SOMETHING'S GOT TO GIVE ON B.C. HYDRO FINANCES
NDP wants more electrification. But it also wants to limit hydro bill increases
The New Democrats recently announced regulations to provide inflation protection against B.C. Hydro rate increases while promoting greater electrification of the economy over reliance on fossil fuels.
However, both claims have been challenged by Richard Mason, a longtime member of the B.C. Utilities Commission, the province's independent energy regulator.
He says the government has provided itself with an escape hatch on inflation protection. He also estimates the cost of the NDP goal of electrification of the economy will be astronomical.
Mason resigned suddenly from the commission last September after seven years as a director. He left five days after Premier David Eby fired Commission chair and CEO David Morton in favour of hand-picked replacement, Mark Jaccard.
Ex-commissioner Mason has now launched an online forum ( justandreasonable.com) for news and analysis about the energy sector. The focus is on what changes “might mean for utilities, customers and residents of B.C.”
The latest two postings examine the regulatory changes under the Clean Energy Act, announced Feb. 15 by Josie Osborne, the minister of energy, mines and low carbon innovation.
“We are focused on keeping the cost of clean electricity as low as possible,” declared Osborne. “Affordable, stable B.C. Hydro rates are good for households, businesses and climate as we work together to power B.C.'s growing economy with clean energy instead of fossil fuels.”
Mason says those claims should be viewed with skepticism — particularly the government's suggestion that it has tied Hydro rate increases to “the rate of inflation.”
One might conclude, from “a casual reading of the press release” that the new regulations will “ensure that B.C. Hydro's rate changes do not exceed the rate of inflation,” says Mason.
“They will not.”
The changes merely state objectives. They do not bind either B.C. Hydro or its regulator, the Utilities Commission. The government's own news release conceded that the regulatory changes “do not obligate the commission to undertake specific actions or guarantee a certain decision.”
Moreover, the New Democrats' actual rule is that Hydro's rates will not exceed “the cumulative rate of inflation” from when they took office in 2017 to the year 2030.
“The devil is in the details,” writes Mason. “According to the news release, B.C. Hydro's rates are currently 15.6 per cent lower than cumulative inflation from 2017 to the present.
“B.C. Hydro's rates could jump 15.6 per cent tomorrow and still meet the government's new objective of being below cumulative inflation. Anyone thinking that rate increases will be limited to today's inflation rate of 3.89 per cent (Statistics Canada CPI figure for 2023) could be in for quite a surprise.”
He figures a greater challenge would arise if B.C. Hydro needs to spend more than the supposed `rate cap' to meet other priorities.
“This is not merely a historical or theoretical problem,” says Mason. “There are significant cost pressures on B.C. Hydro as it seeks to ramp up its supply of electricity to support the government's energy transition to reduce greenhouse gas emissions.”
A second posting discusses the impact of the regulatory changes aimed at promoting greater reliance on clean energy over fossil fuels.
“The government does not say categorically that it plans to replace all fossil fuel use in B.C. with electricity,” Mason acknowledges.
“But it has added a new energy objective to the Clean Energy Act to ensure that B.C. Hydro holds rights to a sufficient amount of clean or renewable electricity to enable B.C. to meet its clean energy targets.
“This sounds an awful lot like the government is intending most, if not all, the province's energy needs will be met with electricity, and from B.C. Hydro.”
He sees this as a challenge, putting it mildly.
“The province is still very dependent on the use of fossil fuels. B.C. Hydro estimates that electricity provides only 19 per cent of the energy used in the province.”
He can't point to any evidence that Hydro has a plan to replace the remaining 81 per cent with clean, renewable sources.
“If B.C. Hydro is to electrify the other 81 per cent of the province's energy needs it doesn't currently serve, the cost is going to be astronomical,” says Mason. As examples, he cited the $16 billion cost of Site C and an estimate that it would take as much as $3.4 billion just to completely electrify the city of Kelowna.
“There is nothing in the government's announcement that provides any comfort that ratepayers will be protected from the cost of electrifying the province,” says Mason.
“By focusing solely on electrification, the government is forestalling the possibility that additional methods of reducing greenhouse gas emissions might be cheaper and easier.”
A more balanced approach could be overseen by an independent regulator. Indeed, one was set in motion by the Utilities Commission before Eby fired the CEO and Mason resigned.
From his current position on the sidelines, the ex-commissioner says his purpose is now to promote the public interest and help journalists to hold the government to account.
He's already met both tests with his postings on the limitations of the NDP commitment on inflation protection and the unspecified costs of its drive for electrification.