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Regulator quashes controversial power sale agreement.

By Richard Warnica 3 Jan 2007 | TheTyee.ca

Richard Warnica is a senior editor at The Tyee.

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A tiny town in Northern B.C. has become a big little pain in the ass for the B.C. Liberals. Kitimat was in the news again this week when a provincial regulator quashed a power sale agreement between Alcan -- the aluminum company with a large operation in Kitimat -- and B.C. Hydro, the provincially owned energy utility.

Under the deal, B.C.'s ratepayers would have bought electricity from Alcan at a locked in price that is, according to many, way above the market rate. But on the last day of 2006 the B.C. Utility Commission ruled that the agreement was not in the public interest and cancelled it.

For the Liberals, the ruling comes as a blow to their plan to privatize energy production in the province (a plan Simon Fraser prof. John Calvert railed against in these pages in October.) And it likely comes at least partially thanks to a constant stream of objections from the mayor of Kitimat.

Alcan was granted the right to damn the rivers in and around their power station in Kemano  -- a process that came at a high environmental cost --  to provide energy for their aluminum smelter in Kitimat. The hope was that the smelter would provide jobs and fuel investment in the region for years to come.

It worked, for a while. But eventually the power station began to produce more electricity than the smelter needed. And instead of ramping up production, Alcan sold the excess power for a tidy profit. They continued to auction off electricity even as they scaled back aluminum production in Kitimat. 

The people of Kitimat, led by mayor Richard Wozney, say that's illegal.  They have argued for years, in public, private and even the courts, that the water used to fuel the Kemano plant is only Alcan's as long it they use it to fuel the Kitimat smelter. For them, B.C. Hydro, by signing on to buy from Alcan until 2025 was explicitly participating in an illegal usurpation of a pubic asset by a private company.

Alcan and the government counter that the deal would allow them to fund a major expansion of the Kitimat smelter - an expansion they would run at capacity for 30 years beginning in 2011. Without the power deal, the expansion, and the jobs it would bring, are in doubt

Only one problem: Alcan was never bound to the expansion in the first place. As the Globe's Konrad Yakubuski points out, the contract Hydro signed imposed "no obligation on Alcan to build a smelter, yet guaranteed the company $71 per megawatt hour for all the electricity it saw fit to sell to B.C. Hydro until 2025…

"Without some kind of obligation to produce aluminum and provide a certain number of jobs -- similar to the kinds of binding undertakings the Quebec government has secured from Alcan in exchange for providing cheap electricity and renewing the company's own hydro licences -- a future Alcan CEO could shut the smelter and sell electricity, period."

On Friday, the BCUC agreed. They killed the deal, and in the process opened the Liberal's controversial energy plan back up for scrutiny.

Coda: This is not the first time the people of Kitimat, all 11,000 of them, have caused the Liberals problems. In the last provincial election, Campbell avoided the town entirely during his heartland tour to avoid charges that he was selling them out on the electricity sales issue. Kitimat also emerged as the key player in the donate-gate scandal when town officials told The Tyee's Dee Hon they had been duped into donating money to the Liberal party.  [Tyee]

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