Massive power bill increases due to Liberals' failed IPP scheme

Massive power bill increases due to Liberals’ failed IPP scheme

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Massive power bill increases due to Liberals' failed IPP scheme
BC Energy Minister Bill Bennett (photo: CP)

I told you so!

My colleague Damien Gillis told you so! Independent economist Erik Andersen told you so! The Campbell/Clark government has taken the jewel of our diadem, BC Hydro, and forced it into what would be, for any company in the private sector, bankruptcy.

We learn this from a leaked internal BC Hydro document, headlined in the September 11 Vancouver Sun, where Independent Power Projects (IPPs) share part of the blame for the massive power bill hikes on the way for Hydro customers – over 26% by 2016! By 2024, rates will allegedly skyrocket by 57.3 per cent!

Minister Bill Bennett says that the costs from IPPs are “not that great” but doesn’t give any figures. According to Jim Quail of COPE Local 378 – the union that represents many Hydro employees – these losses are due to “a failed experiment with independent power producers”.

$55 Billion in over-priced IPP contracts

What we do know – and have known for some time – is that BC Hydro has signed on for some $55 BILLION of power from IPPs, over the next 20-40 years, to buy power at 2 -3 times the market rate, sometimes far more. We also know that Hydro didn’t have to spend one cent for private power (we’re now a major net exporter, at a considerable loss) and we also know that on Minister Bennett’s orders, at least 10 IPP contracts for unfinished projects will be cancelled.

Minister Bennett, trying to act as if he and his government had nothing to do with the mess Hydro is in, says:

[quote]I’ve been very forthcoming since I took over as minister, in terms of saying to the public that there will be some rate increases. I have always coupled that statement with my commitment that I will do everything I can to keep the increases to a minimum.[/quote]

And while we’re at it, how can a BC Hydro report come as a surprise to the minister?!

Is there any question why Premier Clark is not calling the Legislature into session this Fall? Day after day hammering by the opposition on BC Hydro?

No chance, Lance.

LNG is the answer to all our fiscal problems…or so they tell us

When I started preparing this piece, I asked this question: “How are you going to deal with these huge power bill hikes, Minister?”

There is only one way – find some other pathway to the taxpayer’s pocketbook. Be honest, Mr. Bennett, your government has screwed up big-time and no matter how you tart it up, the taxpayer will pay every red cent of Hydro’s debt.

Amazingly, a magic fairy has fixed everything overnight. A day later, “back of the envelope” Bennett has figured out how to deal with a 26% rate increase.

I had underrated his ability to whip into place a change in government policy that truly takes the breath away, for now, 24 hours after the BC Hydro report was leaked, natural gas is the answer! I wonder what policy is on for tomorrow, Minister?

Do you remember when natural gas was a filthy fossil fuel? When the Liberals loudly condemned the Burrard Thermal plant, which for a few weeks of the year, when Hydro is short of power, supplies a tiny amount by natural gas?

The Campbell/Clark government came out in 2002 with an energy policy principally in line with the preferences of the right-wing philosophies of Alcan, General Electric, Accenture and the Fraser Institute. It declared that all new power henceforth (with the exception of Site “C”) would come from private projects.

IPP map
Map of 700+ IPPs – proposed, under construction, and on-line (ippwatch.info)

This policy designated some 700 rivers to be ruined and sent BC Hydro down the one way road to financial collapse. The only thing in the way for Hydro’s bankruptcy was the bigger and bigger assault on citizens’ wallets.

Of course, now that natural gas has gone from being a toxic fuel to clean energy overnight, can coal-fired power plants be far behind?

A government out of control

This government is out of control. It has had a decade to analyze BC Hydro and assess its power needs and how to meet them – and yet it couldn’t be more off-base.

Why? Because they have made these highly improvident deals with IPPs. Any study of the Hydro problem will run afoul of industry, which is on a gravy train and supported by the Fraser institute. Most of all, they’re hugely frightened that these secret IPP deals – which you’re paying for – would be made public.

