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Council delays action on pipeline

John Stark
The Bellingham Herald

The Whatcom County Council decided Tuesday to take no action on the Georgia Strait Crossing natural gas pipeline project until pipeline backers submit a major project application.

David Grant, an assistant Whatcom County prosecuting attorney, told council members that under county land-use law, they could not act until the pipeline backers submit that application. Once that application is complete and is reviewed by county planners, it would then go to the Whatcom County hearing examiner for a recommendation and a final ruling by the County Council, Grant said.

The pipeline, known as GSX, is a project of Williams Pipeline Co. It would cross 33 miles of the county from Sumas to Cherry Point before moving under water to supply fuel for proposed generating plants on Vancouver Island. Backers say it could also eventually supply natural gas for industrial development at Cherry Point.

Steven Snarr, general counsel for Northwest Pipeline Corp., a Williams subsidiary, told the council that county planners advised his company more than two years ago that the major project application would not be required. The company did not hear otherwise until earlier this year, he added.

Grant said the misstatements from county planners did not change the law, which mandates the major project permit process for any project with a value in excess of $5 million. The county portion of the project will cost more than $90 million, he said.

Snarr noted that the major project permit process does not include any deadlines for the county to complete review of the permit application. He expressed concern that the process was being imposed in an effort to kill the project by delay.

Council member Laurie Caskey-Schreiber told Snarr that was not the council's intent, but added that the proposed pipeline has aroused widespread concern about potential impact on the environment. Snarr replied that his company had completed millions of dollars' worth of environmental studies indicating that impact will not be significant.

Snarr noted that the Federal Energy Regulatory Commission has already given GSX a green light. He said his company wants to work with the county on developing appropriate environmental safeguards for the project, but if it appears as though the county is trying to block it, the company could take the matter to federal court.

The Tenth Circuit Court of Appeals is already considering the question of whether Washington state and Whatcom County waived jurisdiction in the matter by missing deadlines for review of earlier applications from GSX.

Reach John Stark at 715-2274 or john.stark@bellinghamherald.com.

Whatcom County Council remands GSX back to Hearing Examiner

The Whatcom County Council has spoken (for now)--unanimously! In a nutshell, a 7-0 vote to remand GSX back to the Hearing Examiner, pending an application for a "major development permit" on the part of GSX.

A reporter at the meeting offers the following account:

I attended tonight’s Council Meeting covering the disposition of the GSX project following the recommendation by the Planning and Development Subcommitte to remand the project back to the Hearing Examiner. Their finding was that the project application and all ancillary permits require application as a major development.

This will go back to the Hearing Examiner and will be held until such an application is made. He will again review the application and provide a recommendation, but the County Council will again make the decision whether to approve or deny the permit.

There was a little grumbling about “fairness” to Williams by Sam Crawford who alleged that Williams had been told by none other than the Director of Planning (Roland Middleton) at some point in the past that a major development permit was not required.

Seth Fleetwood stated that the requirements had changed and somehow implied that Roland was off the hook. The Council voted to remand this back to the Hearing Examiner to await the additional information necessary to make application for a major development.

Steve Snarr, GSX's attorney, is reported to have looked like he had eaten a bad oyster.

---

Independent power producers hopeful

Vancouver Sun
Scott Simpson
October 27, 2004

COMMENT:With the Independent Power Producers, the Ministry of Energy and Mines, and BC Hydro all on side with opening up BC for IPP generation, watch out! IPP opportunities are just as attractive to the sharks, scam artists, stock promoters and general incompetents as are, well, classic mining as practiced for decades on the Vancouver Stock Exchange, or coalbed methane as it appears it is about to be practiced here in BC in places like Campbell River or Hudson's Hope.

We're not saying it's all bad. Small entrepreneurial companies have dollar-for-dollar, a gazillion times the creativity and entrepreneurial oomph of a Hydro technocrat or Ministerial bureaucrat. —Arthur Caldicott

Independent power producers are carrying high hopes for a surge in business opportunities into an annual conference that begins today in Vancouver.

Both Energy Minister Richard Neufeld and BC Hydro CEO Bob Elton have been making signals in recent days that indicate greater opportunities are looming for private-sector companies to join Hydro's grid.

Now, Independent Power Producers Association of B.C. president Steve Davis is hoping that those signals herald accelerated growth and a stable investment climate -- something that he said is lacking in the independent power sector.

Last Friday, Elton told the Vancouver Board of Trade that he wants B.C. to lessen its dependence on imported electricity -- with "more regular calls" to independent power producers (IPPs) to add new projects to the grid.

A day earlier, Neufeld said he wants to see opportunities open up that would build a strong IPP community in the province.

Davis said the IPP sector recently suggested that Hydro issue annual calls in the neighbourhood of 1,200 gigawatt hours.

In four years, he said, those annual calls would draw in enough new electricity generation to cover the amount of electricity that B.C. usually imports in a given year.

"Imports are pretty expensive and they're pretty comparable to the price of our power," Davis said. "When you net off the resource revenues and taxes that various levels of government collect from IPPs, we're significantly less expensive than imports."

Hydro officials address the conference on Thursday.

If they indicate that Hydro is prepared to commit to a regular call for tenders it will improve the ability of independent project developers to attract investment cash, Davis said.

Hydro has issued several calls for so-called green energy projects, but Davis said the sector is capable of providing far more energy than what Hydro has been seeking.

"By having an annual call that is quite likely and reliable, it allows all of the parties in the electricity industry to start to plan."

One prospective IPP project developer, Donald McInnes of Plutonic Power, said his company has an ambitious series of green energy projects -- but needs a signal from Hydro to take them to the next level.

"At this point our company doesn't have an energy purchase agreement in place," McInnes said. "We're waiting for Hydro to formally announce a call. And we're trying to influence Hydro directly, and through the MLAs and everybody else, on the size of the call."

Vancouver Sun

Weather, demand blamed for income dip at BC Hydro

Scott Simpson
Vancouver Sun
October 23, 2004

COMMENT:This is the same unoriginal refrain from BC Hydro - we're running out, we're a net importer, we need to build more generation capacity. Come on, Mr. Elton. Let's go over the basic arithmetic again. [1]

In BC, we presently use about 55,000 GWh per year according to BC Hydro. This will rise to about 58,000 GWh in 2013. With "heritage" hydro and thermal capacity, plus existing and new contracted capacity, plus conservation and efficiencies, our generation capacity will exceed consumption until 2013. This is pretty much as it is laid out in BC Hydro's 2004 Integrated Electricity Plan

The "net importer" story that Mr. Elton and Energy and Mines Minister Richard Neufeld never seem to tire of telling, is a different story. The government expects a revenue stream from BC Hydro. In the 2004/2005 budget, it budgeted for about $400 million to net back to provincial coffers. How Hydro does this is clever, it's good busines, and it usually ends up with BC being a net importer of electricity, but an overwhelmingly successful winner on the bottom line, year after year.

