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Campbell River project highlights problems facing BC Hydro

B.C. Energy Minister Rich Coleman, then the province's Solicitor General, speaks in New Westminster in 2010.

Darryl Dyck/The Canadian Press/Darryl Dyck/The Canadian Press

As part of a plan to spruce up its aging network, BC Hydro on Friday filed for a permit to upgrade the John Hart Generating Station, a Campbell River site that began operating in 1947.

The $1.35-billion upgrade is part of $6-billion in proposed spending over the next three years, including provincewide installation of smart meters.

Once complete, the refurbished John Hart will generate 835 gigawatt hours a year of electricity – enough to supply about 80,000 homes, but an increase of less than 10 per cent above the 778 gigawatt hours it produces now and less than 2 per cent of BC Hydro's overall generation.

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The project highlights the headache for BC Hydro: Even big-ticket projects don't necessarily provide a big boost to electricity supply. And with demand projected to grow and the current government putting a lid on rates, some see that headache getting worse.

"We do need to spend billions upgrading infrastructure and building for growth," Richard Stout, executive director of the Association of Major Power Customers of B.C., said on Friday. "But there's a big question mark over exactly how many billions we need."

Labour and business groups were poised to ask those questions at a public hearing in June on BC Hydro's most recent rate application. But the province on May 24 ordered the B.C. Utilities Commission to adopt a three-year rate schedule, effectively cancelling the hearings. Groups that had filed to appear as intervenors were left fuming, saying they now have no way to question the utility about its expansion plans, accounting strategies and other issues raised by a government-commissioned review of BC Hydro last year.

In an opinion piece Friday, Energy Minister Rich Coleman said "the clock could no longer continue to tick" on the rate application and that "further process" would not be in the interest of British Columbians.

Mr. Coleman and Premier Christy Clark say the rate increase – 17 per cent over three years from 2012 to 2014, instead of a previously proposed 32-per-cent hike over the same period – will keep electricity rates affordable and allow BC Hydro to maintain and expand its system.

The John Hart project is expected to create about 400 jobs during five years of construction.

Other projects, meanwhile, have been put off to save money. BC Hydro's November, 2011, application for revenue requirements lists $655-million worth of deferred projects, ranging from seismic upgrades to beefing up the power system in downtown Vancouver.

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None of the projects has been deferred indefinitely or cancelled outright and each of the deferred projects is expected to proceed eventually, the application states. The projects were identified after the province ordered the utility to come up with cost savings last year.

Critics such as Mr. Stout were also looking to the hearings to provide a window on BC Hydro's use of deferral accounts. In a 2011 report, provincial Auditor-General John Doyle said the balance of such accounts – through which expenses can be deferred to future years – had climbed to $2.2-billion and was predicted to grow to $5-billion by 2017. The use of such accounts allows higher payments to the province.

If overused, Mr. Doyle said, "rate-regulated deferrals can mask the true cost of doing business, distort the financial condition of an enterprise and place undue burdens on future ratepayers."

Under the rate plan announced last week, the government says deferral and regulatory account balances would be reduced by more than $250-million by March 31, 2014.

Mr. Stout, whose group represents industrial users such as pulp mills and mining companies, says the government is sidestepping issues raised in last year's review, including a corporate culture of shooting for the "gold standard" that can contribute to higher costs.

"After you've got the legitimate costs that you have to actually spend … then you still have some costs which are going to drive rates up," Mr. Stout said. "If you then say, 'Oh no – there's an election coming, I'm going to hold rates down right now,' then all you're doing is deferring that money to the year after the election when we have to catch up big time.

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"And that's what every customer is worried about."

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