Aug 12, 2011

BC Hydro Review


If it were true that BC Hydro could effectively plan and operate its system with 20% fewer workers, as the government panel has recently suggested in its Review of BC Hydro, one would have to assume that the BC Hydro Executive and Board, as well as the BC Utilities Commission, have all grossly failed in their management and oversight responsibilities. And one could further assume that the government would want to investigate how such a failure of responsibilities by its own appointees could have taken place.

But of course, there is no recommendation to investigate any failure of management and oversight responsibilities. And that is just as well, since there is no reason to believe that BC Hydro could effectively operate with 20% fewer workers. The anecdotal evidence laid out in the report (my favourite being the comparison to the number of engineers employed by the Ministry of Transportation, as if that had some relevance to a complicated electrical system) does not support the slashing of over 1000 full time jobs. Nor could BC Hydro easily reduce overtime costs, as the review panel called for, at least not  until Mother Nature and aging infrastructure agree not to wreak havoc at night and on weekends.

In any event, the real story in the review panel report, although gingerly and cautiously stated, is that it is government itself which bears major responsibility for driving up BC Hydro costs and rates. It was the government that directed BC Hydro to acquire all new sources of energy from Independent Power Producers (IPPs) except in the refurbishment of existing projects or developments like Site C on existing BC Hydro-controlled river systems. It was the government that legislated self-sufficiency requirements that have forced BC Hydro to buy more power than it needs to ensure reliable supply. It was the government that imposed debt/equity provisions that exaggerate the cost of BC Hydro financed investments. And it was this government that raised water rentals in a way that directly affected BC Hydro and its customers, but that would not impact private power producers , including Alcan and Teck.

In its report, the panel points out the problems with these government actions. It reports, for example, that BC Hydro expenditures on IPPs have increased 64% over the last 3 years, to $568 million in 2010 (more than BC Hydro’s entire labour force costs).  The panel concludes that BC Hydro needs to be able to acquire its energy needs more flexibly and cost-effectively than what government policy allows.

Sadly, only 4 of the over 50 recommendations in the government review panel report address government policy. And even those are very soft, unlike the recommended BC Hydro labour force and other management measures the government is least competent to judge and effect.

What the government review panel could and should have provided, and what we still need, are specific recommendations and actions to reverse the full range of policies that government has imposed on BC Hydro in recent years — the ones touched on in this report and the other major ones the panel failed to address.