This is how it works. During the nght, generation continues in Alberta, Washington and elsewhere.[2] The power generated does not have much of a market, so BC Hydro buys it cheap, and at the same time reduces the water flowing over BC's dams, reducing hydro generation in BC. Big blocks of power are acquired at low rates. More power, often, than can be used. And BC's valuable reservoirs are saved, like giant batteries.

During the day, demand for power goes up, and BC Hydro then opens the floodgates, allowing the our pent-up reservoirs to generate electricity that will then fetch a premium in the market - particularly in California.

For example, in August 2004, Powerex exported 540 GWh at an average price of $61.17 per MWh. In the same month, Powerex imported 449 GWh at $44.05/MWh. In the screaming energy market of January 2001, Powerex exported 303 GWh at $597.89 and imported 647 GWh at $173.[2] (National Energy Board electricity import and export stats). This only tells part of the story - the US/BC import/export part. The interprovincial trades are not disclosed for public scrutiny. Overall, BC Hydro reports in their 2003 Annual Report that in fiscal 2003, Powerex paid an average $47/MWh and sold power for $62/MWh.

Powerex now trades upwards of $6 billion of "energy products" a year, and had revenues of $1.9 billion in fiscal 2003.

It is a management decision whether to use the reservoirs or to purchase and import power. Mr. Elton is pleading a dry year, and increased industrial demand, as part of his explanation as to why the 2004 figures are not as good as those from 2003. However, the report indicates that the reservoirs this year are sitting at 98% of their average storage capacity, compared to 94% a year ago. Hardly seems like there's a pressing need to hold back on the water.

Increased demand from industrial users is probably a positive thing, reflective of a healthy economy. On the other hand, there are two points: 1. industrial users get such a deal on power, at about $30/MWh, that those low rates encourage wasteful use. Jack those industrial rates up, and the industrial users will have all the incentive they need to invest in more efficient technologies and processes. 2. According to the BC Hydro 2nd quarter report, the cost of power purchases was about $60/MWh - twice what industrial users pay. What is wrong with this picture? If this discrepancy it to be fixed, be prepared for a large whine from the industrial lobby.

Mr. Elton and Mr. Neufeld and just about everyone in between keep telling the "net importer" story as if we need to import power to meet British Columbian demand. It's much like the story BC Hydro has told people on Vancouver Island for the last four years: "The lights will go out" unless GSX and VIGP are built. Mr. Neufeld delivered a similar message earlier this week.

These are gun-to-your-head messages, highly emotive, and come from authorities we should be able to trust. So, when BC Hydro moves from "net importer" to "need more capacity", the people of BC are inclined to defer, to aquiesce.

Not us. There were no weapons of mass destruction, the emperor was wearing no clothes, and BC does not need to rush into more big dams, big fossil fuel generation, or rapid expansion of contracts with independent power producers.

Long before we jump to more big box generation projects, we must ensure that industrial users are paying fair costs for the power they use. And we must have full public debate about the appropriate role of energy trading in public energy and fiscal policy. - Arthur Caldicott

NOTE1: BC Hydro's use of numbers has always been a minefield of qualifications, caveats, exceptions, footnotes, and sometimes stuff that's just plain wrong. In its demand/supply scenarios, a fudge factor called "line losses" is often deployed to tip the balance in favour of whatever Hydro is trying to prove. In its forecasts, exaggerated growth rates, unrealistic "reference cold days", and other factors combine to make Hydro's case. A rigorous examination of these numbers requires deconstruction of all their assumptions, data inputs, and methods. There's a guy in Cobble Hill, a farmer named Steve Miller. Nobody in British Columbia analyses BC Hydro's numbers better than Miller.

NOTE2:Some of this power is hydro power. But much of it is coal-fired generation, especially from Alberta. BC prides itself on having no coal-fired generation, but in fact we regularly use coal-fired power, and make money from it, continuously. It's just that the coal is not being burned in BC.

NOTE3:This export price of $61/MWh compares to about $58/MWh that residential customers in BC pay to BC Hydro (57 cents a kilowatt hour), or about $30/MWh that large industrial customers in BC pay, or about $24/MWh that Hydro estimates its cost to produce hydro-electric power. Or $89/MWh that Hydro calculated it would cost to produce electricity from the Vancouver Island Generation Project at Duke Point.

Depleted reservoirs and industry's growing appetite for electricity have cut an estimated $166 million from BC Hydro's projected net income for the current fiscal year, the Crown corporation announced Friday.

Hydro's second-quarter report forecasts net income for the 2004-05 fiscal year at $240 million, down from the $406 million expected in its 2004 annual report.

Hydro reported second-quarter net income of $11 million, compared to $39 million in the same period last year.

The shortfalls stem from an unanticipated increase in electricity demand due to higher consumption in resource industries.

This meant electricity imports -- which cost BC Hydro money -- tripled compared to the second quarter of last year.

Energy costs of $916 million were $119 million higher than the same period the previous year.

"A significant portion of this increased consumption is in the large industrial sector as activity levels have increased in certain resource-based sectors in the province," Hydro reported.

Hydro is preoccupied in summer months with storing water in its reservoirs, in anticipation of winter demand, and tends to rely on imported electricity to defer full use of reservoirs.

Aggravating the situation is a somewhat dry year with below-average snowpack that left reservoirs at less than full capacity.

The costs associated with increased imports were so great that they exceeded the additional revenue Hydro took in from a 7.23 per cent that took effect April 1, the crown corporation reported.

In a speech on Friday to the Vancouver Board of Trade, Hydro CEO Bob Elton emphasized that his belief that British Columbia should be self-sufficient when it comes to electricity supply.

Two decades ago, he said, Hydro was flush with surplus electricity after the construction of a series of large dams, and able to export a surplus

But he said the benefit of that legacy is winding down to the point that the province is now in what he called a "slight" deficit position.

"Over the years we've let that surplus erode to the point that we are more or less in balance. The question is, should we allow that slight deficit we have today to build?" Elton asked.

"I believe we should not. We should aim for self-sufficiency for domestic needs, because that will improve our ability to develop a variety of electric sources within the province and will also add to our sense of energy security.

"We will make the case to our regulator that we believe British Columbia will be self-sufficient in electricity to meet domestic needs."

In a subsequent interview, he said Hydro will work towards that objective by making "more regular calls" to independent power producers for private sector generation projects to contribute to the province's electricity grid.

"We will certainly increase our purchases from independent power producers. We will have more regular calls. I think doing them once a year at a reasonable size is a good way of doing it."

Hydro is committed to making 50 per cent of future private sector purchases from so-called clean energy sources such as run-of-river hydro and wind power, he said.

"About two years we started to have more calls [for tenders for private sector generation]. We will continue to do that. It's not going to get any more tilted towards imports."

Those sources tend to be intermittent providers of electricity, and Hydro's commitment to security of supply means also seeking large-scale generation projects.

Those could include major hydroelectric projects such as the proposed Site C dam on the Columbia River, or gas fired generation plants such as one that is still under consideration for Vancouver Island.

