Debt-ridden B.C. Hydro to undergo review
‘There’s not going to be any overnight solutions,’ expert warns of challenges
VICTORIA B.C.’s energy minister has launched a new review to find efficiencies within B.C. Hydro, as the Crown corporation struggles under a growing debt load, uncertain electricity predictions and the political pressure of a government that wants rates kept as low as possible.
Michelle Mungall said Monday the review of Hydro will be split into two stages. The first will try to find internal efficiencies, new revenue sources and help decide what rate increases Hydro will apply for next year. The second will see a panel of experts chart the future of the publicly owned power corporation amid changing technology and government’s pending climate action plan.
“For me the bottom line is we want to make B.C. Hydro works for British Columbians going into the future,” Mungall told Postmedia News on Monday. “We need to have a better understanding of what that future load demand is going to be and how we’re going to meet that and what’s the best way to do that to keep costs low for British Columbians.”
Mungall pointed to the increasing number of electric cars and charging stations as one area Hydro will have to grapple with.
Hydro rates rose three per cent on April 1 — an average increase of $23 per year for a residential customer. The NDP government ran in last year’s election on a promise to keep electricity rates low, as well as a rate freeze that was ultimately rejected by the independent B.C. Utilities Commission this year, which ruled Hydro could not afford to forgo the money.
Veteran energy analyst David Austin said Hydro has three main problems: It has historically been unable to accurately forecast how much power British Columbians will actually use, it is adding billions in new debt annually on top of billions in existing debt it hasn’t paid, and it’s not positioned to take advantage of new power technology, including rapidly improving and cheaper batteries to store wind, solar and other alternative energy sources.
B.C. Hydro needs to aggressively get people to convert from fuel sources like natural gas into electricity, in order to increase its customer base, said Austin. This will have the added benefit of helping the province achieve its goal of reducing greenhouse gas emissions by 40 per cent by 2030.
“In the past there’s been not much attention paid to increasing the demand, and in the future there has to be this effort in order to reduce greenhouse gas emissions,” said Austin. “You have to get people fuel switching, getting people to move from fossil fuels to electricity as promptly as possible.”
Hydro has almost $6 billion in deferral and regulatory accounts — loans that electricity users have to pay back one day in the form of higher rates. It is also spending on average $2.4 billion more every year upgrading its old transmission lines and equipment. Premier John Horgan recently approved finishing construction on the $10.7-billion Site C dam, adding to Hydro’s debt.
While Hydro could raise rates to help pay off its debts and deferral accounts, such a move would conflict with government’s political insistence that costs remain as low as possible for voters.
“Hydro is in a deep enough hole that there’s not going to be any overnight solutions,” said energy lawyer Jim Quail, who added that he thinks the review is a good idea. “Everybody loves to find efficiencies, but it’s like trying to move a mountain with a teaspoon with the kind of issues they are dealing with, and the amount of deferral of operating costs.”
Mungall, who has called Hydro’s finances a “mess” in the past, said she has faith in the leadership of B.C. Hydro to find a way to repay the debt.
“B.C. Hydro might be on track to pay off the deferral accounts, but there’s still a lot of concern about their very existence about how high they are,” she said.
“Even if things are on track and the books are being kept well, should we have even been in that situation in the first place is a fair question, and that’s part of our review.”
Hydro currently has a moratorium on new independent power projects, pending the outcome of the review.
But Clean Energy B.C., which represents many of those companies, said the private sector could play a role in helping Hydro get to the leading edge of new technologies and battery storage.
“There’s a multitude of things they could be doing, there’s a lot of Crown corporation power companies around the world addressing exactly the same issues, many of which have started transitioning to increasing load through electrification,” said Jae Mather, executive director of Clean Energy B.C.
“Electrification is the only way B.C. is going to hit our climate targets, so it goes in line with the government policies.”
The government is set to unveil its roadmap to meet its pollutionreduction and climate-change targets this fall, which will likely include a new set of marching orders for Hydro.
“The big concern we’ve got is will we set targets that are achievable or unachievable, will we put in place the things that are needed for us to succeed or not?” said Mather. “That’s what we’re waiting to see.”
It’s like trying to move a mountain with a teaspoon with ... the amount of deferral of operating costs.