BC Hydro Rates: End of an Era
Hydro rates are going up in B.C. – the only question is by how much.
His tone was contrite, bordering on apologetic, when BC Hydro president and CEO Dave Cobb announced
this March that hydro rates had to go up, effectively declaring an end to W.A.C. Bennett’s era of cheap electricity. Raising rates a cumulative 32 per cent over three years
was a “difficult decision,” one that would be “financially challenging” to some B.C. families and a burden the utility does not “take lightly,” he said in a public announcement. But the BC Hydro leader, then just 10 months on the job, said his hands were tied: B.C.’s dams, generating stations and transmission lines were built primarily between 1950 and 1980, and many of these assets are nearing the end of their projected life span.
The news was worse than Cobb let on in the press release: beyond the 32 per cent rate hike over three years, BC Hydro projected annual increases right to 2020 in its application with the B.C. Utilities Commission (BCUC), averaging about five per cent a year from 2016 to 2020.
Word of the dramatic increases evoked immediate public outrage. Cheap hydro power has been a birthright in B.C. for a generation – in an expensive place to live, turning the lights on is the one thing most of us could afford to take for granted. It has been industry’s great natural advantage, too, blessed as we are to live amid great rivers, abundant rain and mountainous topography.
Emerging details did not strengthen public support for the hikes: a $930-million plan to install nearly two million “smart meters” is barrelling ahead, exempt from the scrutiny of the BCUC, and the Ruskin Dam, singled out by Cobb as an example of aging infrastructure in dire need of investment, will only power about 33,000 homes when an estimated six-year, $850-million upgrade is complete.
The rate hike has quickly become a political liability too, prompting B.C. Minister of Energy and Mines Rich Coleman to order an investigation that is scheduled to be completed by the end of June. But regardless of how Coleman or the BCUC tinker with specifics, we’re all going to be paying significantly more for electricity over the next decade. And if there’s an upside, it is that conservation will soon be much more achievable, and with it, BC Hydro’s goal of meeting a lot of our projected future power needs by cutting back demand.
About 80 per cent of the power British Columbians consume is generated by large hydroelectric stations in the Columbia and Peace River basins, then distributed across B.C. via a spiderweb of transmission lines. The 15 per cent of our supply provided by independent power producers (IPPs) – including run-of-river and wind projects developed by private companies – accounts for most of the balance.
To keep this system up and running – and prepare to meet the 40 per cent increase in demand the corporation predicts we’ll see by 2020 – Hydro has estimated it needs $6 billion over the next three fiscal years. BC Hydro’s March 3 Revenue Requirements Application says the expenditures will support heritage-asset upgrades, four new transmission projects (including the Northwest Transmission Line), the smart-metering initiative and work toward building the proposed Site C dam. Included too is the maintenance of infrastructure – everything from nearly one million aging utility poles to kilometres of degraded underground and submarine cable. Significant expenditures will also be needed to fund BC Hydro’s Power Smart conservation and efficiency programs.
Implicit in BC Hydro’s communications around rate hikes is the idea that managers of the past have put off these expenditures, postponing the pain until today. To drive the point home, Cobb provided ratepayers with a graph in his March 1 announcement, demonstrating how capital expenditures roughly flatlined between 1985 and 2007. So are we paying the price for mismanagement of the system?
“I think there is some of that, but it was from the last decade, not the ’90s,” says Mark Jaccard, SFU professor of sustainable energy and former BCUC chair. He notes that “saying not enough was done in the past is a universal strategy in the utility world,” used to justify rate increases. Not only has there been a “lull in investment” in utilities across most industrialized countries over the last 20 years, says Jaccard, but the cracks are appearing at a time when virtually everything costs much more: “We’re more stringent with regulatory aspects, social impacts and compensating people, and total costs to the projects are going to be higher.”
Experts across a broad political spectrum agree that rates must go up to reflect higher costs and upgrades to aging facilities, but a growing chorus of critics say B.C. ratepayers are being forced to pay more than necessary. SFU economist and public policy professor Marvin Shaffer, for one, says the province’s habit of interfering with the efficient operation of BC Hydro is costing all of us money.
“You cannot understand this 10-per-cent-per-year increase, and the forecasted increases over 10 years, without understanding the really extraordinary restrictions that the government has placed on BC Hydro,” he says. Shaffer cites a series of government orders that force the utility to buy more electricity than it needs – mostly to meet legislated “self-sufficiency” requirements – at prices much higher than market value.
Shaffer says government strictures mean that BC Hydro must meet these standards without depending on some obvious alternatives to its own hydroelectricity supply. It cannot rely on the natural-gas-powered Burrard Generating Station to help restore reservoir levels in very dry years, nor can it count on any of the power the province is entitled to each year under the Columbia River Treaty.
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