Tuesday, October 6, 2015

Shockingly high BC Hydro rate increases inevitable

The audio file below is a recording of my time on CFAX1070 with Ian Jessop October 06. We talk mostly about BC Hydro and the inevitable high-level rate increases.

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"Radical" environmentalists proven correct

In 2009, the Wilderness Committee issued a press release. Gwen Barlee and Joe Foy were prescient:
“Requiring BC Hydro to purchase power that it doesn’t need is an idiotic decision and a gift to the private power industry. Three months ago, the BCUC said buying this power was not in the public interest, and yet the BC government is ignoring their own regulatory watchdog and ordering BC Hydro to spend billions of dollars on power we don’t need. This decision won’t reduce greenhouse gas emissions in BC by one iota, but it will damage a lot of streams and rivers in the process,” said Gwen Barlee, policy director with the Wilderness Committee.

“Private power coming from so-called ‘run of river’ projects comes mostly at the wrong time of year for British Columbians, is costing us far above market rates, and threatens our rivers and streams. Ratepayers are already on the hook for $31 billion [$56 billion as of March 2015] in energy agreements to the likes of General Electric. The BC government’s decision to order Hydro to buy even more of this power is irrational and unacceptable,” said Wilderness Committee campaign director Joe Foy.

... “It is sadly ironic that while the BC government is bailing out the private power industry under the ruse of addressing climate change it is blasting ahead with contradictory plans to promote carbon-producing coal mines such as Klappan and Groundhog in northern BC, axing Live Smart BC, radically increasing subsidies to the oil and gas sector, and promoting massive highway expansion. People recognize hypocrisy when they see it and are aware that this gift to the private power sector has nothing to do with addressing global warming,” said Barlee.
The Wilderness Committee is Canada’s largest membership-based, citizen-funded wilderness preservation organization. We work for the preservation of Canadian and international wilderness through research and grassroots education. The Wilderness Committee works on the ground to achieve ecologically sustainable communities.

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As we've been saying...

Premier should admit LNG dream is dead, David Bond, Kelowna Daily Courier, October 5, 2016
The evidence is now overwhelming. B.C.’s current energy policies, centred on the LNG export strategy and BC Hydro’s Site C, are likely to fail at great cost to taxpayers.

Under regulations set by the provincial government, LNG development will result in significant emissions of carbon dioxide and other greenhouse gases. Moreover, liquefying the gas once it reaches tidewater to enable shipment overseas will more than double the pollution produced because the province has approved burning gas to power the cooling operation.

In short, our clean air policy has been sacrificed to the LNG dream...

Note: Also published in Vancouver Sun, October 5.

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Friday, October 2, 2015

State and future of BC Hydro

Opposition parties in BC ought to create a set of hearings to conduct a thorough PUBLIC examination of independent power contracts, alternative less-destructive energy sources and the state and future of BC Hydro.

MLAs should try to initiate the examination as a committee of the legislature and when Liberals refuse to participate, cross the street to a public place and begin hearings. Leave empty chairs for Liberals.

The Christy Clark Government would try to ignore the event but the public would not and the corporate media could not, without destroying what little credibility they still have on matters of resources.

There are plenty of experts from business, academia and environmental groups who would participate in meaningful ways. Invite Rafe Mair to give first testimony.

Provide a public forum and take the lid off the financial shenanigans that took us into the current situation. There won't be any ability to subpoena documents and compel people to participate and there won't be millions of dollars from taxpayers to spread among friends organizing the events.

In other words, it would be about MLAs representing the people, getting energy policy information to citizens and revealing how BC Hydro was hijacked to profit Liberal friends and insiders. The public forum would not be an exercise managed by ranks of lawyers, spin doctors and ass-coverers.

The Liberals would refuse to take part but the Green Party and the NDP could proceed without them. How about it John Horgan and Andrew Weaver? Let’s put policy over party and protect the future for our children and grandchildren.

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Wilderness destruction, only to enrich a few

Narrows Inlet by Duane Burnett:
An almost pristine silent majestic oasis where the west coast rain forest mountains plunged straight into the fjord carved out by the last ice age, rich with so many salmon spawning you could almost walk across the water, and an area steeped with thousands of years of beautiful Shishalh nation history.

Read more commentary about the video and Narrows Inlet by Duane Burnett

More from In-Sights about Narrows Inlet private power projects.

