Feb 20, 2009

Electricity Policy in BC: “Buy High – Sell Low”


It was only a one-liner in the budget — the government plans to spend $10 million to advance the $400 million Northwest transmission line project along Highway 37, a project it says it will develop in partnership with the private sector. But this not-so-little initiative raises major questions about electricity policy (and sustainable economic development strategies) in beautiful BC.

The nature of the partnership with the private sector is unclear. I suspect it means the mines and other firms who stand to benefit from the transmission line will put up some of the capital costs, with the government subsidizing the rest. No doubt Partnerships BC will develop innovative financing schemes to obfuscate the long term costs to taxpayers or BC Hydro ratepayers (or both), but it is almost certainly the case those costs will be significant.

If it was just the one-time subsidy of the line, it wouldn’t be so bad. The real problem is the electricity sales the new line will encourage. Mines are electric-intensive — some metal mines consume as much electricity in one year as BC Hydro hopes to achieve each year in conservation with its multi-million dollar Power Smart programs. And under the government’s energy policy, BC Hydro sells electricity to these new mines at less than half the cost of new supply. The revenue loss to BC Hydro from each new mine (subsidized by you, me and everyone else who pays a Hydro bill) is in the tens of millions of dollars per year.

Now it’s one thing (though still problematic) to subsidize existing major industrial consumers of electricity with the government’s buy high – sell low electricity policy. But why would you subsidize new transmission lines so you can attract even more electric-intensive firms to subsidize. I’m not going to talk yet again about my tequila habits, but one can easily see how this can drive one to drink.

The government, of course, justifies all this by the economic development that the subsidized line, and even more heavily subsidized electricity, will generate. But the issue here is whether subsidizing energy use is an environmentally attractive, economically efficient or sustainable strategy. The short answer is that it isn’t. Better use of energy, not subsidizing more use of it, is a far better way to go.

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