Customers on the hook for $16B after Liberals' costly BC Hydro deals: report
British Columbia's energy minister lambasted the province's former government Thursday over a long-criticized Liberal energy strategy the NDP says has left hydro customers on the hook for billions.
"The previous government's choices related to BC Hydro and their constant interference with the BCUC resulted in long-term commitments of over $50 billion to private power producers," Michelle Mungall told reporters, adding that "BC Hydro bought too much energy, the wrong type of energy and paid too much for it."
Mungall's remarks come just a day after the release of a damning report that claims BC Hydro ratepayers will pay more than $16 billion over 20 years because the province's previous government pressured the utility to sign long-term contracts with independent power producers.
Championed by then-premier Gordon Campbell, the privately-owner green energy top-ups have cost each household an extra $4,000 over two decades or $200 a year, according to the report.
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Mungall commissioned the independent report and asked consultant Ken Davidson to examine factors that influenced BC Hydro's purchases from IPPs.
The NDP government released Davidson's findings on Wednesday evening, claiming his report details how the BC Liberals had "manufactured an urgent need for power" and stopped BC Hydro from producing its own – a process that led to the utility having to buy from private companies and, ultimately, raised prices.
"The BC Liberals' IPP scheme was a sweetheart deal for some, but not for British Columbians," Mungall said.
"B.C. didn't benefit. BC Hydro customers didn't benefit. A small number of well-placed independent power producers benefited, and customers were stuck with a 40-year payment plan."
Recommendations could lead to smaller rate increase
Despite denouncing the Liberals for actions the government said led to bigger hydro bills for British Columbians, the NDP itself is planning to apply for a rate hike this year.
By adopting some of his recommendations, Mungall said the government will be able to apply for a 1.8-per-cent hydro rate increase in April as opposed to the 2.6 per cent planned under the previous government.
"We are able to do this because we accepted a recommendation from the review into BC Hydro to stop using the rate-smoothing regulatory account and to write off its balance to zero in 2018-19," the minister said.
"This will relieve ratepayers of the burden of paying off $ 1.1 billion in deferred costs over the next five years."
The proposed hike comes after a three-per-cent increase in April 2018 after the B.C. Utilities Commission rejected an application to freeze rates for a year.
According to Mungall, other cost-saving measures include "managing future energy purchases from private producers," as well as immediately ending BC Hydro's Standing Offer Program.
The SOP was meant to encourage new small, clean and renewable energy projects in B.C. was billed as a way to "streamline the process for selling electricity to BC Hydro."
BC Liberals fire back
The Opposition was quick to point the finger back at the NDP, saying the province would have a "significant" power shortage with the IPPs helping supply electricity.
The NDP has also approved IPPs, Liberal hydro critic Greg Kyllo said, adding that Wednesday's report is part of a political tactic.
“After introducing a throne speech so devoid of ideas that NDP members had nothing to say, the government is now trying to distract from the fact they are out of gas," he said.
“The NDP promised to freeze hydro rates and have failed to do so. Now they’re looking to blame someone. The never-ending NDP blame game could cost up to 5,000 jobs, many of them First Nations workers.”
IIPs part of ongoing controversy
It isn't the first time, however, the Liberals have been criticized for these public-private energy partnerships.
"It's unfair and it's going to bankrupt the Crown utility," warned Melissa Davis of Citizens for Public Power when the so-called sweetheart deals were announced in 2009.
Two years later, observers were already sounding the alarm, saying BC Hydro was paying IPPs 10 times the cost of making its own power.
Western Canada Wilderness Committee's Gwen Barlee said at the time the money was being used "for energy we don't need and we sell at a loss out of the border."
SFU political scientist Majorie Griffin gave another prediction in 2012, saying "at some point, hydro has to pay for these very costly initiatives the government has imposed upon it."
Advocacy group Clean Energy BC, on the other hand, pointed out that those projects helped B.C. become a leader in green power, criticizing Davidson's calculations for using spot prices instead of long-term fixes price arrangements.
"In his report, there is a fundamental error in using an inaccurate and overly simplified proxy for the market price of electricity," the group wrote. "No party that builds new energy projects – BC Independent Power Producers (IPPs), BC Hydro, or IPPs or utilities anywhere – uses a spot price like Mid-C. Projects are based on long-term fixed price arrangements."
Davidson's report marks the end of Phase 1 of a comprehensive review of BC Hydro the government launched last summer.
While acknowledging the importance of developing green energy, Mungall said the current government is pledging to prioritize the bottom line and the impact to taxpayers.
"I would say there are opportunities for wind and solar in British Columbia, but what we want to make sure is that it's also economical," she said.
Below is the full 90-page BC Hydro report. Viewing this on our mobile beta site? Tap here for a compatible version.