Feb 4, 2012

After Self-Sufficiency — Will the Public or Private Interests be Served?


It was, I suppose, too much to expect the government to acknowledge that the self-sufficiency and insurance requirements it had imposed on BC Hydro was a serious mistake. So it was no surprise that they simply stated in their announcement paving the way for the powering of the proposed new LNG plants that the Campbell-era policies were being jettisoned because conditions had changed.

Of course, the only condition that had changed is that it was increasingly obvious to everyone except the IPP lobby (and the Globe’s Justine Hunter) that that  these government-imposed requirements were unnecessarily costly, and without question a major contributor to the politically intolerable upward pressure on BC Hydro rates.

The fundamental problem with self-sufficiency and insurance is that it was forcing BC Hydro to buy new sources of electricity supply at prices well in excess of their market value — electricity that BC Hydro did not in fact need to ensure a reliable, environmentally responsible, cost-effective supply. It was a gift to the nascent private IPP industry, and an extraordinarily lucrative one at that.

The question now, however, is what comes next. Will more responsible policies be put in place? Or will the gifting to private interests at the expense of the general public interest continue in a different form. The worry is that the gifting will continue, this time under the cover of a jobs strategy.

The government recognizes that BC Hydro’s standard industrial rates will not recover the cost of supplying the new LNG plants’ demands for power. And it has indicated that the LNG plants will have to pay higher rates. The issue is how much higher. Will the new plants be required to pay for the costs they impose on BC Hydro or will substantial subsidies remain.

A simple policy declaration could clarify the government’s intention. When it amends the Clean Energy Act to eliminate the self-sufficiency and insurance provisions, the government could  require that all new major users of power, including not only the LNG plants but also the new electric-intensive mines proposed for B.C., will have to pay all of the costs that BC Hydro has to incur to meet their requirements. The government could ensure that BC Hydro and its customers will not have to subsidize any of these new developments.

There are creative ways industry could minimize the costs of the power it needs. In the case of the LNG plants, they could combine the development of their own gas-fired generating capacity with purchases of non-firm electricity supply that BC Hydro and others often have available for sale at relatively low cost. The gas-fired capacity would ensure the plants have a reliable source of supply. And the purchases of the non-firm supply when available would reduce the need to burn gas — minimizing the LNG plants’ impact on GHG emissions in the province. Or, they could combine their own gas-fired capacitiy with new wind power development, using the wind power to displace gas whenever available.

What responsible energy policy would not allow, however, is the option of new industry forcing BC Hydro to acquire the electricity they need  and not paying the full cost –for example, forcing BC Hydro to buy and back up wind power at its own expense. The gifting to private interests at the expense of the general public interest would not be allowed to continue.





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