Agency throws cold water on deal
Utilities commission rejects heating system accord over fees for future construction
The B.C. Utilities Commission has given community utility company Creative Energy permission to build a new hot water heat system in Northeast False Creek.
But in a blow to Vancouver’s plan to get the company, which is owned by developer Ian Gillespie, to convert from natural gas to biofuel, the commission has rejected a franchise agreement between Creative Energy and the city.
In a ruling issued Tuesday, the BCUC said it doesn’t think the utility’s plan to charge new users extra fees for future construction of a low-carbon biomass facility is fair.
It also turned down a proposal in the application to build a separate hot water heat utility in Chinatown, saying it can’t judge if there is enough business.
And in an unusual rap on the city, the commission said it was concerned it was being dragged into looking like it supports the city’s neighbourhood energy bylaw. That new bylaw, approved by council but not yet enacted, will make it mandatory for buildings to hook into the monopoly utility.
The BCUC’s ruling affects Vancouver’s objectives of getting the single biggest source of greenhouse gas emissions off natural gas. For much of the year, Creative Energy and the city have been working on a plan to locate a low-carbon biomass energy facility on the False Creek flats that would use waste wood to heat Creative Energy’s old gasfired boilers near BC Place. At stake is the reduction of more than 70,000 tonnes of greenhouse gas emissions.
This first deal is part of a much larger plan by the city to convert some of its densest neighbourhoods to hot water heat powered by low-carbon waste. It has targeted other areas, including the Cambie and Broadway corridors and False Creek Flats for district energy systems.
But it has set its sights first on Creative Energy’s existing gasfired steam energy since it would get the city dramatically closer to its plans to cut greenhouse gas emissions by 33 per cent by 2020.
In February, Gillespie bought Central Heat Distribution, which supplies steam heat to about 210 buildings in downtown Vancouver. He renamed it Creative Energy, and in March entered into a franchise agreement with the city to expand hot water service to Northeast False Creek, which spans from the west side of BC Place to the undeveloped lands owned by Concord Pacific near Science World.
That agreement also requires Creative Energy to move to a low-carbon source of energy and begin reporting on its efforts to reduce greenhouse gases.
In its decision, the BCUC said there is enough demand to justify construction of an $11.2-million hot water heat system. Trent Berry, the chairman of Creative Energy Vancouver Platforms, said work must begin soon since many buildings in the area are nearing completion. He said the system should be finished by late 2016. The company will submit a rate application to the BCUC at a future date. The commission had trouble with the new franchise agreement between the city and Creative Energy. It singled out a proposed “carbon reduction rider” it said was similar to one it rejected last year by Corix MultiUtility Services, which is building a district energy utility at the University of B.C. Both Creative Energy and UBC have older natural gas-fired boilers that provide relatively cheap heat to their customers, but at the expense of high-carbon emissions. Creative Energy charges about $64 per megawatt-hour. UBC charges $83. BC Hydro’s energy rate is closer to $104, while FortisBC is about $90 per megawatt-hour.
The commission said such a rider, in which the difference between old rates and new rates would be banked to pay for construction of a new low-carbon energy source, “is inconsistent with cost of service rate design principles.”
Todd Smith, the director of infrastructure for BCUC, said the commission has no role in negotiating franchise agreements and can only accept or reject them. The three-member panel didn’t like some elements of the city’s deal with Creative Energy, and therefore turned it down.
Berry said the rider would only have been in place for four years and affected a small number of buildings, all of which would still have to pay a higher rate once the switch to low-energy is completed.
The commission also was unhappy with language the city inserted into the agreement that made it look like the BCUC was directly or indirectly approving the city’s new Neighbourhood Energy Bylaw.
On the issue of expanding to Chinatown, the commission didn’t like the company’s unfocused approach. Creative Energy had asked permission to build a separate “test” system, but not hook it into its main grid until it had enough interest.
In an emailed statement the city said it accepts that it will have to revise the franchise agreement, but was encouraged that the utilities commission supported the expansion plan.
It defended the decision to ask for a carbon reduction rider, saying it was meant “to demonstrate the low-carbon commitment of the utility company and its customers.”
However, it said the rider is “not a significant factor in the business case for the low-carbon system” and that it does not expect eliminating the rider will delay the conversion of the existing system.