Common Sense Canadian
 

Who Killed BC Hydro?

Posted August 2, 2016 by Rafe Mair in WATER
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Who-Killed-BC-Hydro

This is the story of the death of our province’s once greatest institution, BC Hydro. Though the public power utility began its life under Socred Premier WAC Bennett in 1961, the story of its demise starts circa 2001, under the newly-minted Liberal administration of Gordon Campbell.

Today, this once thriving institution is de facto bankrupt, without counting the $8.8-plus billion set aside for Site C Dam (a number surely to double, as we have seen with Newfoundland’s Muskrat Falls) – this catastrophe when customers haven’t required any increase in electricity for more than a decade, while rates increased by 30%.

The envy of the world

Longtime Bc Premier WAC Bennett's dream is dead

Longtime BC Premier WAC Bennett’s dream is dead

When the Liberals came to power in 2001, BC Hydro was a thriving energy company and it is no exaggeration to say the envy of the world. It was set up by WAC Bennett so that cheap power could be delivered to the less developed regions of the province the private sector wouldn’t supply. Bennett held that without cheap transportation and power, the north couldn’t develop, so he converted private companies into BC Rail, the BC Ferry Corporation and BC Hydro.

Since 2001, BC Rail has disappeared and BC Ferries might just as well have. Moreover, BC Hydro’s real debt has increased by 1,170%, from $6 billion in 2005 to $76 billion today.

How did this happen to a profitable company and so quickly?

Public bad, private good

Former BC Premier Gordon Campbell and his Finance Minister Colin Hansen

Gordon Campbell and his Finance Minister Colin Hansen

Clearly, it was deliberate and consistent with the Camp Rightwing and Fraser Institute-inspired view that crown corporations are evil and can’t possibly do anything as well as the private sector. You’re to overlook that this wasn’t part of Campbell’s election platform; in fact, he promised to save the crowns I mentioned, including BC Hydro. This was the first of a long line of Liberal falsehoods that continues to this day, reaching a crescendo with Premier Clark’s ongoing bullshit about Site C.

Let’s see how it happened and you judge whether or not it was deliberate.

In 2002 Campbell propounded his energy policy, part of which said: “The private sector will develop new electricity generation, with BC Hydro restricted to improvements at existing plants.” The other exception was Site C, since it had been in the plans since the ’70s.

The myth of “small hydro”

The private companies were called Independent Power Producers (IPPs) and here’s how then finance minister Colin Hansen described the program:

… where we can encourage small companies to build small scale hydroelectric projects that are run of the river, and what that means is, instead of having a big reservoir, a big dam that backs water up, and creates a great big lake, these are run of the river, so the river continues to flow at its normal rate but we capture some of the energy in the form of hydroelectric power from this.[emphasis added]

 

Construction of a private power project on the Ashlu River (Photo: Range Life)

IPP construction on the Ashlu River (Photo: Range Life)

This was all barnyard droppings – the dams were called weirs but no less dams for that: the rivers, their ecologies, salmon runs and other water life were killed; roads and transmission lines were constructed; the small companies were the likes of General Electric. The contracts, which virtually run forever, pay the companies at least and often much more than double the market price and BC Hydro is required to buy all of their energy whenever produced whether it needs it or not!

A vital fact is that the vast majority of private power can only be generated during the annual Spring run-off, when BC Hydro least needs it as its reservoirs are full to brimming and power demand is at its lowest.

Power we don’t need, at outrageous costs

These huge corporations pay peppercorn rent, but didn’t fancy putting their own money on the line, so the public was forced to carry almost all the financial risks for a wealthy private system. It wasn’t long before every sharp operator wanted in, with the result that a few big guys cashed in and Hydro was stuck with buying power it didn’t need at prices it couldn’t afford.

What happened then?

Norman Farrell, a Hydro watcher for many years and the publisher of In-sights, says:

… IPP power, (for 2015) costing BC Hydro $1,217 million, could have been acquired from our southern neighbours for $545 million, a $672 million premium for buying power in BC. Ironically, many of the IPPs are foreign owned companies, happily exporting their profits…the fastest growth in the independent power industry has been in last two years, while Premier Clark hurries to get the Site C dam construction beyond what she calls “a point of no return.”

