B.C. HYDRO UNLIKELY TO CHANGE COURSE SOON
NDP ‘looking at everything,’ but expect call for status quo from initial review
Six months after giving the green light to completion of the Site C hydroelectric dam, the New Democrats this week released details on a review that is already underway into B.C. Hydro’s finances and future.
Topics include: Operating costs. Capital spending. Debt. Dividends and taxes paid to central government. Deferrals, under the controversial spend-now, pay-for-it later plan inherited from the B.C. Liberals.
What the giant utility is paying for energy, from its own sources and private power producers. Export sales. Conservation. Risks. What Hydro needs, versus what it thinks it needs, in generating capacity. Options for future sources of electricity — green, renewable and otherwise.
The all-in terms of reference run to 14 points, each a source of debate and controversy.
“It’s a very broad scope,” Energy Minister Michelle Mungall advised the legislature during debate on her ministry budget late last month. “The fastest way to sum up is: We’re looking at everything.”
But for opponents of Site C, it probably resembles a review of the sturdiness of the barn door six months after the horse has escaped to greener pastures.
Mungall’s look at “everything ” is bound to be constrained by last December’s decision to proceed with the most expensive and controversial project in B.C. Hydro history.
For instance, her pledge to review B.C. Hydro’s 10-year capital plan comes with a caveat: “excluding Site C.” Site C is locked in at $10.7 billion in capital costs, which will have to be borrowed, amortized and repaid over the estimated 100-year life of the dam.
Note, too, that the first phase of the review — underway since March — is being conducted in-house by many of the same civil servants and B.C. Hydro officials who provided advice to the cabinet on the decision to proceed with the dam. Not likely will they recommend putting Hydro on a much different course than the one represented by Site C.
Rather, the first phase of the review is about facing some short- and mediumterm challenges, underscored by the NDP’s failure to persuade the B.C. Utilities Commission to approve a one-year rate freeze.
The freeze was part of the NDP’s affordability platform. But the commission ruled the freeze was unaffordable in terms of B.C. Hydro finances. Result: a three per cent rate increase that’s likely to be a prelude to even larger increases in the coming years.
“I remain concerned with how people around B.C. are being impacted by increasing rates,” says Mungall, “and I remain concerned that we have to find a way to make those rates affordable for all British Columbians.”
She brought in short-term relief in the form of a $600 crisis grant for those threatened with a cutoff of service because of unpaid bills. The grants are funded by all ratepayers, through a roughly 25-cents-per-month levy that began showing up on the June Hydro billing.
But that is only the beginning.
“We’re looking at all opportunities for cost savings within B.C. Hydro,” as Mungall told the legislature, invoking a similar exercise undertaken by Premier Christy Clark after she became premier in 2011.
“What they found was over a span of three years, they’d be able to save $396 million. It’s a fair guess that we might be able to do the same.”
Not to make light of a saving of almost $400 million over three years, but such an amount would only dent the Hydro cost structure. The Crown corporation is still paying more than $600 million a year to central government in dividends, water rentals and other taxes.
Or consider the postponed financial reckoning represented by those deferral accounts. They are supposed to be phased out completely by 2024. But even with a $200-million improvement over the past year, the balance to be paid totals $5.4 billion. Once the in-house review is completed and delivered to the cabinet by fall, Mungall envisions a more ambitious second-phase review extending into next year.
She believes Hydro did “a fantastic job” building giant hydroelectric dams from the ’60s onward.
“But what was going on in the 20th century is not necessarily what’s going to go on in the 21st century,” she told the legislature as she rattled off some possibilities: “Electric vehicles, the electrification of the gas fields, more and more industries wanting to have their industries powered by clean hydroelectricity, immense opportunities with renewables here in British Columbia.
“Part of my mandate is to develop an energy roadmap. We need to have a better sense of what all these opportunities are, how they fit in place, for example, electrifying the gas fields and royalty credit programs to make that happen, and so on.”
The terms of reference for the second phase call for “an expert panel” to provide advice on positioning Hydro “to maximize opportunities flowing from shifts taking place in the global and regional energy sectors, technological changes and climate action.”
Given the status quo bias of the first phase, it will be instructive to see how far afield the minister roams in choosing experts for the second.
To mention just two possibilities, would the appointments include a Site C critic like David Austin or an independent power opponent like Marvin Shaffer?
In any event, if there were to be any recommendations for a substantial change of direction at Hydro, I wouldn’t expect them until the second phase of review is completed sometime next year.
I remain concerned with how people around B.C. are being impacted by increasing rates.
MICHELLE MUNGALL, B.C. energy minister