Am I bitter?

Frankly, I am, but perhaps not for the reason you might think.

I am a native and lifelong citizen of British Columbia and yes, I’m a British Columbian above all else. Since the scales fell from my eyes in 2005, I’ve fought against IPPs. Everywhere I spoke, audiences would look heavenward, assuming I was exaggerating – I must be, for no government would do this!

[signoff1]

In many meetings I was heckled by shills for the IPP racket, who would try to discredit me by asking red herring questions about Hydro’s workings and by discussing the minutiae of these secret contracts, which only they could claim to know.

I became more and more frustrated and when the NDP blew the election in 2009, I despaired for the province and kept on speaking and writing. I thought some relief would come after the election last May. I’m no NDP fan, having whipped their ass in 1975 and 1979, but I could see that they were the only hope.

Empty vindication

I knew that vindication for Damien, Erik and me would come but what would that mean? It wouldn’t bring our rivers back and it wouldn’t stop the fiscal ruination of BC Hydro.

Now we have a government acting as if the huge mess came from the Wicked Witch of the West. Maybe it has something to do with sun spots or chemtrails.

There will be no political penalty. Just before the next election, the Liberals will trot out a modest increase in electricity rates. According to this leaked document, that’s exactly what they’re planning to do, drastically curbing power bill hikes – just as they did this election year, when they capped  increases at 1.44%, further compounding Hydro’s long-term financial woes for short-term political gain.

In the meantime, they will peddle a load of horse buns about a pot of LNG gold just around the corner.

So yes, I’m bitter that our government and private power industry have destroyed much of the province I love so dearly and dragged our once proud power company to the portals of bankruptcy.

And I make no apologies for my bitterness.

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About 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.

18 thoughts on “Massive power bill increases due to Liberals’ failed IPP scheme

  1. Dear Gavin; You are failing to grasp the obvious. Into this century BCH delivered what people and businesses needed in BC, an affordable and reliable supply of electricity for their day to day needs.

    Despite the many fictions by the government and echoed by BCH, that people in BC needed more than 50,000 GWhrs a year of electricity the evidence shows how wrong it has been. Our government directed BCH to contract for more generation than was and is needed, full stop. If you are totally honest you will acknowledge that all this new generation by IPPs has been with contracts that make certain of payments of $90 MWhr or more. The BCH chief of forecasting made it clear, over a year ago in public and in Victoria, that most new generation is coming with contracts for up to $125 per MWhr.

    If you look at the 2013 BCH annual report, sales to Others, wrongly shown by BCH as domestic sales, are in fact sales to people outside of BC (see page 68 of notes to financial statements by the corporation’s auditors). Like it or not BCH and the government have made enormous mistakes that are challenging to explain as accidents or poor judgments. “Sales to Others” in 2013 totaled 7,417 GWhrs which if you care to translate is the equivalence of 2 Site C s. That means BCH made a financial error of between $16 and $20 Billion of new contractual obligations.

    When asked by me, the BC auditor General wrote “For a contractual obligation, the other party has yet to provide the service, so the Province does not have the obligation to pay and potentially circumstances could change, rendering payment unnecessary.” That is the theory but the reality is different. That is precisely why Minister Bennett is negotiating with those contracts suspended or canceled.

    IPPs would never find development financing if the money was at risk nor would they book takeout, long-term financing if revenues were not certain to be a minimum amount no matter what.

    If promoters exaggerate contract certainty it has nothing to do with BCH and everything to do with free riders and parasites behaving as they always do.

    1. Dear Erik – thank you for your thoughtful response. You raise many points which I will try to respond later. It is not as dysfunctional as you portend. There are no millions or billions being made by the private sector. There are two reasons for that: The call for tender by BC Hydro is extremely competitive and fully open, probably the most competitive tenders conducted by the province – and the cost of generation by IPPs is considerably lower than BC Hydro, after we deduct for government benefits that IPPs pay but BC Hydro does not pay (such as property tax and school tax).

