Increase to help BC Hydro pay for rising energy costs

BC Hydro's investment in green energy is expected to cost it almost $1 billion by 2014.

In a Revenue Requirements Application filed with the B.C. Utilities Commission that is expected to garner the power authority a 32 per cent rate increase from 2012 to 2014, BC Hydro indicates that it will be spending progressively more on electricity generated by Independent Power Producers (IPP's) in every year that the rate increase occurs.

In the 2010 fiscal year, BC Hydro spent $567.4 million on electricity from independent power producers. Those purchases climb to $781.8 million in 2013 and finally to $939.8 million in 2014.

Asked for comment, a spokesman with BC Hydro declined to explain the increases. He said only that parties involved with hearings before the B.C. Utilities Commission in the coming weeks would address the increases and that the power authority would address concerns at that time.

BC Hydro says in the application that the majority of the cost increases between 2013 and 2014 are attributable to projects that were extended electricity purchase agreements (EPA's) under the 2009 Clean Power Call. Several new projects approved through that process are expected to come online between 2012 and 2014.

Independent power producers reach electricity purchase agreements with the power authority under various requests for proposals such as Clean Power Calls and the Standing Offer Program.

Programs such as these have resulted in facilities such as the Fitzsimmons Creek run-of-river project in Whistler and the Rutherford Creek run-of-river project near Pemberton.

The Upper Lillooet cluster, a series of run-of-river facilities being pushed by Creek Power Inc. on streams surrounding the Lillooet River north of Pemberton, is among the projects that obtained an electricity purchase agreement under the 2009 Clean Power Call. It is currently undergoing an environmental assessment and must obtain a certificate from the Environmental Assessment Office before it is allowed to operate.

But the 2009 Clean Power Call isn't the only place where costs are rising for BC Hydro when it comes to purchases from IPP's. In fact, costs are rising for BC Hydro on every single call to solicit green energy from the private sector except for the 2002 Customer-Based Generation program.

For example, in 2010, BC Hydro spent $38 million on projects approved under the 2006 Clean Call. That number climbs to $154.2 million in 2011, $215.4 million in 2012, $221.2 million in 2013 and $236.7 million in 2014.

Marjorie Griffin Cohen, a political science professor at Simon Fraser University and former BC Hydro board member, said it makes "no economic sense" for BC Hydro to be purchasing so much electricity from independent power producers.

"It's wrong on all kinds of levels," she said. "First of all, it is a tremendous cost. These contracts are also indexed, which means they will never get cheaper. They are sometimes as much as 30 times what BC Hydro can sell the power for.

"This isn't BC Hydro's fault, this is the government's fault. BC Hydro would never have chosen to do this because it makes no economic sense for them."

Purchases of electricity from IPP's actually supply BC Hydro with more power than it expects domestic customers will actually demand between 2012 and 2014.

In each of these years it expects to generate 52,600 GWh through "heritage assets" - that means publicly-owned facilities such as the Revelstoke and WAC Bennett hydroelectric dams.

Residential, commercial and industrial customers are expected to purchase 54,494 GWh of electricity in 2012. BC Hydro will have 62,814 GWh to provide in this year alone thanks to 10,114 GWh in IPP purchases.

Sales in 2013 are projected to reach about 56,000 GWh. BC Hydro expects to generate 62,541 GWh of electricity that year, with 9,941 GWh coming from IPP's.

Then, in 2014, sales are expected to reach about 58,000 GWh worth of electricity. BC Hydro expects to generate 63,668 GWh of electricity in that year, with 11,068 GWh coming from IPP's.

There, too, Cohen had some questions. She recently attended a session in which BC Hydro showed forecasts for consumer demand as part of its Integrated Resource Planning process.

"It's hard to know what they are basing their increase in demand on," she said. "Sometimes they're talking about the need for total electrification of cars, so there are other kinds of things they're talking about that have to be looked at very carefully to see if that huge increase in demand is significant."

These demand figures, however, don't take into account energy conservation programs such as Power Smart that are aimed at decreasing consumption of electricity. Power Smart works to educate the public about energy efficient technologies and conservation actions. BC Hydro believes such a program will lower demand for electricity.

BC Hydro CEO Dave Cobb continues to maintain that its rates will remain the cheapest in North America even after the rate increases. He has maintained in media appearances that the B.C. Utilities Commission must approve the rate increases.