What the BC Hydro Report Hides
Premier's team deftly obscures the real fix, and what drove up costs: BC Lib decisions.
"You shouldn't have to pay higher than necessary electricity rates, because government wants to play politics with BC Hydro." -- BC Liberal Party 2001 election platform
The B.C. government report suggesting BC Hydro cut its planned 50 per cent rate hike must have been written in a burning glass factory, because it's full of smoke and mirrors.
That explains why despite the misleading appearance of being "tough" on BC Hydro, this report in fact completely ignores obvious solutions and lets the government right off the hook.
Instead of terminating the expensive, useless and possibly unhealthy billion dollar "smart meter" program, the report instead suggests BC Hydro may need to charge consumers more money sooner to pay for it!
And still worse, the report doesn't conclude that government must immediately stop forcing BC Hydro to buy extremely expensive electricity from so-called independent power producers -- because hydro rates are going up unnecessarily as a result.
Hardly surprising the government emerges unscathed, because the report was authored by Premier Christy Clark's own Deputy Minister John Dyble, Finance Minister Kevin Falcon's Deputy Minister Peter Milburn and Advanced Education Acting Deputy Minister Cheryl Wenezenki-Yolland, B.C.'s former comptroller general.
Even they had to admit that private IPP electricity in the latest call for tenders costs $124 per megawatt hour compared to power readily available to Hydro on the market at between about $4 and $52.
BC Hydro purchases of IPP electricity have jumped dramatically, from $364 million in 2007 to $568 million in 2010 -- a 64 per cent hike. And let's not even talk about the $30 billion obligation B.C. has to the IPPs in contracts stretching over the next quarter century -- because the deputy ministers certainly don't.
But the report makes darned sure people who are not responsible for BC Hydro's rate increase extravaganza will pay the price -- consumers and BC Hydro employees.
Hydro rates will still go up at least 16 per cent over three years instead of a planned 32 per cent, including an eight per cent jump next year. No word on what happens to two additional eight per cent hikes in each of the two years following that for the original total of a 50 per cent compounded rate increase over five years.
And up to 1,000 workers will get a pink slip from B.C. Hydro, on top of the 400 meter readers who are being phased out as smart meters are installed -- who were previously "outsourced" to private multinational Accenture Business Services.
They saw it coming, and hid
The BC Liberal government knew in advance that smart meters and a huge call for expensive IPP electricity would be big trouble with BC Hydro customers. That's why in April 2010 they exempted both from approval by the BC Utilities Commission which regulates energy issues.
Just like the Harmonized Sales Tax, this government wasn't confident enough in the merits of their policies to subject them to independent public review -- and to let voters decide the issue before a provincial election.
And not the for the first time, the BC Liberals completely contradicted their 2001 election promise to "restore an independent BC Utilities Commission, to re-regulate BC Hydro's electricity rates."
"You shouldn't have to pay higher than necessary electricity or auto insurance rates, because government wants to play politics with BC Hydro or ICBC. You should be conﬁdent that government will protect your interests," the New Era for British Columbia party platform loudly proclaimed.
Protecting friends and interests
Instead, the government has been working hard to protect its own interests -- and those of its friends and political donors who own IPPs and install smart meters, as previously documented by The Tyee's Will McMartin.
The deputy ministers' review of BC Hydro is intended to give the government the tools to look good by cutting the proposed rate increase -- but it also should give critics considerable worries about customers being gouged even more.
The report backs the Smart Metering and Infrastructure [SMI] project completely: "The business case rationale for the SMI project appears reasonable, and the assumptions used to support the cost savings are generally consistent and supported."
But there's a catch, and it's a big one. BC Hydro consumers aren't paying enough for the billion dollar boondoggle.
The deputy ministers say cost recovery won't happen until 2015 -- conveniently well after B.C.'s scheduled 2013 provincial election -- or possibly even after a 2015 election should Clark hold an early election this year.
The report states: "The scheduled completion date for the installation of the smart meters component of SMI is in 2012, yet no costs are to be recovered until three years later, according to the current Revenue Requirements Application."
"This deferment of costs is understandable from the perspective that BC Hydro does not wish to increase rates or pass on costs to the ratepayer pre-maturely," it concludes.
No, don't increase rates even more "pre-maturely" -- wait for the politically right moment -- after an election.
Given all this, one wonders if New Democrat energy critic John Horgan has a very strange sense of humour.
Horgan has publicly called the three deputy ministers who wrote the report "courageous" for saying the government may need to rethink its energy self-sufficiency policy that forces BC Hydro to buy high cost power from independent power producers.
Courageous? Christy Clark and Kevin Falcon’s own deputy ministers don't do anything courageous if that means contradicting the wishes of their bosses!
What would be truly courageous for this government is to do what is obviously needed:
Cancel the smart meter program and tell independent power producers the gravy train ride is over.
And put publicly owned BC Hydro back in charge of generating electricity at the lowest possible cost for consumers.
If not, smart meters and IPPs may be another big reason voters will put the BC Liberals out of power.