Monday, February 4, 2013

BC Liberal style: buy high, sell low

From BC Hydro's quarterly report for the period ended September 30, 2012:
"As a result of the high inflows, the Company sold a significant volume of surplus energy in the six months ended September 30, 2012, an increase of over 4,000 GWh as compared to surplus energy sales in the first six months of fiscal 2012. The high inflows also resulted in both the Williston and Kinbasket reservoirs spilling substantial volumes of surplus water in the summer of 2012... (emphasis added)"
In the six months ended September 2012, BC Hydro purchased 5,589 GWh of electricity from private power producers for $383 million, an average cost of $68,527 per GWh. BC Hydro didn't need private power since it was generating more than it could sell domestically, despite dumping stored water without running it through generators.

Surplus electricity sold through trade markets returned $24,580 per GWh while BC Hydro paid almost three times that unit value for private power. One could calculate an apparent loss of $246 million between BC Hydro's purchase price and its selling price for private power. However, the loss is even higher because potential power, not generated when water was spilled from dams unused, could have been had for little more than zero marginal cost.

The loss noted above is for six months only. The "fiscally prudent" Liberals are costing electricity consumers more than half a billion a year. That  affects residents and light industrial/commercial clients but also puts heavy industry at a disadvantage.

Kind of at odds with government advertising currently costing taxpayers millions of dollars.

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  1. The report says BC Hydro's debt is now at $13.4 billion.

    We know that our hydro rates are going up. This means people and businesses will look for ways to use less electricity. Meaning even less need for power from IPPs.

  2. Thanks for this Norm. Another glaring example of how the liberals are best suited to manage our economy. Not.

  3. so lets hear again from the lieberals what good business people and money managers they are. Kids who run kool aid stands have better business sense than the lieberals. of course the kids may be trying to make money instead of just enriching their friends.

  4. From the International Brotherhood of Electrical Workers 2013 The Hotline - LU 258's News Magazine

    Over the last decade the BC Liberal government has undermined much of what made BC Hydro a dominant utility in North America. In doing so they have undermined our province’s competitive advantage of low-cost, low-carbon electricity.

    Ratepayers expect decisions involving BC Hydro will be made in the public interest. Unfortunately, BC Liberal energy policy severely restricts BC Hydro from building new generation, forcing the crown agency to purchase power from private for-profit companies at inflated prices. The policy also prohibits BC Hydro from storing water and purchasing electricity on the open market when prices are low.

    This already bad directive was made worse by the Liberals’ “Clean Energy Act,” which formalized an artificial “self-sufficiency” requirement defined by a 50-year drought water level, plus a massive insurance requirement of an additional 3000 GWh. With these directions from the Liberal government, BC Hydro signed long-term contracts for this power at locked-in, take-or-pay rates that are many times higher than the spot market price for freshet power.

    We saw the ultimate result of these deals last spring, when we lost at least $180 million dollars with BC Hydro buying private power at a cost averaging $68/MWh, when the average open market price averaged $10/MWh. Worse, much of that seasonal power wasn’t even needed to meet demand. At a time when we were spilling water over the top of our publicly owned Peace Canyon dam, we bought private power at almost seven times higher than the market price.

    This kind of instability is not good for British Columbians or BC Hydro. More troubling, the Liberal policy centralizes decision-making with politicians in the cabinet and cuts the independent BC Utilities Commission out of the loop.

    These Liberal policies have undermined the BC Hydro work force, dramatically increased debt and deferral accounts and has resulted in double-digit rate increases on hydro bills. It’s a lose-lose situation.

    BC New Democrats are working on a plan to restore confidence at BC Hydro and ensuring that all British Columbians continue to benefit from a strong public utility.

    Four main principles should guide energy policy: Put conservation and environmental protection first; maximize the public benefit by encouraging community-based energy solutions that create jobs, economic development and revenue for social programs; keep a strong BC Hydro at the centre of renewable energy development and generation; and keep rates affordable for both industry and consumers.

    BC Hydro has been put in a very precarious position by the constant political meddling and poor decision making that has been the hallmark of BC Liberal energy policy.

    Putting our provincial utility back in order will be one of the highest priorities of an Adrian Dix New Democrat government. We will open the books, bring back the oversight role of the BC Utilities commission, and do our best to mitigate the impact of contracts the Liberals signed that are not in the public interest.

    We understand the vital role that BC Hydro plays, not just in delivering clean, reasonably-priced energy to BC families, but in promoting industrial development and in making our province an attractive place to invest.

    From the very beginning it was clear that the Liberals didn’t understand how vital it is to maintain BC Hydro as a strong public electricity utility.

    New Democrat leader Adrian Dix is offering a change for the better, one practical step at a time.
    We know government can’t do everything, but it has to get the fundamentals right. That means putting the needs of British Columbians before narrow political interests, and making sure everything we do is aimed at making life better and more affordable for our citizens.

    LU258 IBEW thanks MLA Horgan for this Guest Column that appeared in the December 2012 issue of the Hotline.

  5. The Liberals or the Mafia? Who do you think, could run the economy better? But seriously, the Mafia get rid of their own garbage, the Libs just re-appoint them to another office or portfolio...and with a raise as well. Wow...

    Kinda makes you wonder eh?

  6. I know it's not legal, but I would love it if BC Hydro cut off the IPP's and told them we won't buy their power until agreements are renegotiated at more reasonable rates.

    Losing one billion dollars over the next 4 years is not a viable option, especially when the deficit gets picked up by the BC Hydro customer...which gets siphoned into the pockets of Gordon Campbell's friends.

  7. According to Global TV, Rich Coleman (there is that name again, another day, another scandal) says BC Hydro will lose money in the early years of these long term contracts but MIGHT not IF prices rise enough that profits become a POSSIBILITY. But, there are price escalators in contracts with private power producers so the losses MIGHT get even larger.

    The Minister of Corruption has summed up Liberal business methods. The only certainty is that the "free enterprisers" make profits and the consumer/taxpayers get screwed.

  8. Williston reservoir is also being used by one of the companies running a fracking operation in BC for a source of water. I recall Coleman doing his soft-shoe routine during question period in one of the few days the Legislature actually sat.

    I wonder if this would fly. Most of these IPPs are run of the river projects which they are getting for free. Why not impose a water usage fee. Just a thought.

  9. Cranky, I'm pretty sure the IPPs don't get the water for free. There are royalties and taxes paid.

    Maybe Norm can spill the beans on those figures.

    1. G. Barry Stewart:

      If you go to the Independent Panel's review of BC Hydro, you will find: that water usage rates chargeable to large hydro projects(aka Site C) are up to more than 5 times of that chargeable to small power projects.

      In my view, that is outrageous considering BC already pays a premium for IP power.

      That seems to be another covert form of favour to IPP's.

      And, BC Hydro pays already more than 2 times what other jurisdictions charge. If that were reduced accordingly, BC Hydro could save $150 million out of the current $312 million.

  10. I don't know whether or not the contracts could be reopened. Use of an "order in council", to "revisit" the contract and "explore" whether or not they are in the "public interest", would be warranted. This may be a way to open the contact, to the "scrutiny" of a new government, if they believe the contracts, are not in keeping within financial policy and other guidelines...

    One has to ask the question, if corruption cannot be reversed, in a contractural setting by an incoming government, what other options are there?

  11. I would recommend reading the BC Clean Energy Act 2010. Sec 6 is about creating an artificial surplus.

    I posted a comment here:



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