      IPP’s profits are somewhat marginal, given the huge risks that they take (it takes $6 million and 5 years to permit a creek, if successful), and given the nature of the tender where 68 projects comprising of 15,000 GWh are vying for an offer of only 3,000 GWh.

      I will keep an open mind to your arguments, and I hope the truth would come out. If you do not hear from me, please check with the moderator as to why.

      Gavin

      1. Hi Again Gavin; This evening I presented a few suggestions to the provincial budget committee, on tour in BC.

        What confounds me is how BC can report a 63% increase in annual GDP from 2003 to 2013 when total sales of electricity by BCH to only BC customers has flat lined at 50,000 GWhrs for the same period and total people working in BC only increased by 17%. This divergence suggests to me that economic value and financial assets are escaping the province to avoid taxes and local redeployment, they are not filtering down into the real economy as President Reagan promised.

        The GDP is given to both the Auditor General and the Comptroller General by Moody’s, a reputable source that derives the values from Stats Can.

        Since 09 the total provincial revenues as a % of GDP have dropped away from 20/21% to 18% with indications of going lower. Had 2013 revenues remained at 21% of GDP the posted total revenue in 2013 would have been $5-6 billion greater.

        Why I write the above is to illustrate just how seriously off base the provincial finances are and BCH is a big reason for this horrible condition.

        Not sure if you have knowledge of the acceleration principle but if so you will know that as in nature there must be symmetry and in the case of credit driven economies there must be contraction. Japan has been in such a period for 20 plus years. The significance of this for IPPs and BCH is that planned new generation used wrong thinking and are now caught in the period of gloabal economic contraction. In the world of the military commanders, those who have excellant situational awareness survive and thrive. Our BC government and BCH do not yet demonstrate this attribute so keep doing what they have decided to do but expecting a different outcome only because they say that is what they want. Einstien called this a form of insanity.

  2. BC Hydro has never said the contractual obligations to IPPs is $55 billion. BC Hydro says: long-term energy purchase contracts obligations are approximately $52 billion. This commitment includes the following:

    Purchase of power from government, municipality or community owned generators
    Purchase of power from First Nation generators
    Purchase of power from BC Hydro subsidiaries (Brilliant dam, etc.)
    Purchase of power from Washington or Alberta generators by Powerex
    Electricity futures contracts by Powerex
    Natural Gas futures contracts by Powerex
    Purchase of power from gas generators
    Purchase of power from sawmills, pulp & paper plants
    Purchase of excess power from mines and smelters
    Municipal solid waste incineration power generators
    Municipal solid waste biogas power generation
    Capital leases
    Operating leases
    Purchase of power from IPPs that have abandoned the contract and have lost millions in nonrefundable deposits with BC Hydro. 50% of contracts won by IPPs get terminated or abandoned due to lack of feasibility. BC Hydro is currently terminating these contracts.

    There are 59 hydro and wind IPP projects of > 4 MW, and 15 less than 4 MW. Of these projects, 14 are under development or construction and 60 operational.

    There are 13,000 creeks and rivers in BC.

    If the EPA obligations for these 74 existing or future hydro and wind IPPs are summed up, the total contractual obligations to IPPs is $14 billion.

    However, it should be noted that the cost of IPP power to BC Hydro is less than the cost of generation by BC Hydro. Source: BC Hydro 2013 annual report.

  3. Someone as angry as Rafe sent me a short note yesterday. He went on line to the BC Government web site and entered the phrase “commercial fraud”.

    This search disclosed that modifications to the statute occurred in the period 1996 through 2006; then again in 2010,2012 and 2013.

    These modifications may signify nothing or possibly something. Does anyone with direct legal knowledge have summations of the various changes?

    Clearly, if there was a theme of reducing accountability , particularly ahead of 2006 when the Government began its Hydro spending rampage, there could be a case for premeditation of a fraud.

