Friday, March 18, 2016

Twenty years ago...

In 1996, BC Hydro was a company with total assets of $12.1 billion, delivering 42,834 GWh of electricity to BC's residential, commercial and industrial users.

Ten years later, BC Hydro had total assets of $12.5 billion and it delivered 50,602 GWh of power to the same customers, an 18% increase in domestic consumption with only a 3% growth in assets.

Ten years along, in 2016, BC Hydro's domestic consumers needed only 49,142 GWh, down 3%, but the utility's assets had grown by 136% to more than $29.6 billion.

Incredibly, from 1996 to 2016, purchases from independent power producers (IPPs) soared by 839% to 14,877 GWh, which cost about $1.3 billion in the current fiscal year. According to BC Public Accounts, the obligation to IPPs is $1.85 billion in the year ended March 2017.

Many of IPP deals were made when BC Liberals thought they could find a profitable export market in the USA. Since private operators didn't want to put their own money on the line, it was decided that the public would carry almost all financial risks for the private power system. It didn't take long for every sharp operator in the province to join in the frenzy of activity. As a result, a few people cashed in and the public utility is stuck with buying power they don't need at prices they can't afford.

Unfortunately, Liberal politicians learned nothing - or perhaps learned they could easily get away with financial fraud - and they've taken a similar approach to LNG. Billions of public money are committed to benefit gas producers and future governments are locked into decades with no substantial revenues from gas. Like high prices in the California power crisis at the turn of the century, a short period of elevated Asian LNG prices had BC Liberal hearts beating fast. Foolishly, they dealt with the gas industry with the same expertise they applied to electrical power markets.

The values of IPP generating facilities are not included in BC Hydro assets although the company is obliged by contracts extending up to 56 years to pay a reported $56.2 billion for the produced power. Had the public operation built and owned these many producing sites, its asset growth at Hydro ould have been substantially larger.

At BC Hydro, what citizens have is a spendthrift corporation gone mad, bent on delivering billions into the hands of BC Liberal friends. The company has plans for more than $20 billion additional capital spending in the next decade, has the stated intention of buying larger volumes from IPPs at higher prices and the utility's managers have proven inability to either tell the truth of future needs or to forecast them without massive error.

The company is led by BC Liberal apparatchik Jessica McDonald who says her lack of experience in utility management is OK because her predecessors were equally lacking in experience. One qualification of hers cannot be denied; she's married to a person Premier Clark called "one of my oldest friends."

McDonald acts with a Board of Directors that has zero experience in large utility management and the most important qualification to serve appears to be political loyalty. We must accept that McDonald - who would not have been hired in a private company with assets over $25 billion - can trust her job to be secure at least until the next election.

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  1. From Jessica McDonald's Linkdin summary:

    "As President and CEO of BC Hydro and Power Authority, Jessica leads BC's largest Crown corporation responsible for generating, transmitting and distributing electricity to 4 million customers, with $5.5B in annual revenues.

    Prior experience includes commercial mediation and negotiation on major infrastructure and industrial projects in BC(!!!???), Deputy Minister in the BC government for 6 years as well as many other posts in the government under numerous administrations beginning in 1991.

    From 2005 to 2009 she held the most senior public service position in the provincial government as Deputy Minister to the Premier, Cabinet Secretary and Head of the BC Public Service, responsible for oversight of all aspects of government operations."


    2005 to 2009 was when the BC Liberal's Green Energy Plan and Clean Energy Act were set up.
    The CE Act gives a massive benefit to the IPP industry. This resulted in Norm's graph #2 above.

  2. Painfully obvious that they are DESTROYING our public utility and the public purse with it yet its not considered fraud ? Gross mismanagement ? Criminal negligence ? Is there any lawyers not employed with the government with a sliver of pride and honor in our province that can take on a charter challenge to stop these "managers" of our public utility from burning it to the ground? What the cuff is going on here how did it get to this ? How can this be right ?

    1. There are numerous people in our province profiting from the fuel needed to burn our institutions to the ground. That exacerbates the inequality that is growing in this province. Politically connected people grow rich while government tells citizens that funding of public schools must be reduced, that disabled people are worthy of only tiny increases in benefits after they've had none for 8+ years, that every person should annually pay more for a medical services plan that is shrinking benefits. Etc.