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Tuesday, September 29, 2015

Financial fraud at BC Hydro?

What is a deferred expense?
The term "deferred expense" is used to describe a payment that has been made, but will not be reported as an expense until a future accounting period.
In 2002, WorldCom, a company with a peak net worth of $100 billion, submitted the largest bankruptcy filing in United States history. The action followed an accounting scandal that created billions in illusory earnings. Edmonton born Bernard Ebbers, WorldCom's former CEO, is now in Louisiana, serving the tenth year of a 25-year sentence.
Fraud at WorldCom
WorldCom was accused of having inflated profits by $3.8 billion over a period of five quarters. The company undertook the massive fraud by capitalizing costs that should have been expensed. Capitalization of these costs allowed the company to spread the expenses over several years instead of recording all the costs as expense in the current period. Such deferral of costs allowed the company to report lower expenses and therefore inflated income.
But, beyond its flawed financial reporting, WorldCom was spending huge sums to add capacity when the market was already oversupplied. Similarly, BC Hydro, despite 10 years of flat domestic demand, is proceeding with unprecedented additions to its power capacity. In addition, the utility has contracted for so much high-cost power from private producers that it has at times been forced to turn off its own low-cost generators.

In fiscal year 2015, BC Hydro purchased 13,377 GWh of electricity from independent power producers for $1,064,000,000 ($79,540 per GWh). In the same period, BC Hydro sold 14,020 GWh to large industrial users for $748,000,000 ($53,250 per GWh).

In other words, each GWh of power purchased from IPPs was resold for $26,290 less that it cost. However, the loss was not limited to $352 million since the utility had to pay distribution, administration and other overhead costs in addition to the power acquisition price.

Note: The chart above is created by using BC Hydro reports that disclose purchases from independent power producers and electricity sales to residential, commercial and industrial users. The quantity of power from publicly owned generating facilities is calculated as the difference between domestic user demand and private power supplied.

What is the driving force between BC Hydro's style of operations? Clearly, it not a desire to meet needs of the province's electricity consumers.

Not to be forgotten is that term-debt of BC Hydro is rising rapidly. With current capital projects estimated above $10 billion and with British Columbia's record of exceeding initial estimates by 100% and more, long term-debt of the utility may exceed $30 billion within five years.

That borrowing is in addition to the more than $50 billion in long term energy purchase commitments.

Since Liberals assumed power, BC Hydro has paid $10.8 billion to the provincial and local governments. In the same time period, the utility's long term-debt rose by $9.4 billion. Consequently, it is a simple argument to say that every dollar transferred to government was a borrowed dollar.


Justine Hunter at The Globe and Mail provided BC Hydro preps for rate review. It contains this statement:
Because rates haven’t kept up with Hydro’s real revenue requirements, the corporation has been amassing debt in what it calls “deferral accounts” – those accounts will reach more than $5-billion by 2018.
It an analysis that is less than honest. First, the deferred charges already exceed $5-billion by hundreds of million of dollars and that would have been apparent to Ms. Hunter if she'd read the 2015 annual report of the public utility. Secondly, the idea that debt and deferrals are caused because "rates haven't kept up" - as if prices have some animate existent of their own - is errant nonsense.

Readers here will know the reporting tricks are there to disguise actual results and facilitate transfers of "surplus equity" to government accounts. Thee Liberal Government defers BC Hydro expenses, then skims its pretend-profits to create pretend-surpluses. However, revealing that inconvenient truth would not serve groups the media wishes to serve.

* * * * *

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Monday, September 28, 2015

Trusted editorial content may not be trusted

Postmedia is a company in trouble. It cannot sustain crippling debt to American debt holders with revenues from traditional advertising, circulation and digital paywalls. One of its responses is Postmedia Content Solutions, which aims to elicit cash in controversial ways. Part of their sales pitch:
We've learned that advertisers receive increased engagement when pairing their thought leadership with our trusted editorial content.

...You can provide us with content you've already created, or you can work with our dedicated Postmedia Works team to develop something brand new!
Writing at The Common Sense Canadian, Rafe Mair described - better than I might - how the "partnership" system works. Postmedia partners with LNG lobby to sell Woodfibre LNG – latest lapse in journalistic integrity.