"In the past few years it has actually been cheaper for us to buy on the market but I think we recognize there is a risk to that strategy so we agree that long term, we want to see more made in B.C. generation."

He said it is difficult for Hydro to maintain consistent performance in its budget, quarter to quarter because of the corporation's dependence on t the weather.

But he said over time the situation evens out.

Mark Veerkamp, executive director of BC Citizens for Public Power, said that if British Columbia wants to continue to enjoy its legacy of low-cost power, Hydro's best option is public sector investment.

He said the cheapest electricity in North America comes from sectors where public investment in generation has dominated.

"Our focus isn't big or small, it's making sure we can capitalize on the efficiencies that public power can provide," Veerkamp said. "We've seen the benefit for future generations in the public investment that was made 20 or 30 years ago. I think we need to look at now as the tipping point where we need to invest again for the sake of future generations."

Meanwhile, a lawyer who acts for independent power producers said Hydro's second quarter results show that British Columbia is dependent on imports for "at least" 10 per cent of the province's energy needs.

"This dependence is the result of poor planning and decisions made in the 1990s," said David Austin.

"The problem wasn't created overnight and it can't be fixed overnight."

Earlier this week, independent producers released a study showing that the costs of green energy derived from private sector projects already operational in B.C. is the same as what Hydro is paying for import power.

The independents go on to say private power generation works out cheaper for B.C. than imports, once taxes and levies going back to government are removed.

"A significant portion of this increased consumption is in the large industrial sector as activity levels have increased in certain resource-based sectors in the province," Hydro reported.

Hydro is preoccupied in summer months with storing water in its reservoirs, in anticipation of winter demand, and tends to rely on imported electricity to defer full use of reservoirs.

Aggravating the situation is a somewhat dry year with below-average snowpack that left reservoirs at less than full capacity.

The costs associated with increased imports were so great that they exceeded the additional revenue Hydro took in from a 7.23 per cent increase that took effect April 1, the crown corporation reported.

In a speech on Friday to the Vancouver Board of Trade, Hydro CEO Bob Elton emphasized that his belief that British Columbia should be self-sufficient when it comes to electricity supply.

Two decades ago, he said, Hydro was flush with surplus electricity after the construction of a series of large dams, and able to export a surplus

But he said the benefit of that legacy is winding down to the point that the province is now in what he called a "slight" deficit position.

"Over the years we've let that surplus erode to the point that we are more or less in balance. The question is, should we allow that slight deficit we have today to build?" Elton asked.

"I believe we should not. We should aim for self-sufficiency for domestic needs, because that will improve our ability to develop a variety of electric sources within the province and will also add to our sense of energy security.

"We will make the case to our regulator that we believe British Columbia will be self-sufficient in electricity to meet domestic needs."

In a subsequent interview, he said Hydro will work towards that objective by making "more regular calls" to independent power producers for private sector generation projects to contribute to the province's electricity grid.

Hydro is committed to making half of future private sector purchases from so-called clean energy sources such as run-of-river hydro and wind power, he said.

© The Vancouver Sun 2004

Reliable power, at low cost, for generations

Bob Elton,
President and CEO, BC Hydro to the
Vancouver Board of Trade
October 22, 2004

Background

Before I begin my talk today, I want to acknowledge that there are a number of significant regulatory decisions pending that I will not comment on. The decision on our revenue requirements application and the outcome of our Vancouver Island Call for Tender process are perhaps the most significant ones. However, my remarks today will apply regardless of the outcome of these and other decisions.

BC Hydro is a public trust, and we employees of BC Hydro are stewards of it. That is not fashionable today – as a society we excel in being consumers more than we do in being stewards. But we owe it to our future, to build on our past.

Our purpose is to supply reliable power, at low cost, for generations. Today, our reliability is generally regarded by our customers as good; we have among the lowest costs in North America; and we have a proud environmental record.

So we have a great heritage. What will we leave to our children and grandchildren? That is what I want to talk about today. I want to explain some of the very high long term goals that we are setting for ourselves as a company, and then talk about what we, and you, must do to make sure that we achieve them.

Reliable Power

Reliability comes from having enough energy there when you need it; and then from getting it to you along the wires Many years ago, British Columbia built large hydro dams that meant we would be exporting a surplus. Gradually, we have let that surplus erode to the point where today, we are in a slight deficit. Should we allow that deficit to continue to build? I believe not. Aiming for self-sufficiency will improve our ability to develop a variety of electricity sources within the Province; and it will also add to our sense of energy security.

So we will make the case to our regulator that we believe BC should be self-sufficient in electricity to meet domestic needs.

We will still import through Powerex when the price is low, as that helps keep costs down for our customers. And Powerex will continue to export when the price is high to bring in additional revenue for the Province. But in net terms, we will be self sufficient.

As for getting the energy to you along the wires, we face several physical challenges– the mountainous terrain, the distances between our generation and our customers, the combination of trees, and winter weather. That puts limits on the reliability that you can expect. I think this is a balance that our customers are prepared to accept.

So we intend to ensure that we keep reliability at today’s levels; to preserve our heritage and not squander it. We will target our investments so that our maintenance and capital will be spent more on the places in the Province where reliability most needs to be improved.

And we will improve the way we talk to you about reliability, so that we will eventually tell you what outages you have had, how long they lasted, and how your reliability stacks up with others.

That will help you put pressure on us to do better.

At Low Cost

Let’s come to our low cost heritage. You have practically the lowest costs in North America – typically, we are tied with Quebec and Manitoba. We recently applied for a rate increase of 8.9% next year, and 0% the year after. If those increases are granted in full we will still be practically the lowest and in addition we return about $700 million a year to our shareholder, through profits and water rentals.

We are a very different enterprise than many in the public sector, in that labor is only about 20% of our costs. 40% of your bill is actually to pay for capital costs – depreciation, financing, and so on. That means that we must focus on the long term – ensure that we invest wisely, and that we make the right capital decisions in particular.

Our goal is to preserve our competitive advantage. Put another way, we want to continue having the lowest rates in North America relative to other jurisdictions, while at the same time providing a strong financial return to you through our shareholder. As long as we continue to look at our assets on a lifecycle basis, as long as we ensure that we buy energy using open, transparent, competitive processes, as long as we build Powerex within proper risk tolerances, and as long as we work constructively within our strong regulatory framework, then we will succeed.

For Generations

So – we intend to preserve our reliability, and to preserve our cost advantage. But not at the expense of the future.

Reliable power at low cost for generations – those generations are not an abstraction. They are real people. They are children who look up at me, and at you, with that look in their eyes that is full of hope, that says: “I trust you to look after my future.” Let me talk particularly about the environment. What right do we have to leave our children with an environment that is blighted, that is worse than the one we inherited? Some answer that we must create wealth. But if we reduce electricity rates today, or increase reliability, in a way that destroys the environment, that is not creating wealth. That is taking wealth from the future, so we can consume more in the present. Why should we do that? Some answer that technology will save us. That is irresponsible, because we are deciding to take the risk, but it is our children who will suffer the consequences if we are wrong.

