Electricity forms the backbone of modern society, though it's not something most of us think about until the power goes out or it's time to pay the hydro bill. However, there have been some important developments within B.C.'s energy sector and I wanted to share my perspective.
The B.C. government recently released a review of B.C. Hydro's operations and capital spending plans. Conducted by senior civil servants, it followed Hydro's request to increase rates by 30 per cent over three years.
This increase interfered with the new "families first" agenda and it didn't look good going into a possible election. The review found the excuse needed to reduce the increases from 30 to 16 per cent: B.C. Hydro was overstaffed, inefficient and overpaid. The government was happy.
But the far more important findings were hidden in comments sprinkled throughout the review: recent changes to government policies were the single biggest reason for the increased rates.
The effects of this policy are clear. The review notes, "In Fiscal 2010, IPPs produced 16 per cent of total domestic electricity requirements; however IPP electricity costs represented 49 per cent of the overall domestic energy cost."
A bit of history helps. In 2002, the Campbell government's first energy plan made several major policy changes. One important change made the private sector (independent power producers or IPPs) responsible for developing new electricity generation.
B.C. Hydro was limited to upgrades at existing plants.
In 2007, the government updated the plan. It called for B.C. to be self-sufficient in electricity generation by 2016. B.C. Hydro could no longer import electricity to cover shortfalls, even when advantageous to do so. It would have to build or acquire more generating capacity than actually needed during normal water level years.
In 2010, the government passed the Clean Energy Act. This legislation stripped away independent oversight of electricity planning decisions by the B.C. Utilities Commission. It placed the power within cabinet, and by extension the Premier's Office.
I felt this was an abuse of power. While a policy to generate revenues from electricity sales is laudable, I voted against it. In my response to the bill I said:
"A radical policy shift is in the works, and the people of B.C. had better get ready to start paying for it. The policy shift represented by this act affects every individual in the province and defines an energy plan that changes the very nature of our public utility, that serves to privatize our common resources and that impacts the very essence of our physical environment.
"Yes, it will likely make us self-sufficient, and yes, it will provide power for export, but at what cost? Is it a cost we should be paying?"
These changes together mean B.C. Hydro is paying for entrepreneurial risk and must guarantee profits for the private sector. These are assured through long-term contracts worth more than $50 billion. Not my kind of free enterprise.
To ensure private sector profitability, Victoria is willing to bankrupt B.C. Hydro and drain ratepayers.
It further admitted, "The policy of self-sufficiency... amounts to a significant planning constraint affecting B.C. Hydro's ability to offer cost effective energy solutions. The financial burden of meeting this government direction will be passed on to current and future ratepayers, in the form of rate increases."
I can think of many better uses for hundreds of millions of dollars every year.
I urge the government to remove the requirements for "self-sufficiency" by 2016, a date that B.C. Hydro cannot meet without huge cost and without significantly burdening the ratepayer.
Encouraging independent power production is one thing, but jeopardizing the future of our most important public utility is not good government policy.
