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May 24, 2012
Water behind the dam is as good as money in the bank and this spring, BC Hydro's
dams are full. This matters because it's our water, our dams, our power
corporation and eventually, when the water generates electricity and the
electricity produces revenue, our money.
This surplus water would be good news if our government hadn't signed contracts
to buy electricity at a high price from independent power producers (IPP).
B.C. is not the only place blessed with an abundance of water and snow this
year. All the Pacific Northwest has a surplus. B.C. has 130 per cent of the
usual supply and Oregon has a spectacular 172 per cent of normal, reports Scott
Simpson in the Vancouver Sun. Oregon has so much surplus electricity that they
are flooding the market with bargain-priced electricity.
This is the good news part of the story. BC Hydro is buying electricity from
Oregon at the bargain price of $20 per megawatt of while keeping our water in
reserve.
The bad news is that BC Hydro isn't buying all the cheap electricity we could
use because of contractual obligations to buy it at a higher rate from IPPs.
That's right, folks, our power company is forced to buy electricity for more
than the market price. For comparison, imagine that gasoline was selling at
$1.20 per litre but you had to buy it at $3.60. That's the difference we are now
paying for Oregon's electricity compared to IPP power.
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For ideological reasons, the B.C. Liberals invited IPPs to generate power
and paid them a premium to do so. It's not the fault of independent
producers; they have cash flow problems. "IPPs require minimum [payments] in
their contracts in order that they can show the bank a minimum revenue
stream - in order that they can get financing. So Hydro is more or less
forced to accept minimum pay provisions on those contracts" said Richard
Stout, executive director of the Association of Major Power Customers of
B.C.
BC Hydro generates power for less than private power companies for a variety
of reasons. Public corporations can borrow money for less and that lowers
the cost of building power stations. Public corporations can invest in
massive projects in which the cost recovery will take decades whereas
private ones require a quick return at a higher rate.
In their folly, the B.C. Liberals forced BC Hydro into contracts with 75
IPPs, large and small, including giants such as Rio Tinto Alcan and Teck
Resources. As a result, in winter, when the water is not as plentiful and
the market price is up, we have to buy from IPPs at five times the current
market price - - imagine paying $6.00 per litre for gas!
Still worse, BC Hydro may have to spill some of its own water. They won't
know for sure until the snow melts and the dams fill but it's possible that
for safety reasons, water may have to be spilled over dams: water that could
generate cheap electricity.
There is nothing inherently wrong with small power operators producing
electricity but like any business, they have to accept risk. If they can
sell electricity to BC Hydro at market value without contractual obligations
that fix prices artificially high, then more power to them. I may even want
to put solar panels on my roof and sell the surplus power.
The B.C. Liberals should have let BC Hydro do what they do best: build and
operate generating plants that meet our needs and environmental standards
and sell electricity back to us at the lowest price possible.
David Charbonneau is the owner of Trio Technical.
He can be reached at
dcharbonneau13@shaw.ca
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