Hydro's gas-fired fiasco

Brian Lewis
The Province
January 9, 2005

COMMENT: The Province's business editor Brian Lewis has been writing, once or twice a year, about GSX and BC Hydro's Vancouver Island mega-projects, since 2000. This article gets it marvellously right (I agree with him) on a number of points, and dreadfully wrong, on at least one big one.

Lewis is the first major media commentator outside of intervenors like the GSX Concerned Citizens Coalition, to suggest that government should get involved in what BC Hydro is up to, giving direction. With an entire electricity policy department watching what's going on, and putting its oar in the water late at night when no-one can see the effect, the Ministry of Energy and Mines has been involved. No matter what they say. But Minister Richard Neufeld has been all to ready to say that the government's hands are off, that oversight of BC Hydro is up to the BC Utilities Commission. But that's Neufeld's Believe It Or Not.

The BC Utilities Commission let BC Hydro run wild with the Call for Tenders, even after they'd been roundly browbeaten in December 2003 with the concerns that various intervenors had with the CFT. The BCUC wimped out. Lewis says that was the time for the government to step in. It's a bold statement for a journalist to make.

But when Brian Lewis suggests that a solution to island energy supply challenges is coal, he's dead wrong. The BC government wants to encourage coal fired generation, and it's a disappointment to find Lewis taking a pro-coal position. First of all, coal simply cannot be burned as "cleanly" as natural gas, in contradiction to Lewis' statement. And second, the cost of the scrubbing technologies that clean up coal emissions, are prohibitively expensive. If all of them were to be mandated, the economics of coal-fired generation, relative to natural gas, would collapse. Coal is a cheap fuel, but "clean coal" generation is damn expensive. The Nanaimo coal is likely to stay in the ground for a long long time.

Lewis' last call is for leadership from government. Given that two governments and many years have not resulted in anything other than furtive promotion by government of these misguided natural gas schemes for Vancouver Island, we can reasonably expect government to avoid wading directly into the Duke Point Power cesspit. - Arthur Caldicott

DUKE POINT: Electrical plant may burn Liberal gov't

There may be another "Fast Ferries" style project on the drawing board, one that has the potential for putting the governing Liberals in the hot seat as they ramp up for May's provincial election.

Unlike the previous NDP regime's $400-million aluminum ferry fiasco, this one doesn't involve building ships to move people to and from Vancouver Island, but it does centre on providing electricity to B.C. Hydro ratepayers on the Island.

Hydro and private sector partner Pristine Power of Calgary will be making their case before the B.C. Utilities Commission next week to build a 252-megawatt natural gas-fed power plant at Duke Point near Nanaimo at a cost of $282 million. The Calgary company will sell the power to Hydro under a 25-year contract and was selected by Hydro to build the facility following a call for tenders from the Crown-owned utility last year.

On the surface, it all looks copacetic but, as they say, the devil is in the details.

This is Hydro's second shot at trying to push its Duke Point project through the regulatory approval process.

The first application was turned down by the BCUC in September 2003 following a lengthy public hearing during which it became painfully obvious that the project was an uneconomic pig-in-a-poke.

That was the project Hydro had tied to the Georgia Strait Pipeline proposal which would have carried natural gas from the Mainland to feed the Duke Point Plant.

Not surprisingly, the GSX was also tossed aside as another of Hydro's poorly planned projects. In its September 2003 decision, the Utilities Commission ordered Hydro to issue a call for tenders.

But the way the call was structured meant that, basically, only proposals calling for a gas-fired plant at Duke Point would be considered.

Alternatives such as using on-Island available fuels like coal or wastewood to generate power, or utilizing energy savings from industry were never considered.

That's the point where the current Duke Point proposal left the tracks.

It's also the point where the Gordon Campbell government should have shown leadership and stepped in. It didn't.

Not surprisingly, critics such as Hydro's industrial and commercial customers will be hammering their tables at next week's BCUC hearing that if approved, the Duke Point plant locks Hydro and all its ratepayers into a plant fed by natural gas from the northeast corner of the province, gas that has increased roughly three-fold since Duke Point was first proposed.

That has led the Joint Industry Electrical Steering Committee, which represents Hydro's industrial customers, to warn that this project could trigger electricity rate increases of three per cent -- or more -- for everyone in B.C.

But hold on, it gets better, or worse, depending on your point-of-view.

The Duke Point plant will only be used during peak periods of Island electricity demand when or if it begins operation a few years from now.

At the same time Hydro is planning to build a new transmission line over to Vancouver Island which is expected to be in service by 2008 -- about one year after Duke Point's scheduled opening.

"In our view there's got to be a way of bridging that gap without spending $280 million on Duke Point," says Dan Potts, executive director of the industrial group. Penny Cochrane of the Commercial Energy Producers of B.C. puts it this way: "It seems Hydro wants to build a truck when a bicycle might do the job."

The critics also make an excellent point when they say shipping natural gas all the way from northeastern B.C. to Vancouver Island to generate electricity doesn't make sense -- especially when you consider that the Nanaimo region still has ample supplies of coal.

And these days coal-burning technologies make the fuel as clean as natural gas.

However, the Duke Point issue arose as a direct result of poor planning and neglect by Hydro for more than the past decade which has resulted in B.C. importing ever-increasing amounts of higher-cost electricity.

It's time for this foolishness to stop. It's time for leadership --but so far no one in Victoria seems to care.

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Brian Lewis is the Province's business editor. He can be reached at blewis@png.canwest.com.

© The Vancouver Province 2005