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.

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BC Liberals suppressed Hydro rate hikes

For decades, B.C. governments have hidden the true cost of Hydro rates -especially the BC Liberals.

image: Common Ground

Under the direction of the BC Liberals, the Crown utility used “inappropriate” accounting to pile $5.5-billion in what are known as deferral accounts says B.C.’s auditor-general.

“That debt amounts to $1,300 for every residential customer, more than $10,000 for each commercial and light industrial ratepayer, and almost $5-million for each large industrial consumer,” according to the Globe and Mail, February 7, 2019.

Deferral accounts are not improper when correctly accounted for. They can be used as a temporary measure to avoid the shock of sudden rate hikes. After rates are gradually increased, the deferral account can be paid off.

But that’s not what happened. To keep voters happy and to make governments popular, BC Hydro rates were kept artificially low leaving future governments to deal with the problem of billions hidden in deferral accounts.

“BC Hydro was not allowed to charge its customers enough to cover its operating costs each year,” Auditor-General Carol Bellringer wrote.

The current minister responsible for BC Hydro, Bruce Ralston, said his government is committed to fixing the problem but it will take time given the size of the debt. “We are going to keep rates affordable. No one’s rates are going up by $1,300 in a year.” His government has already reduced the deferral accounts by $950-million by bringing that debt onto government books.

The NDP government also intends to prevent misuse of deferral accounts by future governments by restoring the role of the independent regulator, the BC Utilities Commission (BCUC) and ensuring that BC Hydro adopts ordinary accounting practices.

Industries who are used to cheap hydro are not happy with the prospect of paying the real cost of producing electricity. Industry representative Richard Stout says industrial customers shouldn’t absorb the shock of getting Hydro back on sound financial footing. Since the government is responsible for the mess, they should pay:

“I think most would agree the appropriate source of paying down the debt should be from government, rather than the ratepayer.”

Huh? He wants taxpayers (the government) to pay for the meddling of former governments rather than ratepayers? Last time I looked Hydro users and taxpayers were one and the same.

Critics of BC Hydro will point to the debt incurred in building the massive hydro dam at Site C as an additional source of the problem. The project was started by the BC Liberals and given green light by the NDP who said the project had gone too far to abandon.

The government is faced with a hard choice, says Bellringer: “You can either have a rate increase or you can end up with a deficit that ends up getting covered by the government at some point.”

Hiding Hydro debt, which in reality is our debt, is not an option.

Transferring BC Hydro’s debt to the government’s books is the right thing to do but government debt is not popular with voters because it’s visible. Turning control of BC Hydro over to an independent regulator is the right thing do but hydro rates will go up.

We’ll see if doing the right thing pays off for the NDP in the next election.