SCOTT SIMPSON, Vancouver Sun, June 1, 2010
AltaGas gets unprecedented 60-year contract from BC Hydro
An unprecedented 60-year electricity purchase agreement between BC Hydro and AltaGas Income Trust has prompted some critics to decry the secrecy surrounding a $700-million run-of-river hydro project in northwest British Columbia.
The deal for the 195-megawatt project on Forrest Kerr Creek has the endorsement of northwest first nations aligned under the Tahltan Central Council, who will share in revenue from the project.
It also clears the way for construction of a $400-million high-voltage transmission line that will benefit mine development in the remote but resource-rich northwest.
Construction on Forrest Kerr will commence in July and the project is expected to be ready in mid-2014.
Contracts between BC Hydro and independent power producers (IPPs) typically run 25 to 40 years -- and 40 years is the maximum length of term for a water license under the B.C. Water Act. AltaGas will have to reapply for a water license after 40 years.
The 60-year term was apparently requested by the Tahltan, who wanted long-term financial certainty, and was also awarded in recognition of the $180-million contribution AltaGas will make to the high-voltage line connecting Forrest Kerr to Hydro's grid.
The deal gives AltaGas full protection from inflation over the length of the contract by indexing power sales to the Canadian consumer price index.
Independents typically get an inflation rider pegged at half the consumer price index.
"A 60-year deal on a 40-year water licence -- I don't understand how they do that, and we may not ever know," NDP energy critic John Horgan said Monday in a phone interview. "The biggest concern is the length of the contract with no oversight, no public accountability by government or the proponents."
Melissa Davis, executive director of B.C. Citizens for Public Power, suggested that even the Liberals' supporters in the independent power sector will be concerned that Forrest Kerr delivers benefits they were unable to obtain in their own contracts.
"Ironically, both government and industry have, on multiple occasions, refuted [and even trivialized] claims by opposition citizens groups and environmental organizations regarding the length of these contracts," Davis said.
The federal government last year announced a $130-million contribution to the transmission line.
Another $94 million will come from BC Hydro, via the rates charged to its customers. Hydro expects to recover that money with a special tariff on subsequent independent power projects and mine developers as they connect to the new line.
"The thing that stands out for me is the increased economic security," Tahltan Central Council chairwoman Annita McPhee said in a phone interview. "This agreement [extends] for so many generations. It's an independent revenue stream."
Blair Lekstrom, minister of Energy, Mines and Petroleum Resources, said the 60-year term reflects the AltaGas contribution to the transmission line.
"I think it's a legitimate question to [ask] why is this one longer than others. It's simply because of the significant up-front capital cost agreement that we reached with them on the NTL [northwest transmission line]."
David Cornhill, chairman and CEO of AltaGas Income Trust, described the trust as the "anchor tenant" on a transmission line that will open up northwest B.C. to new activity.
"It makes the economics far more attractive for mining opportunities down the road, to have reliable electrical generation," Cornhill said in a phone interview.
ssimpson@vancouversun.com
