B.C.’s north is in a frenzy of planning. There are applications for port expansions, coal and mineral mines, oil terminals, pipelines, synthetic fuel plants, liquefied natural gas facilities and hundreds of new drill rigs for shale gas extraction. Pinned on a map, the proposals create a porcupine of industrial intentions.
While the North is poised for unprecedented growth, B.C. Hydro is at pivotal moment in its history. Key energy decisions remain undecided by the policy makers in Victoria who will shape how big, how fast and how green that development will be.
Competing interests are demanding lower rates, more flexible service, a tougher watchdog, a leaner corporation.
Since 1962, the Crown utility has played a fundamental role in opening up the province to industrial development. What happens next in the North will determine what role B.C. Hydro plays in the province’s in the future.
The electricity grid mostly runs one way: The North supplies 35 per cent of all of B.C.’s hydro-electric power, but half of that is consumed in the South.
For all the North’s new, energy-hungry endeavours – which could easily double B.C. Hydro’s current industrial demand if only a third of them are built – the power isn’t set to return.
Sandwiched between demands for huge dividends to the provincial government and outrage from its ratepayers over threatened rate hikes, B.C. Hydro is prepared to walk away from its new customers. If these developments are built, many will have to provide their own power by burning natural gas.
This runs counter to the government’s legislated targets to reduce greenhouse gas emissions.
But that core agenda of Gordon Campbell’s B.C. Liberal government no longer resonates with the Liberals under Premier Christy Clark. The clean-energy mantra has been replaced by one that puts investment first, and fiscal restraint a close second.
But B.C. Hydro is poised to pass along hefty rate increases – as much as 26 per cent – to its 1.9 million industrial, commercial and residential customers.
That figure, contained in a leaked draft document, has become a lightning rod for customer complaints about bloated Hydro salaries, the $1-billion smart-meter program, contracts with private power producers, and more. In that framework, Hydro can use the need to contain spending as insulation against demands to offer new supplies of clean, renewable power.
“The challenge is that we find ourselves, in 2013, with limited options for taking that pressure off,” Energy Minister Bill Bennett said in an interview. Months ago he was vowing to “get a grip” on Hydro’s gold-plated operations. Now, he warns it is a long-term turnaround project. “It’s a large Crown, under repair.”
Residential customers – who still enjoy some of the lowest rates in North America – would direct their anger at the B.C. Liberal government that promised to keep rates low, but the next election is more than three years away. In 2006 British Columbia had the second lowest rates of 22 jurisdictions and in 2012 B.C. was fourth lowest.
Bigger customers have other leverage: Investment decisions may hinge on what Hydro will or will not offer. And those already on the grid warn the threatened rate hikes would lead to job losses.
Catalyst Paper is Hydro’s largest industrial customer, consuming 5 per cent of the entire provincial electricity load. The company sent every MLA a warning this summer: The company contributes $2-billion annually to the provincial economy across 25 communities – and that is at risk in the face of double-digit rate hikes.
“Energy is a big cost item for us,” said Lyn Brown, Catalyst’s vice-president for marketing. It is the company’s second-largest expense, after fibre. Having just climbed out of creditor protection through a major restructuring last year, “any rate increases could wipe all that heavy lifting away,” she said.
Part of the difficulty in tackling rate hikes is that the government has been circumventing the utility’s regulator to suppress rates in advance of the election.
By “smoothing” rates, B.C. Hydro has racked up billions of dollars in “deferral accounts” which it now must start to repay.
And, the aging infrastructure needs to be maintained. The Ruskin dam in the Fraser Valley is more than 80 years old and increasingly unreliable. B.C. Hydro is now spending more than $700-million to reduce earthquake risk and upgrade the powerhouse. It’s just one part of the $2-billion it is spending each year to maintain the grid.
Given those limitations, letting industry in the North use cheap, abundant natural gas to satisfy new energy needs offers a tempting relief valve.
The Clean Energy Association of B.C. estimates that, conservatively, the potential load growth in the North could add up to 35,000 gigawatt hours annually by the year 2026. Last year, B.C. Hydro’s load for the entire province was about 51,000 gigawatt hours.
Paul Kariya, executive director for association, believes that B.C. could meet the pending demands in the North with clean energy. But he worries that the government is too preoccupied to consider the long-term planning that is required.