Premier Campbell’s rationale was that IPPs would supply California, but didn’t do his homework or he’d have known that California’s renewable portfolio standard doesn’t consider IPPs “green”, so they won’t pay a premium for electricity produced by our IPPs. BC Hydro was forced to take and pay for all this power whether it needed it or not – and it didn’t. Another great business decision!

Self-regulation = No regulation

These huge, rapacious IPPs police themselves with respect to environmental practises, and Surprise! There have been no prosecutions. The environmental consequences have been rightly called a “horror show” by eminent BCIT fish biologist Dr. Marvin Rosenau.

And for all that, 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.

Working to save our rivers

In 2008 I was approached by rancher Tom Rankin, who had a ranch on the Ashlu River near Squamish, destroyed by an IPP. Tom, a successful businessman who had formed Save Our Rivers Society, asked me to be spokesperson and I joined Damien Gillis, now publisher of The Common Sense Canadian – which we later co-founded in 2010 – and Joe Foy, chief campaigner for The Wilderness Committee, using Tom’s enormous knowledge reservoir, and we travelled throughout the province in the 2009 election speaking against this calamitous Liberal energy policy.

With help from people like economist Erik Andersen, we would continue for years to explain to people from village to village that their rivers were being destroyed, their Hydro rates were set to soar, and BC Hydro was being driven into bankruptcy. People simply couldn’t believe that any premier or any government would allow this to happen! Well, it did happen and the result was even worse than we had forecast.

The only good news is that through these efforts and the support of thousands of British Columbians awakening to this crisis, we were able to fend off most of the really big projects – General Electric’s $5 Billion/17 river Bute Inlet behemoth, The Upper Pitt River Project, the Glacier/Howser project in the Kootenays, and many others. All that is to say that, no matter how bad things got, they could have been much, much worse.

What is Weaver thinking?

Rafe- Weaver, BC Greens should quit supporting private river power sham

Dr. Andrew Weaver, leader of the BC Green Party

Because politics is what this is all about, you should know that the current Green Party leader, Dr. Andrew Weaver, wrote and spoke in favour of the Liberals’ policy in 2009 (listen here to his robo-call on behalf of the Campbell energy policy) and still supports it to this day – to the astonishment of all who hoped that the Greens might be a solution, not part of the problem.

In fact, prior to his decision in 2009 to support the Campbell Energy Plan and its IPP program, Dr. Weaver didn’t bother to visit the easily accessible Ashlu River project, all but completed, to see for himself what an ecological catastrophe but baldly stated IPP energy to be “clean and green”. Even as recently as this month Dr. Weaver declared to me that IPPs were merely waterwheels!

Here we are in 2016 and BC Hydro would be bankrupt if it were in the private sector. The public is left to pay ever-increasing rates to cover this financial boondoggle (and that’s without the massive additional burden of Site C), scores of rivers ruined, wealthy companies made wealthier with the money going out of British Columbia, all without any change in sight – except for the worse.

Robbing Peter to pay Paul

Ah, but that’s not all this business-oriented government has done for us. You see, BC Hydro is forced to pay an annual dividend to the government so that Finance Minister Mike de Jong’s “budget” looks better. Now – get this – Hydro must pay this dividend even if it loses money hand-over-fist, as it has ever since the Liberals got their greedy little pinkies on the till.

As of now, Hydro owes $852 million to the government over the next three fiscal years in mandatory annual dividend payments and, not having the money, must borrow the funds. In short, BC Hydro must borrow money — which ratepayers will have to pay back in the future — so that it can meet government’s annual demand for a share of its non-existent profits, transferring the debt from us the taxpayers to us the ratepayers!

The business acumen displayed takes the breath away – along with our money.

Deferring the inevitable

Graph courtesy of Norm Farrell

Graph courtesy of Norm Farrell

Here’s some more funny math. BC Hydro has been deferring expenses to avoid declaring operating losses. “Money was disbursed but instead of treating payments as expenses, the company treats some of them as ‘temporary’ assets,” explains Norm Farrell. “It is like a dairy farmer buying hay but not counting its cost as an expense, arguing that feeding cows today allows them to grow larger and healthier and perhaps produce more milk in the future. It is trick accounting, allowed because government writes its own accounting rules.”

