May 27, 2010

Buying off industry


At first glance, the response of the forest sector and other large energy users to the province’s Clean Energy Act was surprising. Here is an Act that will force BC Hydro to waste literally billions of dollars to create an artificial demand for private power.  It will without question drive up BC Hydro’s rates far more than necessary.

The Act enshrines a costly requirement for self-sufficiency that isn’t needed to ensure a reliable supply. It exacerbates the costs of this by forcing BC Hydro to ignore B.C. resources, including the emission-free downstream power benefits under the Columbia River Treaty, that BC Hydro could in fact use if ever needed to meet domestic demand for power. It adds a mindless and even more expensive requirement for insurance, which there is no reasonable prospect of ever needing. Then, the coup de grace, it forces BC Hydro to buy private power for export, taking on risks and costs the private producers themselves refuse to assume — almost certainly ensuring the implicit subsidy of these export-driven private power developments.

The government has provided no analysis of the purported benefits, and it clearly has not identified or, one must assume, even considered the costs, environmental as well as economic.

The joint industry association representing large energy users in the province understands all this. They were publicly complaining about even less costly versions of this plan only a few months ago. So why is their response to the bill so muted?

It could be the timely announcement of power smart subsidies for large industrial energy users. BC Hydro is going to give large forest sector and other firms $80 million, in some cases paying the entire cost of the measures to reduce their electricity requirements. One can only speculate why industry isn’t paying these costs, or at least the majority of them,  itself since it will greatly benefit from whatever savings are realized.

But that is old stuff — industry expects BC Hydro to pay for its conservation of power. More likely is a little discussed or explained provision in the Clean Energy Act — the requirement for BC Hydro, and the power for Cabinet to set the terms, of long term domestic sales contracts. It seems that forest, mining and other large energy users will soon be able to lock in their power costs on terms Cabinet can decide.

That is how you deal with industry concerns about all of the provisions in the Clean Energy Act that will drive up rates. You give them money in the name of Power Smart, and more importantly give them an out from the rapidly escalating rates government is forcing on Hydro. It is all so tidy, especially with an impotent Commission and mostly disinterested press.