Some answer that market forces will take care of environmental costs. But history shows us that market forces consistently underestimate environmental costs. In our industry they have done this repeatedly. When our own dams were built, we did not think about the future costs of water use planning, and the impacts of them on First Nations people.

What we must do is become a generation of leaders, who will accept responsibility for our actions.

Environmental Goal

To do that at BC Hydro we are finding out precisely what our impact is on the environment, and we are setting a long term goal to make sure that we do not increase it – that we have no net additional impact on the environment. It will not be easy, but it is a goal that will energize our company.

I’ve become committed to this environmental goal relatively late in life. I’ve always been very focused on developing young people, in the belief that they would have time to change the world, and that they would start with a good base. In the past few years, a few things have changed me. My own children have grown into being very strong minded about right and wrong, and about our ability to change, urgently, what must be changed.

And when I visit BC Hydro facilities, I get a very clear picture both of the beauty of our Province, and of the scale of those facilities.

They leave me with a conflicting sense – on the one hand, pride in the massive effort needed to construct them. On the other, when you look beyond the dams to the size of what they hold back, or when you look at how tiny our wires are against the backdrop of the mountains they go through, you realize how dependent we are on nature.

We already have a proud environmental record and we want to build on it. Yes, our facilities have a massive environmental impact – wires, dams, power stations. At the same time, we have low greenhouse gas emissions, we work constructively with others on water use plans, we have many outstanding programs ranging from recycling poles, to protecting birds that want to perch near our wires.

Reliable Power at Low Cost for Generations

We are clear about our purpose – we will supply you with reliable power at low cost, in a way that takes care of the future.

Choices: Conservation

Now, let me talk about some of the choices that we must make to get there. First there are two choices that you must make as consumers, and as citizens.

As time goes on, as our population grows, people consume more electricity.

To get electricity in balance, we must either consume less, or generate more. That is a choice for the people of this Province.

Let’s examine that choice.

Can we consume less? That’s a question that each of us can answer for ourselves, but here are some facts. In British Columbia, the average person consumes 15,000 kilowatt hours in a year. We consume three times as much as the average German; two and a half times as much as the average Briton; and more than the average American.

We use electricity in a way that cries out for waste reduction. We use it when we are out of our homes, when we are in different rooms. We wouldn’t leave the taps on all over our homes, but we use electricity carelessly.

We can clearly consume less. For the past few years we at BC Hydro have run a world leading Power Smart program that has reduced the increase in electricity consumption by 3000 gigawatt hours annually – that’s enough electricity to meet the needs of 300,000 homes each year! Can we do better? Can we create, in this Province, a conservation culture? If we can reduce our consumption at home by 20% then that would change our need for new generation sources, and therefore protect the environment. And it would allow us to keep our costs lower.

How can we achieve that? What is our role at BC Hydro? It is our role to continue to provide leadership on energy efficiency and conservation. To build on the leadership shown by enterprises such as UBC, Vancouver International Airport, Colleges, the GVRD, the City of Vancouver, and so many others. To increase our efforts to see that people, especially young people, understand the choices they can make.

We will set goals for reducing electricity consumption in BC, and we will publicize those goals, and we will try to cajole you, inspire you, and if necessary embarrass you, into using less.

Choices: Energy Sources

The second choice we have to make is about the type of energy that we buy There is a debate raging in our industry about what will fuel our future. The public needs to be more involved in that. The world intends to double its generation of electricity in the next 30 years.

Using what? Natural gas is today’s popular source, but its cost and availability are under great pressure. Coal is more plentiful, but has higher environmental costs. There is research going on into cleaning up coal that very much needs to bear fruit. Large hydro projects are increasingly difficult to build in developed countries, because of their effects on communities, as well as conflicting demands on water. Nuclear power has unresolved long term storage issues.

Renewables such as wind, or small hydro, or solar, or tidal, or wave, or biomass, or geothermal are usually more expensive today, and there needs to be more technological development on many of them. For that to happen, there needs to be clear public support.

So what about British Columbia? Our commitment is to buy BC clean energy to meet half of our new needs, and we already have 90% of our power supplied from clean sources. In the past 2 years we have signed 17 contracts to buy enough renewable power to meet the needs of 190,000 homes. And the investment is in excess of one billion dollars, which is providing a very solid base for the developing IPP industry We will soon be going around the Province listening and talking with people as part of our Integrated Electricity Planning process.

We need to understand what people are prepared to do.

What facilities will you accept in your back yard? People have protested against Sumas 2 and Vancouver Island gas plants; Site C; run of the river hydro plants that affect other water users; wind farms that kill birds. What is it you want? What will you pay for? Remember, we have to either consume less, or generate more.

Which is it? And if we will not consume less, then how can we generate more in a way that protects the future? This is a debate about the future, about 10 and 20 and 50 years from now – but some of the choices must be made today.

We will provide leadership, express opinions, set out facts, and we will see what the regulatory process and the public policy process allow us to achieve. We will try to use competitive processes wherever we can. Ultimately, the choices we make about this will be made by society, by the BCUC, by you, and me, and others living in this Province.

Will you support an approach that sees us continuing to pay more for clean energy, that sees us buying off-sets where we buy from other sources, and that perhaps sees the money from off-sets used in British Columbia?

Our Employees Description

I now want to talk about the changes we must make within our company, so we can achieve our purpose. And to do that, I think it’s useful to begin with a description of our work-force – inevitably simplistic, of course.

I am very proud to be an employee of this company, and very proud of the company I keep – of the 4300 people who are very dedicated to serving you, and to keeping you safe. Of course they will challenge me about the way the company is run, about pay and conditions, about many things. But overwhelmingly they will aggressively speak out on behalf of our customers, suggest improvements, rail against bureaucracy.

They have being doing this for 40 years, and this is one thing that has never changed at BC Hydro. “Reliable power is the work of reliable people”.

In Prince Rupert, for example, we have precisely three people.

They respond to calls, often by helicopter, and work in storms and other conditions. They are independent minded people who are empowered to make decisions quickly, to communicate them properly, and to maintain the highest safety standards. If storms hit a particular place in the North, our crews move quickly to work together to restore power.

I am not being naive about this – of course there are things we need to do differently. But this work force is a key asset of this company.

Focus on Costs and on Commercial Decisions

Within our company, the focus on future generations is what can inspire our people, and also help us to attract some great new talent. We already have a great drive to do this, and just need to tap into it.

And the drive towards reliability, and great customer service, is very strong in our company.

But I also recognize that as a public sector monopoly, it is vital that we pay attention to our costs. If we see our costs rising relative to other utilities, if we start to erode that great competitive advantage that we have, then you as consumers will demand that we change our habits. We can be idealistic about the environment, but only if we are hard-headed about our costs. So how we will strike the balance?