Another trick is with something called “regulatory assets” which are largely deferrals – expenses Hydro paid but doesn’t want to treat as expenses. Instead, they stay on the balance sheet as deferred costs. As of this year, they stand at a whopping $6.3 billion, up from $861 million 10 years ago and zero 15 years ago, when the Liberals took over from the NDP.

“Someday, these will have to be treated honestly,” says Farrell. “Except, if they did that, instead of showing profits, they would show massive losses and have to end the transfers from BC Hydro to provincial treasury.”

Where are the alternatives?

BC Hydro is often referred to as our “energy” company – I’ve called it  that – where in fact it is our “Hydroelectric” energy company. Hydro has been negligent unto disobedient in its failure to assess alternative sources of energy.

BC sitting on enough geothermal to power whole province, say new maps

Steam rising from the Nesjavellir Geothermal Power Station in Iceland (Photo: Gretar Ívarsson / Wikipedia)

For many year, it made the excuse that other energy sources like wind power, tidal, solar and so on were intermittent – there’s no wind power when there’s no wind – and the power couldn’t be stored, so it was useless. That excuse is no more. These alternate sources, with new technology, can spell each other off in an integrated grid, and are starting to be stored through improved battery technologies and can thus relieve the need for hydroelectric power with consequent monetary and environmental savings. Not to mention geothermal, which is, like hydropower, “base-load” (always available). Experts tell us we’re awash in geothermal potential but BC Hydro would rather flood productive farmland with giant, old-school dams and sign rip-off IPP contracts than harness the sustainable and plentiful power beneath our feet.

The difficulty is philosophical and emotional as much as anything. It should be called the BC Energy Corporation and thus remove the impression that hydro is the only power we can get.

The management of BC Hydro is so wired into hydropower that they’re like a carpenter who only owns a hammer, so that everything he sees looks like a nail.

Space doesn’t permit an extensive look at Site C here, a book in itself, but most experts – including no less than the head of the Joint Review Panel into the project – agree that Site C is almost totally unnecessary in any event and, going further, there’s not a scintilla of need if alternative forms of energy were developed.

Our debt to bear

In closing, what must never be forgotten in any assessment of BC Hydro is that it is not only a public company owned by the people of British Columbia, their debts are owed by the people as well. It’s not that we don’t think of that much – we don’t think about it at all. We whistle past the graveyard, assuming that we will never be called upon to pay. We may not ever have to write personal checks but government services will be substantially diminished if BC Hydro turns up its toes to be ravaged by the vultures patiently watching.

When you look at the disgraceful mess the Liberals have made of BC Hydro, you have to seriously ask – how long will it take for the public to realize how Gordon Campbell and Christy have, ahem, screwed them?

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About the Author

Rafe Mair

Rafe Mair, LL.B, LL.D (Hon) a B.C. MLA 1975 to 1981, was Minister of Environment from late 1978 through 1979. In 1981 he left politics for Talk Radio becoming recognized as one of B.C.'s pre-eminent journalists. An avid fly fisherman, he took a special interest in Atlantic salmon farms and private power projects as environmental calamities and became a powerful voice in opposition to them. Rafe is the co-founder of The Common Sense Canadian and writes a regular blog at rafeonline.com.