On Saturday, the Vancouver Sun illustrated how its resource industry partners pair interests with the Sun's "trusted" editorial content. A column was written by someone I mentioned here more than five years ago:
Columnist Don Cayo is one of the Vancouver Sun's advocates for big business. In the nineties, he ran the Atlantic Institute for Market Studies, a corporate-funded charity operating as a think-tank based in Halifax. Along with umpteen sister "charities" such as the Fraser Institute, Fraser Institute Foundation, Frontier Centre for Public Policy Inc. and the Canadian Constitution Foundation, it campaigns steadily for elimination of public health and other services and reductions in government spending and lower taxes, at least for higher income folks...
Taxing smarter would mean B.C. could collect more revenue from its resources is an ironic title. No one the Vancouver Sun represents is interested in BC collecting more natural resource revenue. I couldn't resist leaving a comment at the Sun's website but I repeat it here because it may not survive long at the newspaper's site.
Mr. Cayo states:
As well, "From 2009 to 2013, B.C. collected $2.3 billion from resource-right auctions and a further $2 billion from gross-revenue royalties."
A more honest report would inform readers that, in current days, natural gas royalties are far different. It might also note that B.C. receives less in mining tax revenue than it allows in mining tax credits to businesses and individual investors.

According to B.C.'s First Quarter Report, "Cash sales of Crown land tenures" have generated only $9.2 million in the first 9 months of 2015 and are forecast to bring in a total of $44 million in three fiscal years, 2016 to 2018 (Page 45).

Natural gas royalties are forecast to be $220 million in the current fiscal year (Page 15) but unrecorded drilling and other credits owed producers (a total now over $1.4 billion) have grown by $478 million in the last two fiscal years. If more prudent accounting principles were used, the province's gas royalty account would likely be in deficit.

By the way, Ministry of Natural Gas Development is forecast to spend $444 million in fiscal year 2016, up from $401 million in FY 2015 (Page 16).

Natural resource companies remove, sell and deplete public assets and they aim to pay the least possible share to resource owners. To further that goal, corporations invest millions of dollars in friendly politicians, public relations efforts, advertising, and "think tanks" that all try to convince citizens to moderate revenue expectations. In British Columbia, they've been successful.

In 2015, British Columbia received $570 per capita from natural resources. In 2001, the per capita revenue was $1,250 from natural resources, in 2015 dollars. Not surprisingly, the volume and value of materials now produced is significantly higher.

Keep in mind that when resource companies acquire equipment or when they rent executive offices in the downtown, the payments are not determined by revenue streams or profitability of the tenants. It is only taxpayers that are expected waive their right to a fair share of value.

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Thursday, September 24, 2015

The high life

The posh New York real estate linked to a US investigation of Malaysia’s prime minister, BC Liberal's new LNG business partner.
Malaysia’s prime minister must be feeling the heat. Accused of pocketing nearly $700 million from a state development fund, Najib Razak now faces an investigation by the US Justice Department’s Kleptocracy Asset Recovery Initiative, according to the New York Times. Besides the missing mega-millions, investigators will focus on properties in the US that were purchased in recent years by shell companies belonging to the prime minister’s stepson, Riza Aziz, as well as other real estate connected to a businessman and close family friend, Jho Low...

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Tuesday, September 22, 2015

Patronage, corruption and cronyism UPDATED

The September sale of BC Petroleum and Natural Gas Rights realized 577 thousand dollars, bringing the eight month total in 2015 to almost $9.5 million. In the year before Christy Clark became Premier, the total for the same months was almost $782 million. During January to August of 2008, rights sales brought in $2.3 billion, an amount 250 times the value of the current year.

When Christy Clark became leader of the BC Liberal Party, a key supporter and member of her transition team was Gwyn Morgan, a person with boardroom ties to two of the Liberals' favourite corporations: Encana and SNC-Lavalin. At the time, Morgan was also a director of HSBC, another ethically challenged operation.

We can't know what advice Gwyn Morgan gives to Christy Clark but we can see benefits the Premier provides to cronies in the natural gas business. The chart below displays provincial gas revenues from royalties and rights sales in the four years before and the four years after Clark took control of the BC Liberal Party.

Of course, these numbers are incomplete without productions statistics, which are provided by B.C. Oil and Gas Statistics, downloaded July 20.

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