Managing for Performance

There is no magic bullet that will achieve this – just the will to eliminate waste, a drive for more commercial decision making without sacrificing quality, and a focus on identifying and rewarding performance, and developing people to achieve great things.

Culture of Teamwork

The next area for change is to create a culture of real teamwork. Difficult. In our company, we have a management team that is generally quite new in their jobs. Many came from somewhere else. Many have a private sector background. In the field, we generally have the opposite.

We also face skill shortages and our work force is ageing, and many of you can relate to that. Our work-force in the future will need to have more women, more people from different ethnic groups, more First Nations people, partly because diversity of thinking will improve our company, and partly because we simply will not be able to keep finding enough people in the traditional mold. I know that it will be hard for us to welcome people who do not easily fit that mold. We have some learning to do, and we will do it.

It is easy to exaggerate our differences, but we cannot. People who come into our company, me included, have to learn how to celebrate our history, and our core of people doing great work serving customers. People who are long serving have to learn to accept that new people can bring creativity and help us to raise our sights.

This is not done by pretending that new ideas must always replace the old, or by pretending that new ideas will only come from people who just got off the bus.

This is done by recognizing that what we are building here is a company that will take the best people, the best thinking, the best visions, the best execution. What we are building is a company that will, as it always has, mirror our Province – become more vibrant, more diverse, more exciting, and ultimately more successful, because adding new people never has to result in merely replacing the old, but will make it stronger.

Stakeholder Engagement

The other area of change that we need is to learn to listen better.

We have very smart people- engineers, accountants, lawyers, economists, biologists, scientists; we have people who are world leaders in a variety of fields. Working at BC Hydro is like drinking knowledge through a fire hose.

But if BC Hydro were an animal, what would it look like? It would have a large forehead, to fit in the very large brain. It would have a large mouth, so we could talk a lot. It would have a big heart, because our people care a lot. But the ears? The ears would either be very small, or stapled shut. We have to open our ears.

When we listen, it works. The Power Smart program features great ideas from many of our customers; the water use planning process has helped us see how better to run our facilities. On Vancouver Island, the lengthy regulatory processes have brought forward excellent ideas from companies like Terasen and Norske, that can help us to achieve our goals.

One of the advantages of being in the public eye so much is that we get bombarded with advice. A lot of it is very good advice! It is so important that we listen to others because in the end we cannot achieve our goals without support. We will need to explain ourselves to the Regulator, to the Government, to you, if we are to gain permission to do what we believe needs to be done. We can only do that if we have first built strong support for our priorities – and that takes good listening.

This work of learning how to listen is underway, and it will not happen overnight.

Conclusion

Can we achieve our purpose of reliable power, at low cost, for generations? We can with your help. If you will join with us in learning to conserve, then we can keep our costs lower and also minimize our environmental impact.

If you will increasingly express a preference for us buying clean energy and for offsetting our environmental impacts then we can keep our long term costs low while again reducing environmental effects.

If you tell us your ideas to help us achieve our goal of no incremental net effects on the environment, then our joint creativity will preserve mountains, instead of moving them.

We will gradually eliminate waste in what we do, and manage our costs so that we keep for you the competitive advantage that we have all inherited.

Our 4300 people will work together, listening to you, serving you, and building for a future that we will be proud to bequeath to future generations.

Think again about the look of hope on the faces of our youth.

When they look up at each one of us and ask what kind of future we are building for them, what will we say? At BC Hydro, we have a clear path, a clear purpose. Reliable power, at low cost, for generations. We are excited about the chance to achieve that with you.

CFT announcement delayed

BC Hydro has delayed the announcement of the Call for Tenders result, at one time scheduled for Oct 8, then to Oct 26, and now postponed likely to the week of Nov 1 - 5.

B.C. calls for open electricity market

Independents could provide two per cent of annual power output, Neufeld says

Vancouver Sun
Scott Simpson

COMMENT: That BC Hydro will source new capacity in British Columbia from the private sector was a path decreed in the Liberal government's energy policy released in 2002. Nothing new there.

What might be new is the idea of one annual call for energy and capacity, instead of the smaller, localized, specialized calls that Hydro has undertaken so far - for capacity on Vancouver Island (the Call for Tenders) or the occasional "green" calls, for example.

BC Hydro's announcement to mitigate all environmental impacts sounds good. The devil there is in the details. Here's Hydro's news release —Arthur Caldicott]

B.C.'s energy minister said Thursday he wants to throw open British Columbia's electricity market to greater participation by the private sector.

Richard Neufeld said independent power producers have told him they can develop enough new projects each year to add about 1,000 gigawatt hours to the province's grid -- an amount roughly equivalent to two per cent of the electricity that's annually consumed in B.C.

A thousand gigawatts is also roughly equal to annual demand growth in a B.C. economy that's thriving on employment in the construction industry and worldwide demand for resources.

Neufeld says he wants independent power producers to have room to compete for all of the province's needs.

"[BC] Hydro is having a greater load growth than what they were expecting in their plans," Neufeld said. "That's understandable. They didn't expect British Columbia's economy to move ahead that fast, but it is moving quick and fast, and that's good for all of B.C."

At present, independents are hemmed in due to Hydro's practice of addressing the province's growing energy demand via a variety of specialized programs.

The independents have carved out a niche as experts in the development of green energy projects, and they've been beneficiaries of three annual tenders that Hydro has used to add several hundred gigawatt hours to the grid.

However, only six months ago, Hydro conservatively estimated that it would require just 40 gigawatts a year from green producers over the next decade.

That token amount drew angry criticism from proponents of wind, small hydro and other environmentally friendly methods of electricity generation -- particularly in light of the Crown corporation's 2002 estimate that green and alternative energy could provide B.C. with 18,000 gigawatts.

Hydro has several methods of coping with demand growth, with security of supply the crown corporation's stated priority.

It uses its PowerSmart program to reduce consumption, and has a program called customer-based generation in which it partners with industries to finance internal power generation projects such as steam-driven turbines powered by woodwaste.

It's also poised to announce its choice of projects to address a looming shortage of electricity on Vancouver Island -- a gas-fired turbine generator is expected to be selected -- maintaining continuity with a project that was originally begun by Hydro.

Neufeld said his main concern is making sure that Hydro's customers aren't jolted by a sudden surge in the price of electricity -- something that's possible only if higher-cost green sources such as wind power are carefully blended into B.C.'s low-cost hydroelectric system.

He wants independents to have the opportunity to bid on everything Hydro is seeking in a given year, instead of operating in just a niche market.

He thinks one annual call for electricity, with all sources welcome to bid, could give the independents more solid economic footing.

"What we have to do is open it up to all and then Hydro has to move from there to decide where they can buy the electricity from.

"We have to get a big enough call so that it actually builds a good IPP community in the province of British Columbia.

"I know the IPPs are a little impatient at times, but Hydro also has some responsibilities to the ratepayers ... because of course ratepayers want the lowest cost possible."

He made the comments at an announcement that Hydro is committing to a new environmental policy that promises to mitigate for 20 years all adverse impacts that Hydro operations have on the environment in British Columbia.

