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BC Hydro's Salmon River Diversion seen here October 13, 2011.

John Lehmann/ The Globe and Mail

The B.C. government has cancelled public hearings into BC Hydro's rates one month before the review was set to begin, instead imposing its preferred fee structure to ensure a near-freeze of rates that would kick in on the eve of next spring's provincial election.

Energy Minister Rich Coleman said the public review by BC Hydro's regulator, the B.C. Utilities Commission, is not needed because the government has determined what the rates should be.

"Rather than put the public and ratepayers into another multimillion-dollar process, we felt it was necessary to just give them a special direction now."

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BC Hydro had initially proposed rate increases of almost 30 per cent over three years, prompting a government review of its operations last year. The government concluded that the Crown utility could cut costs and keep the rates down to 17 per cent over three years. BC Hydro then re-submitted its rate application based on those marching orders.

In the meantime, rates continued to rise on an interim basis, climbing by 15 per cent over the past two years. That means next year's rate increase on April 1 will be only 1.4 per cent, according to Mr. Coleman's new directive.

"The Premier made a commitment to keep rates down for families," Mr. Coleman told reporters in a telephone interview on Tuesday. "We found the savings, we cut the costs, we think we should be able to pass that on to the consumer and not have unnecessary rate increases."

The BCUC review would have given major stakeholders a chance to query the reasons for rate increases, and the impact those increases would have on the Crown's operations and its debt. The stakeholders include the B.C. Old Age Pensioners' Organization, the union representing BC Hydro workers, and the Commercial Energy Consumers Association of B.C.

John Horgan, the B.C. NDP energy critic, said cancelling the review allows the government to hide the implications of its years of intervention in BC Hydro operations. "It's a disguise to thwart a public hearing into the activities of BC Hydro," he told reporters in Victoria.

"They keep papering things over, avoiding the inevitable discussion about just what it is we are going to do going into the next decade to try to salvage something of BC Hydro after 10 years of disastrous rule by the B.C. Liberals," Mr. Horgan said. "If Mr. Coleman is so confident in his numbers, let the experts look at them."

Richard Stout, executive director of the Association of Major Power Customers of B.C., said he is concerned that the government is taking over the role of the independent regulator. "There is a huge loss of transparency. By the time we get to the bottom of some of these costs, it'll be too late," he said. "There should be a rate review, not just of industrial rates, but that's why you have the Utilities Commission, that's what they are supposed to do."

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The government is planning its own review of the rates paid by the largest customers. In a letter to the BCUC filed in April, Mr. Coleman's ministry stated that its ambitions for natural-gas exports in particular are changing the landscape for BC Hydro's industrial customers.

"In light of evolving provincial economic development, energy and environmental priorities … the government plans to undertake a broader review of industrial electricity policy," the letter from deputy minister Steve Carr states.

That public review will look at whether distinctions should be made between old and new Hydro customers – in terms of both rates and service levels. It will also decide whether the current "postage stamp" system, where Hydro rates are the same no matter where the service is delivered, should continue. And it will look at just how much power is needed to fuel all the anticipated new industrial development.

Mr. Coleman said Tuesday that review will be completed within a year. So while consumers have been granted certainty around rates, the biggest consumers of electricity in B.C., such as mines and forestry mills, have been put on notice that change is on the table.

The government is seeking to establish a liquefied-natural-gas industry in B.C. that would place substantial new demands on the province's electricity supply, from the shale-gas fields in the northeast to the proposed LNG plants on the west coast. Mr. Coleman said his government is still deciding how much of that power will have to come from burning natural gas, rather than from hydroelectricity.

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