A Good Dam Deal?

New Democratic Party MLA John Horgan raised questions in the legislature this week about why B.C. Hydro would buy an interest in Teck Resources Ltd.'s Waneta dam when it could have just bought the power as it needed it.

Teck and BC Hydro announced the $825-million sale in June, subject to conditions that included the approval of the B.C. Utilities Commission where hearings are now underway.

The power from Waneta had mainly been going to the United States, but it could have just as easily stayed in Canada if it was wanted, said Horgan. "Before Teck Cominco could move any of their surplus power to the United States they had to first offer it to BC Hydro."

As evidence he points to three export permits the National Energy Board issued to Teck Cominco Metals Ltd. allowing it to sell power across the border. Before exporting power Teck would have to let possible Canadian customers know and give them an opportunity to buy it, the permits said.

Here's how the permits describe what has to happen before the Waneta power is exported: "Giving an opportunity to purchase electricity on terms and conditions as favourable as the terms and conditions which apply to the proposed exports, to those who, within a reasonable time after being so informed, demonstrate an intention to buy electricity for consumption in Canada."

Price is right: Hydro

That's standard wording for export permits and does not amount to a first right of refusal, said BC Hydro spokesperson Susan Danard. "Teck doesn't have to sell to us," she said. "They have no obligation to sell to us . . . The idea you can buy it whenever you want is not true."

Told of Danard's response, Horgan said, "That's absolute nonsense."

The permit, which would transfer with any sale of Waneta, spells it out clearly, he said. "Before you export power you must first offer it at non-discriminatory prices to Canadian companies," he said. "So that's just ludicrous that they would say that."

Horgan said he supports public power but BC Hydro has agreed to pay too much for the interest in the dam.

Owning a share in the dam will give BC Hydro more reliable access to the power, Danard said. "If we own it, we own it and we have that power there to use it whenever we want it."

As things are now, Teck only sells the energy that's surplus to what it needs to run the smelter in Trail and there's no guarantee there will be a surplus in the future, she said.

It also makes the price more reliable. Based on an assumption that the dam, built in the 1950s, will function well for another 100 years, purchasing a share in it will provide power to the public utility at about $64 per megawatt hour, said Danard.

That's less than the price B.C. Hydro has committed to buying power at in some recent deals. "There's no way you could go out now and sign an electricity purchase agreement and get energy at that price," said Danard.

Teck planned to sell

But it's also more than the $37 per megawatt hour that Teck's recently been charging for power.

The spot price for power fluctuates, said Danard, and has been much higher in recent years and will be again. "That will change as the economy picks up," she said. "Time will tell but I think we'll be very pleased with this price over the life of the dam."

The purchase is in the long-term interest of BC Hydro customers and brings more power generating capacity under public ownership, she said. "How can you argue against that?"

The idea has also been raised in the past that BC Hydro could have signed a long-term agreement with Teck to buy the power from Waneta. But Teck CEO Don Lindsay said in an October interview that the company was uninterested in entering such an agreement.

"We had made the decision to sell," he said. At the time, Teck was wrestling with heavy debt. "We needed the money."

The deal was good for both the company and BC Hydro, Lindsay said. "If you were to try and build that capacity, the capital cost of building a new Waneta dam with that power generation capacity is far higher than what they're paying, but likewise, we're getting a number that's far more than people expected."

High price looks like a gift

As it happens, that higher-than-expected price has also been a source of controversy. The Tyee reported in June that the $825-million purchase price far exceeded the $425 million to $500 million stock analysts had believed it was worth.

Horgan questioned at the time whether the sale was a bail out for a company that has donated hundreds of thousands of dollars to the B.C. Liberal Party. He raised that concern again in the legislature Thursday, asking, "Is it true that the $664,000 in political contributions from Teck to the B.C. Liberals [are] directly related to an $825 million boondoggle on the back of the ratepayers of B.C. Hydro?"

Lekstrom said in the house that he was surprised by the question. "As the minister responsible, I take my job extremely seriously, he said. "I can tell you that I act on behalf of British Columbians each and every day in a way that I'm proud of."

Horgan should have been embarrassed to ask the question about donations, Lekstrom told The Tyee in the hallway.

"I think the main issue for British Columbians is to have some certainty in the power that we receive," he told The Tyee. "The spot market is volatile . . . Definitely right now it's low, but it's been in the hundreds of dollars at times."

Kootenay West MLA Katrine Conroy also questioned the deal in the legislature. "Save taxpayers dollars and tell BC Hydro to call off this deal to your friends," she said.

It's up to the BCUC to determine whether the sale is in the public interest.