23 Comments


  1.  
    Peter Dimitrov

    Some more history: Before Tom Rankin formed Saved Our Rivers website I did primary research on the sale of water licences for power production to private energy companies on hundreds of creeks and rivers in each of the water districts in British Columbia. The list of companies, the details of the power production proposed, the names of the creeks/rivers and the water districts where they were located were copied three times before being made publicly available on the internet. Copies of my report were given to Tom Rankin, Gwen Barlee of Save of our Wilderness and to Grand Chief Stewart Phillip. Thereafter I posted the info on such websites as bcpolitics.ca, vivelecanada, also it was duplicated on a website in the Kootenays by Coyote. During that time Professor John Calvert was inking his book “Liquid Gold” which laid out a good part of the Campbell Energy policy and its consequences for BC Hydro and the growth of the IPP sector. The former mayor of Kitimat went to court trying to stop Alcan’s sale of power arguing the power was intended by WAC Bennett for aluminum production and development of the region. The Province opposed Kitimat and unbelievably by its silence sided with Alcan. BC Hydro had done the primary research using taxpayer money that identified the power potential of most rivers and creeks in BC. When Campbell lobotomized/privatized the intellectual property assets of BC Hydro the private companies got their hands on that information and the staking of rivers began furiously with a very cheap price on water for power licences. Ultimately John Calvert published the book Liquid Gold. At the start of the very long campaign to save our rivers and stop the ‘take or pay contracts’ forced onto BC Hydro by Premier GC, such people as Tom Rankin/Save Our Rivers, John Calvert, Travis/Manager at City of Kitimat, the former mayor of Kitimat, John Calvert, myself, Gwen Barlee, Joy Foy at WW, Charles Boylan at Co-op radio, and lawyers like Leo McGrady who launched the class action suit over the Hydro debacle all worked extremely hard to alert the public to the debacle unfolding, as did filmmaker Damien G and Rafe who both worked for/with Tom Rankin at Save Our Rivers website. The MS media did virtually nothing, and successive BC NDP leaders from Carole James to Adrian Dix paid scant attention to this issue, never making it a major issue in any provincial election campaign. We are now where we are: IPPs, under their non-public non-BCUC scrutinized ‘take or pay’ contracts are receiving from BC Hydro more money for their power than what BC Hydro obtains from sales of power: estimated by Norm Farrell to be about 5.1 billion for the period 2002-2016. HYdro Rates have and will be going through the roof. Site C is totally not necessary to meet demand. Yet the people of BC, the electorate, are still not fully alerted to this matter. Just think what other public investments in housing, health care, education, poverty alleviation, reduction of student loans, etc. could have been made with that $5.1 billion foregone revenues to the Crown. It is a HuGGGE public policy disaster and it will get a lot worse if Christy Clark and the BC Libs get re-elected.




  2.  
    erik andersen

    Hi Edwin;

    A little history on IPP contracting in BC. Back a while ago a couple of connected Calgary lawyers applied to BC Hydro for a contract to build and operate a generation plant, powered by natural gas, at Duke Point on Vancouver Island. After hearings the BCUC approved the plan.
    A number of us from the nearby area stood in opposition for several reasons, pollution and exaggerated contract benefits being but the two big ones.
    The developer’s evidence was that to get to commissioning it would cost $300 million. These developers had zero direct knowledge/experience of building and operating this facility but they more importantly had a transferable contract from BC Hydro that guaranteed a minimum of annual revenue for 25 years , even if no electricity was generated and taken up by BC Hydro. The contract also absolved them of all responsibility when the price/cost of natural gas changed.
    For us as opposing interveners , the BCUC, had just rolled over when they gave the project a green light. So we passed a small hat around collecting enough to pay for legal services and applied to have the complete project examined in a real court of law. To our joy we got a court date.
    You never saw a bunch of developers and their fellow travellers run into the hills so fast. They knew they would be cross -examined on the financials which were horrendous. Their cost to build was $300 million while the present value of the no-risk contract was $500 million. Their target was the $200 million of net equity that was to come from installing an easy to build plant in an easy location.
    After that the “penny dropped” in Victoria and the cabinet made all future IPP contracts secret from the public. Right now there are over $50 billion of IPP contracts active. You do the math as to how much BC Hydro customers are being forced to pay extra for the next 30 or more years.




  3.  
    Barbara Sherman

    Thank you for the sad truth. I wish you’d been our premier all these years! I’ve come to realize that within the next 20 years BC voters will completely lose local control over most property and resources in this province. We won’t be able to complain because it will be due to our own willful apathy that it happened. What bothers me is that the majority of retired baby boomers, who have nothing but time on their hands, are still not getting involved in causes when it was largely due to them that this all started unraveling in the first place.
    Barbara Sherman
    Vancouver, BC




  4.  
    Coiln

    BC Hydro has a poor history of no customer service and causing grief for the development world all because of their structure, organization you name it.

    I hope it fails and good utility operator comes in and stream lines its processes, costs, customer responsiveness.

    BC Hydro and its defunct off-shoots, the Transmission Corp have been vehicles for lining the pension plans of their senior staff at BC tax payer dollars.




