Canada

Report indicates BC Hydro overpaid for electricity obtained through purchase agreements

A report says BC Hydro’s power purchases from independent power producers, starting in 2002, were flawed, with the utility buying too much energy and energy with the wrong profile and paying too much for the energy it bought.
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Report indicates BC Hydro overpaid for electricity obtained through purchase agreements

A report says BC Hydro’s power purchases from independent power producers, starting in 2002, were flawed, with the utility buying too much energy and energy with the wrong profile and paying too much for the energy it bought.

Zapped: A Review of BC Hydro’s Purchase of Power from Independent Power Producers conducted for the Minister of Energy, Mines and Petroleum Resources was prepared by consultant Ken Davidson. BC Hydro issued a statement saying, “We accept the findings in the report.” And, “We remain focused on keeping our rates affordable for our customers, and will continue to work with government to find opportunities to lower our costs.”

However, the author acknowledges BC Hydro undertook these actions at the direction of government, starting with “a move to green/clean power and energy self-sufficiency… expressed in the 2002 Energy Plan” and “further clarified with the 2007 Energy Plan-Vision for Clean Energy Leadership and the 2010 Clean Energy Act.”

The government directed BC Hydro to purchase 8,500 GWh of firm energy it did not need, and the utility acquired 8,075 GWh of firm energy, which cost ratepayers an estimated $16.2 billion over 20 years, “the estimated period during which BC Hydro will likely not need the energy Government directed it to buy.” The report indicates an estimated $808 million per year impact of this surplus energy to BC Hydro ratepayers, or $4,000 per residential ratepayer over 20 years.

Over the balance of the term of the response electricity purchase agreements, BC Hydro will lose an additional $6.8 billion selling energy to ratepayers for less than BC Hydro is buying it from IPPs.

The report offers four recommendations for addressing these financial issues when the purchase agreements expire. These involve:

A renewal strategy that will moderate the future financial impacts of the electricity purchase agreements, with only one offer for renewal on projects that generate intermittent energy, at the real market value of the energy generated

Reversal of the “self-sufficiency” mandate, which interfered with the energy planning process and created the apparent need for additional IPP energy

Improving the transparency around future non-commercial transactions government may direct BC Hydro to undertake

Returning to the British Columbia Utilities Commission its full historic oversight mandate to protect the interests of ratepayers

Many hydro projects were included in the electricity purchase agreements over the years, including: Lorenzetta Creek, Silversmith Power & Light, Serpentine Creek Hydro, Clemina Creek Hydro, Hunter Creek Run-of-River Hydroelectric Project, Winchie Creek Hydro, Wedgemount Creek IPP, McIntosh Creek Waterpower Project, Haa-ak-suuk Creek Hydro, Squamish Power Project, McLymont Creek, Volcano Creek, East Twin Creek Hydro, South Cranberry Creek — R, Waneta Expansion, Box Canyon, Castle Creek, Bremner — Trio, Long Lake Hydro, Forrest Kerr Hydroelectric, Culliton Creek, Skookum Power, Boulder Creek, Big Silver — Shovel Creek, Dasque — Middle, Jamie Creek, Kokish River, Northwest Stave River, Narrows Inlet, Tretheway Creek, Upper Lillooet River, Jimmie Creek, Lower Bear Hydro, Upper Bear Hydro, Canoe Creek Hydro, Fitzsimmons Creek, Cypress Creek, Kemano, Barr Creek, Bone Creek Hydro, Brilliant Expansion 2, Eldorado Reservoir, East Toba and Montrose, Kwoiek Creek Hydroelectric, Kwalsa Energy, Lower Clowhom, Raging River 2, Cranberry Creek Power, Sakwi Creek Run of River, Tyson Creek Hydro, Upper Clowhom, Upper Stave Energy, Ashlu Creek Water Power, Brilliant Expansion 1, China Creek Small Hydroelectric, South Cranberry Creek, Zeballos Lake, Upper Mamquam Hydro, Rutherford Creek Hydro, Pingston Creek, Brandywine Creek Small Hydro, Furry Creek, Hauer Creek, Marion 3 Creek, Eagle Lake C2 Micro Hydro, South Sutton Creek, Mears Creek, McNair Creek Hydro, Hystad Creek Hydro, Miller Creek Power, Arrow Lakes Hydro, Robson Valley, Mamquam Hydro, Walden North and Coats IPP.