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BC Hydro’s Exploding Debt – Accident or by Design?


Mysterious foreign corporate interests are directing our provincial energy policy, as BC Hydro prepares to buy yet another round of discredited private power contracts.

Recent articles about some of the wrong-headed thinking by our government that has put BC Hydro in financial harm’s way, suggest that it has just been a matter of over-enthusiasm and nothing more sinister. It is almost a description of our government as a victim that needs our sympathy not our ridicule – or worse.
Ask yourselves if it was prudent of BC Hydro to recently borrow and spend $10 billion, presumably increasing its capacity to do business, knowing that the global economy was in disarray?

Prior to 2008  publicly available indicators showed commercial/economic global affairs were in trouble. It is not unreasonable to expect those who we pay very well to know about these developments and rein in their more bullish instincts. This is called looking after the public interest. Out of the many such “situational indicators” we all have access to, take a moment to look at one – the Baltic Dry Cargo Index, the 5 year chart. The index plummeted by 94% between a record high in May 2008 and December 2008, when it hit its lowest point since 1986. This should have sent a powerful warning to the people forecasting our future energy demand.
BC Hydro’s most current forecast shows they expect the domestic need for electricity will become 64,000 GWhrs by 2017. GWhrs are the units of electricity their forecast uses so just think of them as units of useable electricity for discussion purposes. Now, most people I know, acting in a common sense way, would test this outlook against the best possible evidence of real demand available. Since the financial peak of 2008, BC Hydro’s record of sales shows demand collapsing, both in total and on a per capita basis. This reality has yet to be recognized by the “smartest guys in the room”. So for at least three years our Government and BC Hydro have been in denial of reality.

In fact, even as recently as this week, it emerges that BC Hydro is planning to buy even more private power contracts, through a 2,000 GWhr clean power call (see page 9 of Hydro’s 2012 Draft Integrated Resources Plan); at the same time we learn that Alterra Power intends to take another run at its controversial mega-IPP in Bute Inlet, announcing a deal with the Sliammon First Nation to build transmission lines for the project.

So, over the last six to eight years how much new debt has BC Hydro taken on in your name, as a citizen and owner; do you know or care? Besides the formal amount of $8 billion in new total liabilities it has added $2.2 billion of receivables from the ratepayer’s category. BC’s Auditor General reports that it looks like this category is programmed to balloon even more. These obligations do not take into account the present value of the secret IPP contracts that would probably add another $30-40 billion to total liabilities.
In the face of evidence that no new electricity generation is needed in the foreseeable future, BC Hydro is presenting a story where it sees the need for 14,000 new units by 2017, not that far off. In terms of new borrowing and spending what does this mean? If we use the values associated with the Site C project, each new unit of useable electricity comes with a capital requirement of about $2 million. Your government/public corporation is planning to contract for or directly finance new generation that will produce a new liability of about $30 billion by 2017 and double that by the end of the forecast period.
You may ask, where does this insanity stop? What motive could possibly explain this outrageous mismanagement of our public asset?
Perhaps the explanation lies outside of BC. In 2006, a new corporation came into existence in the US, dubbed the “North American Electric Reliability Corporation” (NERC).

This corporation has the legal mandate to impose its will on all North American electricity producers. This will is a legal right to levy fines of consequence on those producers not obeying instructions. This corporation is not beholden to any elected body, nor does it disclose its beneficial owners. Our federal government has accepted this reality by having the National Energy Board sign a memorandum of understanding with NERC, in the fall of 2006. NERC’s most recent annual report affirms it now has “ENFORCEMENT” powers in Ontario and New Brunswick. NERC has been and is active elsewhere in Canada, furthering its restraint of trade objective which certainly does not look as serving the public interest of BC citizens.
The forgoing is not something both the BC Government and BC Hydro would have been ignorant of, which makes knowing of an act of complicity.
Most people have memories of Enron Corporation that are generally uncomplimentary of the folks in charge of it. Some of the more prominent of these people are still around. It might amuse you to read what is essentially the Enron oath of office. It serves to illustrate the difference between the “talk and the walk” for some people.
The following quotation is taken from the 1998 Annual Report by Enron:
Our Values
RESPECT: We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness, and arrogance don’t belong here.
INTEGRITY: We work with customers and prospects openly, honestly, and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it.
COMMUNICATION: We have an obligation to communicate. Here, we take the time to talk with one another … and to listen. We believe that information is meant to move and that information moves people.
EXCELLENCE: We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.
Don’t for a moment think that juvenile insincerity is limited to the US when the smell of big money is in the air. The time has long passed for being apologists for the folks who are determined to help others get control of our best provincial asset and the business monopoly that is attached.


About Erik Andersen

Erik Andersen is a retired economist who practiced as a transportation economist with the Canadian Transport Commission; with Airports Branch, Transport Canada; with ICAO and at private corporations such as Pacific Western Airlines. More recently he has been lobbying Federal Ministers to reform the way Canada Pension Plan Investment Board invests pension funds. He has been using his talents of late to expose the calamitous fiscal impact of private power companies on British Columbians.

10 thoughts on “BC Hydro’s Exploding Debt – Accident or by Design?

  1. I believe this boondoggle all started with G. Campbell(talking out the side of his mouth) claiming that BC was a net importer of Hydro. What he neglected to mention is that Nuclear Power companies in California needed to get rid of excess power( apparently it’s cheaper to let them run than perform shut downs) when Californians weren’t using their air conditioners. So BC Hydro took it off their hands for cheap(cheap) meanwhile our dams were spilling water and not generating power to accommodate this redistribution.

  2. You can simply go look around at the BC Hydro website, look at the board members, their careers etc. Then you go to the bcIMC, and look at their board. Then go to CAI capital management and look at their board. Then when you look at some of the periphery members of other companies… look at their board. You will see it clear as day. Most have all handled pensions or worked for the minister of finance or govt in some capacity. They have ALL had backgrounds in ALL the same companies that ALL would or already do benefit from the scheme, enshrined in law, below. These sharks don’t really care about rate hikes etc. This is about getting at the GOLDEN GOOSE. FORCING the people to choose between keeping the lights on or their pensions. Again you only need to look at the names of these clowns and see what is happening, look at the bcIMC holdings etc. It is astonishing and points to one plan only, the IPP’s and rates are the smokescreen to the backdoor confiscation of pensions.

    Authorization to borrow from Canada Pension Plan
    22 Despite anything in this Act, the authority may, in the resolution under section 21, authorize the Minister of Finance or, with the concurrence of the Minister of Finance, authorize the Minister of Finance of Canada to determine any matter required to be determined under section 21 for

    (a) borrowing money from the Canada Pension Plan Investment Fund established under the Canada Pension Plan, and
    (b) issuing and selling to the Receiver General and Minister of Finance of Canada for the credit of the Canada Pension Plan Investment Fund debentures as security for the loans.

    1. Brian Several years ago I was on the Hydro web sight and listen to a forensic auditor who stated that there are people who will drive hydro into debt so that in time they will tell the public that they will have to sell hydro to private enterprise to pay off this debt. I have tried to go back and fined the article, but failed. The points that you make, in my opinion, are a reasonable and could be someones plan. The persons that are on these several boards could do just that. Who knows, maybe they are after the pension money as well.

      John I

  3. Thanks for this report – our provincial/federal opposition should take note!

    I keep wanting to leave BC, but all the provinces are having environmental projects that are corporate theft.

    Avoidance and denial is no longer possible. We must make changes in our own backyard, and BC has a nasty mess there.

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