  5.  
    John Gregson

    Could we not afford to give Gordon Campbell the benefit of doubt when he first misconstrued the power situation back in 2001. As did Chrispy with respect to the LNG situation in 2014. I know, that’s being generous. But when the facts become known and they still pursue their mislead agenda don’t they then become culpable of some sort of fraud? I mean, even w/o a university education one cannot claim to be THAT ignorant! Situations change, and so must your goals – especially when the resultant economics are so disastrous.
    And even if you are THAT ignorant, there are hosts of experts who are not! Listen to THEM, not your ego!
    Sadly, I’m finally convinced that Chrispy has got Site C ‘past the point of no return’. Such a travesty!




  6.  
    peter wanstall

    THIS HYDRO THING HAS BEEN BREWING FOR MANY YEARS …..I HAVE ALWAYS SUSPECTED THAT SOME VERY BAD DEALS WERE MADE INTERNATIONALLY WHEN THE VERY HONORABLE PREMIER CAMPBELL WAS CAUGHT DURING HIS HOLIDAY TRYST IN HAWAI……SOME VERY BAD CONSEQUENCES CAN HAPPEN WITHOUT COOPERATION WITH SO CALLED JUSTICE SYSTEM PLEA BARGAINING ARANGEMENTS……….OH…..TO BE A FLY ON THE WALL !!




  7.  
    gragor

    I hear the Gordon Campbell is coming back after losing his cushy federal government job over there in London. What say we get together a greeting party when he lands in Vancouver and Citizens Arrest that sucker for all he has done to this province. There must be something he had done that was illegal enough to warrant an orange suit.




  8.  
    erik andersen

    Hello Edwin; BC Hydro posted domestic sales (supposed to be to BC only customers ) in fiscal 2013 of 57,012 GWhrs. Included in this total are sales to “others” which were for the most part around were 2,000 GWhrs in each of the previous 6 years. By definition and footnotes to some older annual reports sales to others are sales to folks outside of BC. So to who were the 4,000-5,000 extra GWhrs sold/given to? California got these surplus GWhrs as part settlement of the suit against BC Hydro for participating in the Enron fraud and they were a gift.
    In fiscal 2016 BC Hydro again posted a large number for domestic sales of 57,300. This time sales to others went from 1,582 GWhrs in fiscal 2015 to 7,879 GWhrs in fiscal 2016. When one takes the revenues from “others” in 2015 from 2016 the gain is $184 million for sales of 6,300 GWrs. That means BC hydro sold to others a KWhr at just under $.03 when you and I pay $.09 or $.12.
    That also means that BC Hydro found between 5,000 GWhrs and 6,300 GWhrs surplus to the needs of BC customers in each of those years.
    That also means that building Site C to get electricity of about 4,600 GWhrs per year is to expand production of electricity in the province at exactly when demand is flatlined or contracting and we have a demonstrated surplus.
    Between the years of 2008 and 2016 sales to residential customers shrank by 222 GWhrs per year. For sales to light industrial and commercial customers there was a pathetic increase of 15 GWhrs per year. Lastly, sales to large industrial customers decreased between the two years by 1,711 GWrs.

    When one goes into the balance sheet for BC Hydro it gets even more depressing.




    •  
      nonconfidencevote

      Mr Anderson , your well reasoned, thought provoking, fact based arguement is, unfortunately, all but lost on the electorate. A majority of whom couldnt spend more than 10 seconds of furrowed brow concentration attempting to deduce your fact based statements before “surfing” to the next U-tube video of a cat waterskiing.
      And….unfortunately for all of us……Premier Photo Op figured this out many years ago. Which has created the squalid mess we, as taxpaying voters , find ourselves in.

      Chained for a 4 year term to another politician that is environmentally, fiscally, and intellectually devoid of any positive attributes.

      Christy Clark’s years of squandered university years partying without graduating has left her incapable of understanding basic accounting and she cannot tell the difference bewteen surplus “(+) ” and deficit “(-)”

      But she does look good standing on a podium blinking into the bright lights of the media cameras while smiling…………

      P.S. Please keep up the good work Mr Anderson. Your comments and reports are desperately needed in the next 8.5 months.leading up to the election.