Hydro promises "no net incremental" impacts from its operations.

It could compensate for the impact of a dam, for example, with a fisheries enhancement project, or for air emissions from a gas-fired power plant with a tree-planting program or financial support for fleet purchases of hybrid automobiles.

The policy will be announced in detail today when Hydro chair Bob Elton addresses a Board of Trade luncheon in Vancouver.

- - -

POWER POINT

BC Hydro buys 3,500 gigawatt hours from B.C. independent power producers. Adding 1,000 gigawatts has the potential to power more than 54,000 additional homes.

3,500 gigawatt hours

190,000 homes at any given moment

1,000 gigawatt hours

54,000 homes at any given moment

© The Vancouver Sun 2004

Coal is the way to go for new power

With a potential boom looming for northeastern B.C., it's up to the government to dispel the old myths about coal

Editorial
Vancouver Sun

The idea of using coal as an energy source invokes an image of Dickensian England with black smoke billowing from smokestacks into an already blackened sky.

Whatever ambience that picture creates, it doesn't accurately depict how modern coal-fired power plants work. For the sake of rural British Columbia, which is in dire need of an economic upturn, it's incumbent upon the province to dispel those myths that have made coal the black sheep of the energy industry.

After all, while electricity generated by nuclear power is declining in Canada, and while the supply of hydro power remains flat, demand for electricity is expected to rise dramatically. And coal power could fill the gap.

But the primary demand for power in the next decade will come not from Canada or the United States, but from developing countries, particularly China and other Asian nations.

Thanks to boom in that country's economy, China is building 10 million new homes a year, which is equivalent to the total number of homes in Canada. Since the homes are reinforced with steel, and since coal is relatively cost-effective, there's an enormous demand for steelmaking coal.

And it's not just about homes: The Asian marketplace also has considerable demand for cars, refrigerators, stoves and other appliance that are manufactured with metallurgical or steelmaking coal. And there's no sign that such demand will decrease any time soon.

That's enormously good news to B.C., which has substantial coal deposits -- about 21 per cent of the global market for metallurgical coal -- and it exports an average of 26 million tonnes of coal a year.

Still, we're not operating at full capacity, and as demand increases, it's imperative that B.C. ratchet up its coal production.

That's where northeast B.C. comes in. The area is capable of producing tens of millions of tonnes of coal a year within the next few years, and that will provide up to a thousand new jobs in a region that desperately needs them.

In the 1980s, the province sunk $3 billion into coal development, including the construction of an electrified BC Rail line between Tumbler Ridge and Chetwynd, and a coal terminal in Prince Rupert. Yet the rail line was shut down 18 months ago, and it looked like the province's investment was yet another government boondoggle.

Now, thanks to increasing demand for coal, CN Rail, which took over BC Rail, plans to get the line operational. And changes to the Coal Act to streamline the application for new mines will also help. By facilitating what could be one of the biggest booms to the rural B.C. economy in many years, Victoria could ultimately recoup its investment.

Yet the entire project could falter unless the province informs the public that new technologies have made coal a relatively environmentally safe solution to the world's energy needs.

The combustion of coal does create many pollutants including carbon dioxide, carbon monoxide, sulphur dioxide and particulate matters. But new technologies have reduced markedly the environmentally unfriendly aspects of coal-fired power plants.

For example, the United States, which relies on coal for more than 50 per cent of its electricity, has invested more than $50 billion US in new technologies in the past three decades and has experienced impressive results:

According to the Environmental Protection Agency, sulphur dioxide emissions have decreased by 70 per cent, nitrous oxides by 48 per cent and particulate matters by 94 per cent in the past 30 years.

Further, new technologies actually allow us to generate electricity from coal with no combustion. And there now exists the potential to use coal-bed methane, of which Canada has estimated reserves of 2,500 trillion cubic feet, to generate energy without harming the environment.

Far from creating a Dickensian climate from coast to coast, coal can, therefore, be viewed as an environmentally friendly equivalent of wind power and solar energy.

And if the province gets that message out, it could also help turn the economy of rural B.C. around.

© The Vancouver Sun 2004

Williams intervenes in Terasen Resource Plan & LNG

Williams Gas Pipeline Company
P.O. Box 58900
Salt Lake City, UT 84158-0900
Phone: (801) 584-7094
FAX: (801) 584-7862

October 15, 2004

Mr. Robert J. Pellatt, Commission Secretary
British Columbia Utilities Commission
Sixth Floor, 900 Howe Street, Box 250
Vancouver, British Columbia V6Z 2N3
Via internet: http://www.bcuc.com

Dear Mr. Pellatt:

Re: Terasen Gas (Vancouver Island) Inc. (“TGVI”), 2004 Resource Plan for Vancouver Island and Sunshine Coast and Application for a Certificate of Public Convenience and Necessity for a Liquid Natural Gas (“LNG”) Storage Facility

Pursuant to British Columbia Utilities Commission (“Commission”) Order No. G-83-04, Williams Gas Pipeline Company (“Williams”) files this intervention in the above-referenced proceedings. Williams owns two major interstate natural gas pipeline companies in the United States and has participated in the construction and operation of many interstate natural gas pipelines as well as various other energy-related projects. Williams is a partner in the proposed Georgia Strait Crossing Pipeline (“GSX”) providing the engineering, design, operation and management of the proposed GSX project—both in the design and permitting stages of the project as well as the possible construction and operational phases of the GSX project.

Williams possesses knowledge and information relevant to issues relating to the construction, operation, and reliability of natural gas pipelines generally. Williams also possesses specific information about the proposed GSX project that may be viewed as a natural gas pipeline alternative that should be considered in the evaluation of TGVI’s Resource Plan as well as an alternative to the TGVI-proposed LNG production and storage facility to meet the demands of electric power generation and general gas demand growth on Vancouver Island.

Williams also believes that the outcome of the above-referenced proceedings could have a material impact on the proposed GSX project that has already been certificated by the Federal Energy Regulatory Commission and the National Energy Board of Canada.

Williams is prepared to provide relevant information to the Commission pertaining to GSX that may be required to facilitate a complete review of TGVI’s Resource Plan and the TGVI-proposed LNG production and storage facility. For these reasons, Williams believes that its intervention is both appropriate and necessary.

Please send all materials, information and correspondence relating to this matter to the undersigned, by fax at (801) 584-7862 or by electronic mail at steven.w.snarr@williams.com. I can also be contacted at (801) 584-7094.

Very truly yours,

/s/ Steven W. Snarr

Steven W. Snarr
Senior Counsel
Williams Gas Pipelines

See also BC Utilities Commission website for the Terasen Resource Plan and LNG storage facility (www.bcuc.com)

Examiner backs shoreline permit

NATURAL-GAS PIPELINE:
Whatcom County Council must give final approval.

John Stark
The Bellingham Herald

Whatcom County Hearing Examiner Michael Bobbink has recommended approval of a county shoreline permit for the $248 million Georgia Strait Crossing natural-gas pipeline, sending the project on to the Whatcom County Council for final approval.

