By Vaughn Palmer, Vancouver Sun, June 10, 2011
Easing the self-sufficiency requirement would reduce pressure on electricity rates
When the B.C. Liberals enacted their Clean Energy Act a year ago, they touted it as a route to "green energy, renewable energy," and above all, "electricity self-sufficiency."
The latter goal, No. 1 on the list of energy objectives, obliged BC Hydro to establish self-sufficiency in electricity by mid-decade and to acquire a healthy surplus by 2020.
But no-where in the 42-page Act did the Liberals specify how self-sufficiency was to be measured. Instead they beat around the bush, leaving the precise definition to be determined later, by cabinet order.
The Liberals introduced the legislation late in the session and after a few days of debate, they imposed closure, leaving no time (a mere three minutes) for the clause-by-clause scrutiny that sometimes yields a better understanding of the meaning of specific provisions.
Thus, when the house adjourned in June of last year, electricity self-sufficiency was defined only in general terms as weaning the province off dependency on electricity imports and establishing a surplus that might provide a basis for exporting power in the future.
Precision was not forthcoming until fall, when the cabinet passed an order with two key definitions.
First, Hydro was obliged to build or acquire sufficient power to meet all of its electricity supply obligations as established in its own mid-range forecasts of current and anticipated needs.
Second, the utility had to be capable of meeting those obligations in the face of "the most adverse sequence of stream flows occurring within the historical record."
So a worst-case scenario: The lowest recorded water levels in all reservoirs simultaneously and no possibility of plugging the gap with imported power.
Plus there was that obligation, also written into the legislation, for the utility to accumulate a bonus 3,000 gigawatt hours beyond the break-even point, the equivalent of a goodsized dam.
Hydro was already spending hundreds of millions of dollars upgrading its existing system and acquiring power. Now it would be forced to spend even more, putting further upward pressure on rates.
For the Act also obliged the B.C. Utilities Commission to rubber-stamp the rate increases necessary to allow Hydro "to collect sufficient revenue" to meet the goal of "electricity self-sufficiency," now tightly defined by cabinet order.
The date on the order was Nov. 4, one day after then-premier Gordon Campbell announced he would step down and make way for a successor. One could not ask for a clearer sign of Campbell's determination to dominate the affairs of government beyond the political grave that was already yawning before him.
But all that began to change on March 14, when Christy Clark took the oath of office and appointed a new cabinet and a new energy minister.
Pointedly it was not Blair Lekstrom who'd served as energy minister under Campbell and steered the Clean Energy Act through the legislature before resigning in protest over the harmonized sales tax.
Instead, alarmed by forecasts of a 50-per-cent increase in Hydro rates over five years, Clark named a new minister of energy, Rich Coleman, who promptly announced that the premier had asked him to commission a top-to-bottom review of BC Hydro.
The three senior civil servants conducting the review are expected to report back by the end of the month. They are expected to recommend internal savings at Hydro as well as policy changes that could relieve some of the upward pressure on rates.
Coleman has defended the worst-case definition of electricity self-sufficiency and the requirement for Hydro to acquire surplus power above and beyond that.
"It's insurance to make sure that we can maintain the safety of the cost of rates for the ratepayer in years where we have drought years," he told the house during debate on his ministry budget. But at the same time he had to admit that the government was being forced to revise its expectations about building power for export.
"When this particular initiative was being developed, there was a whole different world in power in North America looking at the possibility that there could be investment in B.C. above and beyond self-sufficiency, where we could attract investment to create power."
"Today there's really no activity," he conceded, thanks to the crash in natural gas prices and resultant shift in the economics of power generation.
"They're building natural gas-powered plants down in the U.S. probably as fast as they possibly can."
Against that backdrop, Coleman indicated that government may relieve Hydro from some of the onerous obligations to build and/or acquire electricity as well.
"The beauty of a review is that it's an open opportunity to have an open discussion with government and the company" he said.
Government could back off in any number of ways. But one of the easiest would be to allow the utility more flexibility in planning for the future, particularly around the definition of self-sufficiency.
The worst case scenario, imposed by cabinet order in the dying days of the Campbell administration, could readily be undone by another stroke of the pen under Premier Christy Clark.
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