  3. Thanks for this Norm and all your ongoing research and posts exposing the Liberal Pirates continued Ponzi Power schemes.

    Bankrupting BC Hydro through contractual gifting to Liberal friends unnecessary IPP run of river and the selling out of our natural gas to offshore profiteer corrupt LNG developers are just the two highest profile schemes this government has pumped promising jobs and prosperity for British Columbians. Reality is all these parallel schemes are only designed to benefit friendly 'corporations' and collect from them ongoing slush funding to remain in power... at great cost to all BC citizens present and future.

    Your work highlighting these schemes is commendable as is the work of many other bloggers that are well known to those that follow your sight.

    As an antidote to the pro-Liberal tire pumping MSM (we know who they are) and the ever increasing carpet bombing of corporate and government 'good news' ... 'good, caring' industry and government advertising - in newspapers, online, tv and radio i.e. non stop on Global News we need to get more people engaged and informed.

    To counter and highlight all this corruption there should be more focus on the non MSM sources that are doing the proper job of investigating and reporting what the mostly compromised media are 'covering' and shoveling.

    Perhaps we need an 'Oscars Awards' type Honours Role of BC Bloggers... The 'BC Truthies', thru which less informed, misinformed and uninformed citizens could be made better aware of the veracity of MSM stories, columns, editorials etc. Your sight Norm as well as Grant' G's. 'Powell River Persuader' have been effectively linked in the comments sections of online MSM pieces....
    I like that the spin of these stories can be countered right at the source of the spin.

    Never mind the self congratulating MSM industry awards... go to "The Truthies for for the truth."

    Keep up the great work Norm.


    1. I appreciate the comment. I'm lucky enough to have the time to research and write about public affairs but what readers can do is to help spread the information. Most media operations are afraid to repeat the material here even though its factual base can not be denied.

      There is not an objective business consultant in the world that would see trends at BC Hydro as healthy or a sign of good management and policy.

  4. Since Hydro has not been permitted to build any new generating plants, only upgrade existing ones, I'm wondering where the growth in assets has come from? Downtown office space? Extra kilometres of power lines, especially those to service remote IPP locations? Or is there some book cooking going on?

    Missing from this piece is debt and deferred debt. Contrast the debt (and IPP contractual obligations) against the assets and what do we have? (I'm sure you know the answer, Norm!)

  5. Privateers have long been a part of our history so maybe thieves raiding BC Hydro should be admired. Clearly Queen Christy loves them.

    A little English history from The Museum of Unnatural History:

    "Outfitting ships was expensive and one way to raise a fleet at little cost was to issue "letters of marque" that entitled the owner of a private ship to outfit it for war and use it to attack enemy ships. In return for official permission the ship's owner split any booty captured with the royal treasury. Men who engaged in this activity were referred to as "privateers."

    "Privateers were in effect legal pirates. Or at least legal to those governments with which they shared the loot. Sir Francis Drake, who started his career in 1570, was a hated pirate to Spain, but a hero in England where Queen Elizabeth addressed him as "my dear pirate." His popularity with the crown was assured after one expedition where he captured for treasury 300,000 pounds of booty, keeping another 10,000 for himself. Drake not only raided ships, but attacked Spanish towns and mule trains carrying gold. So favored was Drake by the Queen that she presented him with a special sword to use upon her enemies."

  6. Article today about BC Hydro:

    1. Private companies move in directions that are to their own benefit. I've exchanged private emails with a few management people in the forest industry and they agree that huge price increases for BC Hydro power are inevitable. They don't have confidence in their ability to lobby government for lower rates and direct subsidies. Granting more of those to heavy industry means that residential, commercial and small business users have to make up the difference. Even the Liberals can't get away with that and any new government may reset the rules.

      The most certain course to protect against rising power costs is to move to self-generation. With solar and battery technology improving, that's one future source. The other one, available now, is the use of modern high efficiency gas turbines.

      BC Hydro is reporting profitability that is dependent on deferrals and aggressive capitalization. That's like a Ponzi scheme; the longer it continues the more certain is disaster. An undergraduate student in accounting can easily grasp BC Hydro's pending problems. Private industry can too and they aim to protect themselves by increased self-sufficiency.

    2. And more homeowners (mostly rural) will be turning to burn renewable wood to heat their homes - so far not taxed or meddled with.

      If there ever was an "Ostrich government" then the BC Liberal must be it.



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