Private power contracts will “cost ratepayers an estimated $16.2 billion over 20 years, the estimated period during which B.C. Hydro will likely not need the energy government directed it to buy»
VICTORIA — The provincial government will bail out B.C. Hydro to the tune of $1.1 billion to limit rising electricity bills in the face of a money-losing deal with private power producers.
B.C. Hydro electricity bills will increase by 1.8 per cent on April 1 and 0.7 per cent April 1, 2020, as part of a total rate hike of 8.1 per cent over the next five years.
The government said those electricity hikes are 40 per cent lower than the 13.7 per cent cumulative increase for the same period under the Liberal government’s 10-year rate plan.
Energy Minister Michelle Mungall acknowledged that the NDP government pledged to freeze hydro rates, but said that’s become impossible because the previous Liberal government signed contracts with private power producers that resulted in B.C. Hydro paying too much money for the wrong type of power.
The concerns were laid out in a government-commissioned independent report that found B.C. Hydro purchased an estimated 8,500 gigawatt hours of energy from independent power producers under pressure from the B.C. Liberal government for the hydro authority to use clean energy sources.
Those private power contracts will “cost ratepayers an estimated $16.2 billion over 20 years, the estimated period during which B.C. Hydro will likely not need the energy government directed it to buy,” according to the report’s author Ken Davidson, adding that the $16.2 billion is a conservative estimate.
The impact of the surplus energy is estimated at $808 million annually, costing residential hydro customers $200 per year or $4,000 over 20 years, the report says.
“The report made it clear that due to decisions of the previous government, ratepayers have overpaid billions of dollars for power,” Mungall said. “The B.C. Liberals’ (independent power producer) scheme was a sweetheart deal for some, but it was not a good deal for British Columbians.”
Liberal B.C. Hydro critic Greg Kyllo said Davidson’s report is a “gross miscalculation” of what the previous government was trying to achieve.
“We need to take into account that British Columbians largely were looking for B.C. to have self-sufficiency when it comes to the provision of electricity,” he said. “We had to look at solar and run-of-river and sustainability with respect to the provision of power in British Columbia.”
Kyllo said solar and renewable energy is more expensive than traditional power-generating sources such as coal-fired plants.
The report said that run-of-river projects generate the most amount of power during the spring thaw, a time when B.C. Hydro already has a large supply of such power.
In an effort to do damage control, B.C. Hydro will immediately suspend its standing offer to buy small-scale power from independent producers. Mungall acknowledged this will affect dozens of Indigenous communities which have used small-scale power projects to create economic development opportunities. The ministry will work with these communities to find other opportunities for economic advancement, Mungall said.
No changes will be made to electricity purchase agreements already signed and in place, as the report found that it would be more expensive to break the contracts than pay them out.
The reforms will also expand the oversight of the B.C. Utilities Commission, powers which were curtailed in 2010 under the Clean Energy Act. The act exempted most energy acquisitions and other major B.C. Hydro initiatives from being reviewed by the commission. The commission will now make decisions on rate increases and deferral accounts as well as capital projects.
Davidson’s report represents the first phase of the government’s review of B.C. Hydro, which focused on reducing electricity rates for hydro customers. The second phase begins this year, and will look at ways B.C. Hydro can find efficiencies through technological advancements and address climate action in line with the Clean B.C. plan.
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