  4. Well folks, the way i see it OUR “public trustees” have dishonored their oath of office.
    Holding them to account is paramount.

    First… they’re ALL FIRED!
    Second, seize their public hazard bonds,
    Third – file civil claims against everyone who willfully participated in these crimes. (Criminal goes nowhere n BC).

    or you could just BUG-OUT-OF BC!
    With the Fukushima’d waters, air and land, influx of unwanted “agents”, and the GVRD being ground zero for NWO & Agenda 21 in Canada, why would you stay to pay?

    BC is cooked.

    1. Gee..finally someone who knows what’s going on. Yes BC is cooked and so is the rest of the planet. There are countless of animals die-offs in oceans and on land. GeoEngineering.org. Our northern ozone is gone. They are spraying poisons; fungus, diseases etc. They are deliberately destroying the planet. Where would you bug-out to?

    2. google ‘iceland jails bankers’. there is a better way to run an economy/province/state i might move to iceland the only truely free state in the western world. free of banksters oh but obama will declare there are terrorist in iceland and nuke em.

  5. Rafe, Damien and Erik,

    Thank you for your long and hard fight. Please keep on fighting and educating BCers so that hopefully one day our wild rivers, backcountry and wildlife will be spared the onslaught of corporate greed, surreal government policies, and politicians who only seek to please their corporate buddies. BCers need to be shaken up before we lose all that we love about this province.

  6. Alcan, General Electric, Accenture and the Fraser Institute ….

    Alcan – Allowed to flood out the upper Nechako basin and the Cheslatta Native Band behind the Kenny Dam in exchange for jobs, jobs, jobs & tax revenue. Jobs are gone, tax revenues have diminished but the private power exports are flourishing at BC’s expense.

    General Electric – Their Atomic Power division is responsible for building the faulty containment vessels of 49 – 1st gen nuclear reactors including 3 that are leaking at Fukushima Daiichi. They are a major recipient of our Largess in the IPP’s through joint ventures with Plutonic Power. Your very expensive IPP kilowatt/hr fees will be going to help GE weather what will surely become a very expensive problem as more and more reactors will require astronomically expensive fixes.

    Accenture – Tainted by its association with disgraced/crooked/busted Arthur Andersen, bookkeepers to ENRON the swindlers who brought California the rolling brown outs created to drive up prices including our very own IPP price structures. Accenture gets the outsourced accounts receivable portion of BC Hydro and these jobs move off shore.

    And definitely last but not least The Fraser Institute – a foreign sponsored environmental terrorist group – oops, Koch Bros approved & supported, Neo-Conservative CPC & BC Liberal Government connected think tank lobbyists responsible for advising the people who created the financial problems at BC HYDRO.

    So when are we going to see the corporations and the individuals who engineered this financial crisis at BC HYDRO personally be taken to task and forced to pay a penalty for their malfeasance? Perhaps a percentage penalty like 10% per annum to help share the wealth they have created with us sweaty unwashed BC Hydro customers?

  7. Don’t forget the so-called “smart meters” and BC Hydro’s egregious accounting practice of deferring costs to future years.

    Last year our premier appointed a panel of 3 deputy ministers to look at Hydro’s business.Hydro blew smoke up their backsides and by changing its deferral practices managed to cap its 2013 rate increase to something that would not cause voters heartburn in May 2013.

    They have stuffed the can so full of worms that not even Lui Pasaglia himself could kick it very far down the road.

    Watch Bennett instruct the Utilities Commission to limit the increase to some acceptable level by deferring yet more costs. Why defer the costs? Because he needs the dividend from Hydro to help balance the province’s books.
    What happens next? We start to get the impact of Mica 5 and 6 and the ILM transmission line in Hydro’s cost structure, which will enable Hydro to close Burrard down and buy more intermittent power at premium prices (or IPPs for short).
    It will only get worse.

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