HORGAN PULLS PLUG ON CLARK’S ASSOCIATES
New director at B.C. Hydro presided over notorious power sale to California
Premier John Horgan launched a shakeup at B.C. Hydro Thursday, dumping two B.C. Liberal appointees and installing a retired executive who spearheaded a controversial foray into the U.S. electricity market under the NDP.
Gone from the Hydro board effective immediately are chair Brad Bennett, adviser to Christy Clark on the last two Liberal election campaigns, and director Jack Weisgerber, the former Social Credit cabinet minister and B.C. Reform Party leader.
Incoming as director and board chair is Ken Peterson, the former CEO of Powerex, Hydro’s wholly owned electricity-trading subsidiary.
Peterson retired as CEO a dozen years ago, but has remained active as a trustee of the North American Electric Reliability Corporation, the non-profit overseer of security and supply for power producers in Canada, Mexico and the United States.
He and Horgan go back to the NDP government of the 1990s, when the now-premier was a policy adviser to the energy minister and Peterson a member of an NDP-commissioned task force on electricity markets.
The latter exercise set the stage for a push by Powerex to sell B.C. Hydro-generated surplus power into the deregulated U.S. energy markets.
“We keep socialism solvent,” to quote the line attributed to Powerex by one of its competitors in those days of wide-open electricity sales.
The drive peaked in 200001 — also the final year of NDP government — during a period of brownouts and power shortages in California.
Initially the Californians were grateful for B.C.’s helping hand in a crisis brought on by ill-advised deregulatory moves in the U.S. But after markets stabilized, the Americans concluded they were victims of market manipulation and extreme profit taking.
Powerex found itself lumped with Enron, the notorious Texas-based energy trader, in a conspiracy to defraud ratepayers of billions of dollars. California then refused to pay for much of the power it purchased from B.C. during the crisis.
Powerex denied all and continued to do so well into the era of B.C. Liberal government, with Peterson leading the fight.
“California caused its own electricity problems,” insisted Peterson in a characteristic rejoinder in 2003 after The Vancouver Sun published the accusations from U.S. investigators.
“Powerex refuses to be the scapegoat. Powerex supplied California with power when it was critically needed. There are recorded transcripts of California traders ‘begging’ for power to keep the lights on. Powerex supplied that power to California according to the rules of the marketplace at that time.”
Far from caving to political pressure, the Hydro subsidiary was fighting back, Peterson continued, vowing that in coming hearings before U.S. regulators: “Powerex will once again rebut every accusation and is confident that in a forum dedicated to facts (and not politics and innuendo) it will be fully exonerated.”
As for the tsk-tsking about B.C. profiting from shortages the Americans themselves created, Peterson offered no apologies.
“Powerex has made more than $2 billion for British Columbians over the last six years. It was profitable before the ‘made-in-California crisis’ and continues to be profitable today — by operating with intelligence and integrity.”
There matters stood when his letter to the editor was published 14 years ago this week.
A year later “fighting ” Ken Peterson retired after 25 years at Hydro and 10 in the executive suite at Powerex, the last at a salary of $335,000 a year.
But despite all the efforts by him and his successors to refute the accusations, the Americans continued to press, making maximum use of their own courts and regulatory agencies to pursue the case.
On and on the losing battle continued, culminating in a guilty finding against Powerex in early 2013 by an administrative judge from the U.S. federal energy regulator.
The B.C. Liberals initially vowed to fight on and the New Democrats, then leading in the opinion polls, agreed. But after winning re-election, the Liberals conceded that the U.S. system was stacked against B.C.
“Canadian litigants do not do well in the U.S.,” said Energy Minister Bill Bennett, announcing in August 2013 that B.C. was throwing in the towel. “There’s $50 million more that could be spent on legal fees if we wanted to duke it out, and at the end of the day, there’s at least a 50 per cent chance that B.C. would be on the hook for up to $3.2 billion.”
Instead, the province wrote off almost half a billion dollars worth of uncollectable power bills plus a dozen years’ worth of accumulated interest. The remaining balance of the estimated $750 million settlement was covered with a cash payment.
The abject surrender had Horgan, then the energy critic for the NDP opposition, wondering about the precedent for the future. The Liberals, for their part, noted that the offending trades had taken place under the NDP and were not likely to ever be repeated.
As for Peterson, the former Powerex CEO is now installed as chair of Hydro at $30,000 a year plus $750 a meeting. Expect a lot of those, as clearly this is an appointment for the long haul.
The Peterson appointment runs for five years to June 18, 2022, meaning his term is longer than the NDP mandate from the electorate. No word on his marching orders, but given Horgan’s long-standing critiques of Hydro, I have to assume it is far-reaching.
In the meantime, one can only hope that if he spots another opportunity to sell power to the Californians, he insists that this time they pay cash up front.