But those familiar with the project say the county's regulatory process could wind up being irrelevant to the project's fate for two reasons:

• Federal courts may rule that Washington state and the county have no jurisdiction in the matter because they did not raise environmental objections within the time limit set by law.

• The natural gas-fired generating plant on Vancouver Island, which the pipeline would be built to serve, may not be built, or could be served by an existing pipeline if it is built.

The pipeline, known as GSX, is a project of Williams Pipeline Co. Steven Snarr, general counsel for Northwest Pipeline Corp., a Williams subsidiary, acknowledged that his company has no current timeline for starting or completing construction of the pipeline.

In his 20-page ruling, Bobbink said he saw no reason to believe the pipeline would have significant impacts on marine life or on the aesthetics of the Cherry Point area, where the pipeline would go under water to deliver natural gas to Vancouver Island. The pipeline is proposed to begin at Sumas and would cross 33 miles of the county between there and Cherry Point before entering the Strait of Georgia.

In making his ruling, Bobbink noted widespread citizen opposition, including 66 letters submitted by opponents. Whatcom County Planning and Development Services staff also opposed the project.

But Bobbink's opinion cites environmental reviews by state and federal agencies finding that any potential environmental impacts could be avoided with appropriate safeguards. He also said his review of the evidence indicated the project would not interfere with navigation or commercial fishing, and would not restrict future development of vacant heavy industrial land at Cherry Point.

Bobbink's opinion got poor reviews from representatives of environmental organizations.

Fred Felleman, president of Fuel Safe Washington, said he didn't think Bobbink's opinion gave enough weight to environmental concerns or to the possibility of providing gas to Vancouver Island via an existing pipeline.

But Felleman said he was encouraged that Bobbink chose not to approve the project's shoreline permit outright, ruling instead that it qualified for full County Council review under county zoning law.

Wendy Steffensen, water programs coordinator for ReSources, said she was disappointed that Bobbink chose to override the recommendations of the county planning staff. But she also expressed hope that the County Council would turn the project down.

Council Chairman Dan McShane said it was too soon to say when and how the Council will address the issue. He said the Council has three options: Refer the matter to the Planning Commission for further review, rule on the permit based on the evidence already collected by Bobbink, or schedule a new public hearing before reaching a decision.

Pipeline company counsel Snarr said his company will press ahead with the county regulatory process, even though the company believes that it already has the permission it needs from the Federal Energy Regulatory Commission. Snarr said the company wants to work out proper environmental safeguards with county and state officials, even though they contend the county no longer has the authority to block the project.

A ruling on the jurisdiction question is pending in the 10th Circuit Court of Appeals in Denver.

Reach John Stark at 715-2274 or john.stark@ bellinghamherald.com.

Whatcom Hearing Examiner recommends GSX approval

The Whatcom County Hearing Examiner refers the matter of a shoreline development permit for GSX-US at Cherry Point, to Whatcom County Council for a decision, because it is a "major project". He also recommends that the county council approve the application.

In his findings and conclusions, Michael Bobbink makes a number of important points, some potentially contentious:

- he appears to agree with FERC and the proponent that the project will not have significant environmental impacts

- he says that if the county wanted to stop the pipeline, the opportunity and legally correct place to do that was in the FERC review of GSX, not in a matter of a local permit.

- he concludes that $1.7 million in county taxes each year, plus additional school district taxes, are sufficient local benefits to accept the pipeline (p14)

Bobbink's two most troubling conclusions, however, have to do with jurisdiction and alternatives.

- bilateral agreements, he says, "forbid discrimination in this situation by either Country against the citizens of the other. In that case, the benefits to the citizens of Vancouver Island would have to be considered the same as the benefits to the citizens of Whatcom County or Washington State." (p16-17)
Speaking as a Canadian, this is bullshit. We've had enough of protecting the interests of corporations and other governments with these trade agreements. If the people of Whatcom County don't want the pipeline they must be able to refuse it.

- project alternatives, says Bobbink, don't need to be reviewed, because "none of the environmental documents conclude that there are other more environmentally desirable alternatives." and FERC has already examined the matter and issued a permit. (p18)
FERC refused to look into the alternatives, even when they realized that some existed. In the draft Environmental Impact Statement, FERC states "Direct transmission of electrical energy to Vancouver Island from the mainland would negate the need for the GSX Project, but no such project has been approved by potential sponsors." Subsequent to this, BC Hydro planning engineers acknowledged that a new cable system to Vancouver Island was their preferred option, but that the gas-fired strategy was forced on them by government. Also subsequent to the draft EIS, Terasen, which owns the existing gas pipeline to Vancouver Island filed evidence that they could deliver the required gas for less capital cost, with mere upgrades to their existing system. BC Hydro accepted Terasens' conclusion in its 2004 Integrated Electricity Plan. Alternatives clearly exist.

Bobbink concludes "the Hearing Examiner cannot find either a factual basis or a legal basis that would justify denial of the Shoreline Permits. Therefore, the Hearing Examiner is recommending that the Whatcom County Council grant the requested Shoreline Permits. This is not a recommendation that the project be finally approved or built."

This may be viewed as a lack of courage or creativity on Bobbink's part, but it is probably a legally correct, if conservative, conclusion.

Nevertheless, the "my hands were tied" legal findings that recur through the permitting processes for GSX on both sides of the border are not merely pathetic. They speak to a more fundamental or structural failing of the permitting structures to address issues in a meaningful way. Most egregious is the failure to represent and give voice to, the people.

Also problematical, but a matter that the people of Whatcom County and Washington State are concerned about, is this situation:

- both the Whatcom County Council, and the Washington State Department of Ecology have staff reports with recently recommended either against or strong concerns with the GSX project,

- yet both offices were interveners in the FERC review of GSX and both let dates and opportunties to intervene lapse

- and both subsequently have concluded, in slightly different ways, that their legal options now are limited because of these earlier oversights.

Are these evidence of bureaucratic carelessness? political spinelessness? Where is the accountability here? The people of Whatcom County and of Washington State have been failed either by their elected officials, their staff, or both.

