

Accenture Business Services of British Columbia has big plans and BC Hydro is just the start. The plan is to bring other North American power companies into the B.C. office.  BC Hydro will share in those profits, Bruyneel said.

“How much profit will Accenture get from the BC Hydro contract?” Sorry, that’s a secret.

Jerri New has a problem with all this secrecy.  She’s the head of the Office & Professional Employees International Union.  Her members were not given much choice — move to Accenture or retire.

“If this is such a good deal,” Jerri New told me, “why is the government afraid to show us the details?”  The whole transfer of a public crown corporation has also been done in secret.  “It’s normal business practice when one company takes over another that hearings are held.  The shareholders of BC Hydro — the people of B.C. — were not consulted,” she said.

Jerri New also disputes BC Hydro’s claim that they could now “focus on its core business of generating, transmitting and distributing electricity.”  Some of that core work is now done by Accenture, such as monitoring water levels in dams.  “The whole computer system is integrated with BC Hydro,” said New, “it’s a matter of public safety.”

The former BC Hydro workers feel betrayed.  They are still providing Information Technology, computer networking, customer service, and building supplies but their employer is now Accenture.

She suspects that profits for Accenture will come by increasing BC Hydro rates.  Accenture is not in business as a public service – – last year they had net revenues of $11.6 billion world-wide.  Also, Accenture will save money from fewer staff.  Of the 1,600 staff that worked for BC Hydro, only about 1,450 moved to Accenture.  That alone results in over one-third of the claimed savings.

BC Hydro employees (some from Kamloops) moved to Accenture call centers in Vernon, Nanaimo, Prince George, and Vancouver.  Most call centers are not unionized, so you can be sure that when the current collective agreement expires, they will be asked to take a pay cut.  And if they don’t, call center operations can be moved to where workers will accept lower wages.

The real question is why Premier Campbell would dismantle a profitable company that provided high customer service and the lowest electricity rates in North America?

The answer is ideology.  In the premier’s mind, crown corporations and public utilities are sources of untapped profits.  Regardless of how efficient they are or how well they are operated, they are public services that must be dismantled for the corporate good.

If money and jobs flow out of the province, and if we pay higher electricity rates, Campbell considers it  a small price to pay for sake his ideology.