  9.  
    Jim Ervin

    Keep up the good work, Rafe. And to top it all off in the way of your comments, you didn’t even mention the Smartmeter disaster which BC Hydro foisted upon us. There’s another billion or so shot to hell.




  10.  

    If we had a media that had any time since 2001 asked a single tough question of any of these half wits much of it wouldn’t have happened. Search your minds – do you recall any msm questioning anyone in government, or indeed the opposition about the IPP – run of river issue? Going back to the beginning? Show a single photo of what was happening? When and how,( if you have yet) did you learn that Dr Andrew Weaver rhe Green Party leader supported the Liberals Energy policy and IPPS in the last two elections, the latter as.a Green candidate AND STILL DOES, and, as a scientist did so without bothering to look at one? Have you heard a peep in the MSM about what the Liberal policy has done to BCH? Any articles by Vaughn Palmer.or Mike Smyth?

    The odds are that anything you learned about this (and probably didn’t believe at first because it didn’t come from the “right” place) was right here, Norm Farrell, Laila Yuill – a private source not controlled by anyone, much less the governments through the fossil fuel industry.

    Think on this folks, our democracy and free speech are hanging on by a very thin reed indeed.




    •  
      nonconfidencevote

      Rafe, you know the local media here drink each others bathwater.
      And while I may understand WHY they sold their blacken souls years ago to pay exorbitant mortages like the rest of us……

      I will never forgive them for pretending otherwise……..

      They have earned their plummeting newspaper sales and dropping viewer numbers…….in spades.




  11.  
    Druid

    Right on Rafe. Campbell wanted to sell BC Hydro at the outset but with a public outcry he started selling off pieces of it and giving away sweetheart deals to IPP cronies – all of whom donated substantially to the BCL coffers. He also kept feeding the corporation terminal poisons – creating a top heavy executive of cronies, funding much of the IPP collector system (which should have been paid for by the IPPs). and making BCH sign “take or pay” long term sweetheart deals with these Liberal donors.
    Regretably – Weaver loves the IPP system – He wants to use the “sweetheart deal” PPP system to create alternative energy projects, with the profits going to the big multi-nationals and BCGP cronies (who will, of course also make significant political donations.




  12.  
    Lew

    In answer to the question posed by your last sentence Rafe, I believe the public comprised of our grandkids will recognize they’ve been screwed by Gordon Campbell and Christy, and blame us for letting them do it. On the other hand, the public comprised of today’s voters will recognize they’ve been screwed and who did it if and when they become properly informed.

    I congratulate you for your efforts to inform, and condemn the impostors posing as journalists in this province for their self-interested abdication of duty.




  13.  
    Garry Anderson

    I worked for B.C. Hydro from 1974 though 1975. It was a wonderful company and well-run by the old-timers who carried forward sound principles of business and engineering. It is sad to see what can happen when “fools” take charge.




  14.  
    Teresa Jones

    Thank you for your concise reporting on this very important topic as you have been doing all these many years since the start of this mess. The lack of logic with this whole scenario is extremely unsettling as it is the people in charge of our great province that are perpetuating the lie about Site C and the run of river scam. We must kick out the morally bankrupt Christy Clark government next year as she is solely about Christy and NOTHING ELSE. Busy feathering her post-premier bed with her corporate ties and not considering the people of B.C. or most of her “people” who do her dirty work. She is all about herself. Period. Sickening, she is our very own Donald Trump. Yikes.




  15.  
    Hal

    Well done again Rafe, but We really need a new independent media to ensure that the voters get more than BC Liberal bumpf before the next election. Even if these issues are too complicated to hold the attention of the “Trump” supporters among us, there are people who would question the government’s financial skills if they only knew what was happening to the crown jewels of the province. All I see in the local papers is superficial “feel good” articles that support resource extraction and the sale of same to foreign interests. I gave up on Black Press years ago and in the past year the CBC. I suspect that in the south a lot of people have done the same with the MSM.

    Soldier on Rafe!




  16.  
    Edwin M. Hopkins

    I did not know that BC Hydro is locked into buying IPP power whether needed or not. W. A. C. Bennett must be turning in his grave. Rafe is so correct in wishing to see BC Hydro widen its focus from just hydro to our other abundant renewable energy sources.





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