Whatcom Hearing Examiner's report

Three excerpts from Bobbink's report:

A major point of opposition to the proposal is the claim that it will not provide any benefits to either local or State interests. The major benefit from the pipeline would be to electricity users on Vancouver Island. The proposal is not expected to create more than a couple of permanent jobs in Whatcom County. Some additional jobs may be created during the construction phase of the project; however, the record indicates that most of this work will go to large contractors outside the local area. GSX estimates that the construction phase will provide approximately eight million dollars in one-time sales tax revenue to State and local governments. GSX also estimates that upon completion of the pipeline and associated facilities, it will be paying approximately 1.7 million dollars yearly in property taxes to Whatcom County. All local school districts through which the pipeline passes will receive additional tax money without having to provide the additional educational services that would be required for a project that created a significant number of new jobs. (page 14)

As indicated in the findings, there are some local benefits, including tax revenue, and the potential source of natural gas for future industrial development within the Cherry Point Management Area. Additionally, the United States has entered into a treaty with Canada, which apparently forbids discrimination in this situation by either Country against the citizens of the other. In that case, the benefits to the citizens of Vancouver Island would have to be considered the same as the benefits to the citizens of Whatcom County or Washington State. In any case, there is no requirement for local or State benefit before a Shoreline Permit can be granted. (page 16,17)

Proponents of the proposal consistently reiterate that there are feasible alternatives available which would not require this pipeline to go through Whatcom County or Washington State. However, none of the environmental documents conclude that there are other more environmentally desirable alternatives. In addition, FERC has granted the project a Certificate of Public Convenience and Necessity, after evaluating the alternatives. In the context of this Shoreline Permit, taking into account the environmental documents and FERC’s ruling, the discussion of alternatives is out of place. (page 18)

WHATCOM COUNTY HEARING EXAMINER
RE: SHORELINE SUBSTANTIAL DEVELOPMENT, SHR02-0003
SHORELINE CONDITIONAL USE, SHC02-0003
Application for
Williams Pipeline
Georgia Strait Crossing
FINDINGS OF FACT,
CONCLUSIONS OF LAW,
AND RECOMMENDATION
TO THE WHATCOM COUNTY COUNCIL

Call for Tenders results delayed to October 26

BC Hydro ducked the October 8 deadline they've had set for most of a year to announce the results of their Call for Tenders. The date has been pushed back to October 26.

26 October 2004
Filing of Independent Reviewer’s Final Report
Announcement of preferred option/award of EPA(s)

16 November 2004
Execution of Final Form Agreements and delivery of Development Security

19 November 2004
Filing of EPA with BCUC under section 71 of the Utilities Commission Act

http://www.bchydro.com/rx_files/info/info16286.pdf

Hydro back on California hook

By Scott Simpson
Vancouver Sun
Page D01
06-Oct-2004

The saga of the GSX Pipeline has been closely paralleled by the saga of BC Hydro's opportunistic overcharging for power sold into the California market during the winter of 2000/2001. Both are stories of financial mismanagement, and both have darker undertones of unstated agendas, manipulation. BC Hydro's Powerex is accused of doing in energy markets exactly what Enron was guilty of, and these activities were driven by the same senior execs in Hydro and government who were ramming through the GSX Pipeline project - part of a set of gas-fired Vancouver Island generation projects that would displace mainland power, freeing it up for sale into the hot California market. Hydro thought it was off the hook with the California issue. Not so, as Scott Simpson reports: "Hydro could lose as much as $280 million US." "But it could see its losses run far higher, if California has its way." What was that about a budget surplus, Mr. Collins?

Powerex has been found guilty once already on these overcharges and in 2002 was ordered to pay back to California US$279 million. (link). This was overturned on appeal.

The questionable relationship between Enron and Powerex goes back a number of years. The Canadian federal Competition Bureau busted the offices of both companies in Calgary in 2000, but didn't find the evidence they were looking for to bring charges of electricity bid-rigging. (link)

B.C. Hydro has suffered a "major setback" in its long-running legal battle with California over the state's energy crisis, and could be back on the hook for more than $750 million US in refund payments to the state.

The setback came in a recent ruling by a United States appeal court that gives California substantial new clout to pursue roughly $5 billion in refunds from electricity suppliers and traders, including Hydro's Powerex power-trading subsidiary.

That's in addition to about $3 billion that's already on the table.

The U.S. 9th Circuit Court of Appeal ruled that U.S. federal regulators were not tough enough in their dealings with Powerex and other trading companies in the wake of the 2000-2001 crisis.

It said the U.S. Federal Energy Regulatory Authority (FERC) acted "improperly" when it decided to let about 60 power- trading companies off the hook despite allegations that they broke rules established to prevent price gouging.

Based on earlier calculations by the B.C. finance ministry, Hydro's potential liabilities in connection with the crisis amount to about 10 per cent of the amount California is seeking.

Two years ago the ministry suggested B.C.'s liability could be as much as $1.3 billion Cdn -- although California has since scaled back its demands, and the Canadian dollar is relatively stronger than it was in 2002.

Hydro maintains that Powerex is innocent of any wrongdoing, but a spokesperson acknowledged that the decision could spell trouble for the British Columbia Crown corporation.

"An early review of the decision indicates to us a major setback for suppliers and a big win for California parties who've been demanding substantial refunds," Hydro media relations manager Elisha Moreno said on Tuesday.

"We were already cleared. We stand by our claim that we participated by the rules of the market, and FERC has already cleared us.

"As far as we are concerned we thought that this was a dead issue. We thought we had been cleared and we were happy because it validated what we had said all along."

Eleven months ago Hydro was celebrating a deal it worked out with FERC, absolving Hydro of any guilt in association with the crisis in exchange for a nominal $1.3-million Cdn "settlement fee."

Many other companies made similar deals and, like Hydro, used them to assert their innocence with respect to charges of gouging during a spectacular rise in energy prices during the bungled 2000-2001 start-up of California's open market for electricity.

However, California Attorney- General Bill Lockyer wasn't happy with the deals.

Last year he filed an attack on FERC in the 9th Circuit Court of Appeal-- the equivalent of the B.C. Court of Appeal.

He argued that FERC failed to exercise its duty to police the California energy market, and failed to punish traders for widespread violations of rules requiring them to keep track of individual power trades.

"With FERC abdicating its regulatory responsibility, California consumers were subjected to a variety of market machinations", bearing names such as Fat Boy and Death Star, that falsely inflated the price of electricity in the state, the court said.

FERC had argued to the court that the lack of paperwork was a mere technicality and that the energy regulatory agency lacked the authority to get tough with alleged violators.

However, the court brushed aside that claim.

"FERC misapprehends its legal authority in this context. In fact, FERC possesses broad remedial authority to address anti-competitive behavior," the court said.

However, the court did not recommend any refund amounts and sent that issue back for FERC to consider.

According to Moreno, FERC officials are still studying the judgment and have not indicated how they will deal with it.

One option is an appeal to the U.S. Supreme Court, another is to pursue a new round of settlements as California requires.

The state is already going to get some money from Hydro and other traders.

That's because FERC earlier ruled that California was entitled to some refunds on the grounds that electricity prices were unreasonably high, even if no wrongdoing had occurred.

FERC is expected to announce refunds based on that premise sometime this fall.

Hydro could lose as much as $280 million US in connection with that event.

But it could see its losses run far higher, if California has its way.

The ruling clears the way for more punitive refund orders and may also double the time frame in which violations were alleged to occur.

"It puts back on the table $2.8 billion in refunds that the federal regulators had taken off the table," said California attorney-general's office spokesman Tom Dresslar. "We believe the ruling also means we should be eligible to collect refunds of another $2.5 billion-$3 billion that FERC has said we're not eligible to collect."

Copyright 2004 Vancouver Sun