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BC Hydro-rate policies put off cost to the future

Political science professor John Calvert was a senior policy analyst in the Crown corporations secretariat during the 1990s.

Ben Nelms/The Globe and Mail

John Calvert has long been watching the challenges of BC Hydro, and shaking his head at what he sees.

As the B.C. government struggles to find the sweet spot in a looming hydro-rate increase between paying for power infrastructure and averting political harm, Prof. Calvert is calling for bold moves the government might be wary about pursuing.

In the 1990s, the public-policy professor at Simon Fraser University worked as a senior policy analyst in the Crown corporations secretariat of the era, which oversaw Crowns, including BC Hydro. The author of the 2007 book Liquid Gold – Energy Privatization in British Columbia has published several papers through the Canadian Centre for Policy Alternatives, largely looking at energy issues.

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Premier Christy Clark has ruled out a 26-per-cent Hydro rate increase proposed by a Hydro working group. What do you think the government will have to juggle to come up with a rate that will be less than 26 per cent, but notable enough to pay for needed infrastructure?

What they're essentially doing is putting off to the future the real cost of the policies they have been following for the last 12 years, and we will have to pay it one way or the other. What they're doing on the rates is simply changing the timing of when we will pay, and punting some of the cost into the future as a way of keeping them down and dealing with the short-term anger of ratepayers who are very upset about the very large increases that are going to be happening.

What do you think is the best approach on the rates issue?

The issue is complicated by the history. To get a better understanding of why we have got a problem today, we have got to look back at policies that were made over the last decade. The 2002 energy plan, the 2007 energy plan, the government's push to buy a lot of power that, arguably, we did not need from private power developers as a way of stimulating that component of the economy at, what I would argue, is a huge cost to ratepayers down the road. All of those factors and, more recently, the expenditures on major infrastructure to support the expansion of resources in mining and gas fracking and so on are all contributors to the fact we now face major financial issues and high rate increases. Partly we're just stuck with things, but we certainly can stop buying more overpriced private power – that would be a first thing. We need to review carefully how much we're spending on some of the infrastructure investments that Hydro is making, much of which is in the north dedicated essentially to a very small number of resource projects.

If you were energy minister, would you have put through a 26-per-cent rate hike?

There are ways in which I think that number could be reduced by looking at the extent to which we can avoid paying for some of this overpriced private power; reviewing the whole question of how much we should be spending on infrastructure dedicated to particular resource projects, and so on. It may be that one could lower it somewhat from that in a real way based on real savings. But my sense is that this is money we're going to need and a question of whether we do it more in the short term or long term.

Is a political agenda always going to be a prevailing force on rates regardless of which party governs B.C.?

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Obviously politics is always going to be a factor in terms of electricity rate-setting, but the longer-term issue is what makes sense both for the ratepayers and BC Hydro; what revenues do we need to meet obligations that we have. Arguably, we should ensure we are paying what is appropriate to ensure that we meet those objectives.

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About the Author
B.C. reporter

Ian Bailey is a Vancouver-based reporter for The Globe and Mail.  He covers politics and general news. Prior to arriving at The Globe and Mail, he reported from Toronto and St. John’s for The Canadian Press.  He has also covered British Columbia for CP, The National Post and The Province. More

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