This morning the Supreme Court dismissed the leave the appeal for the Prophet River case, bringing the legal proceedings over this phase of the Site C proceedings to a close.

Claire Allen and George Hoberg
May 19, 2017

This table provides a resource to help understand the complex litigation against the Site C dam. Thus far, lawsuits challenging the approval decisions by the Government of British Columbia and the Government of Canada have all been dismissed. Plaintiffs in two of these cases, on First Nations treaty rights and consultation, have applied for leave to appeal to the Supreme Court of Canada – a decision on whether to hear the appeal is pending. The only case decided for the plaintiff was when BC Hydro applied to have an injunction enforced to remove protesters from disrupting construction.

Courtesy of BC Hydro

George Hoberg
May 9, 2014

Yesterday, the Joint Review Panel for the Site C dam project on the Peace River in northern British Columbia released its environmental assessment report. The panel did not recommend for or against the project, but instead chose to highlight some significant benefits from the project but also that the government has not convincingly made the case that the project is needed in the time frame proposed. As a result, the B.C. government (and the feds) can still choose to proceed with the project but doing so legitimately, given the concerns of the panel, just got much harder.

The panel’s report is striking both in terms of the approach it took and what it implies for the politics and governance of BC electricity policy. In sharp contrast to the Northern Gateway pipeline Joint Review Panel, whose report read more like a rubber stamp of the proponent’s own arguments, the Site C panel took a hard look at BC Hydro’s case for the dam. It challenged a number of the proponent’s findings, and was especially critical of BC Hydro’s justification for the project costs and superiority to alternatives (most notably, conservation and geothermal energy). The summary finding is that “The Panel concludes that the Proponent has not fully demonstrated the need for the project on the timetable set forth” (p. 306). It even had the temerity to recommend that if the governments “are inclined to proceed, they may wish to consider” having the BC Utilities Commission review several aspects of the case for the project.

Does B.C. Electricity Policy Have a Crisis of Credibility?

It seems that every time a major component of B.C. electricity policy is exposed to formal, independent review, it runs into serious problems. The last time B.C. electricity policy got a formal independent review was the BC Utilities Commission review of the BC Hydro 2008 Long Term Acquisition Plan. The BCUC was strongly critical of BC Hydro’s rationale for its plan, and rejected it. The Campbell government responded by stripping the power from BCUC to review major plans and projects, and the Clark government has continued those exemptions. The Clark government has given BC Hydro a rough ride with internal government reviews as well.

The Site C panel report was the first formal independent review since the 2008 shift in governance, and it leaves BC Hydro in quite a pickle. The panel report undercuts the rationale for moving ahead with the major dam, and it is hard to see how the government can move forward with legitimacy without involving the BCUC, something it has already said it refuses to do. BC Energy Minister Bill Bennett quickly dismissed the notion that the government would involve BCUC.

The proposed dam poses a challenging dilemma. As the BC Hydro report makes clear, and the panel report strengthens, the project has concentrated local impacts on an area quite precious to local residents, including First Nations. Yet it would also create a new source of low carbon energy to feed growing demand in the province. It has the added benefit of being able to store electricity to balance intermittent clean energy sources like wind. As a result, it would help foster the transition to a clean energy economy in BC and neighboring jurisdictions.

The challenge is that for the government to proceed legitimately with such a high impact project, there should be, at a minimum, a strong justification for the project’s need. The Site C Joint Review Panel report makes that much harder for the government. And if it chooses not to pursue Site C, the cornerstone of the province’s strategy to meet future electricity needs, BC Hydro needs to go back to the drawing board on its Integrated Resource Plan.

Several Other Notes

As a climate hawk I was dismayed to see the panel, by accepting that LNG compression will be done by burning natural gas, buy into a scenario for future LNG that will quickly blow through BC’s legislative greenhouse gas limits (page 304).

I’m very pleased to see the panel take such a demanding approach to the government’s rationale for the project. That’s why we have environmental assessment requirements. But I was a quite surprised at panel’s conclusions on costs. “The Panel cannot conclude on the likely accuracy of Project cost estimates because it does not have the information, time, or resources. This affects all further calculations of unit costs, revenue requirements, and rates” (p. 280). It’s one thing for a panel to carefully scrutinize a proponent’s analysis and find it inadequate. It seems much less credible, and justified, to conclude a proponent’s analysis is not credible because the panel didn’t have the capacity to scrutinize it. The panel seems content to tell the government it really needs to get the help of BC Utilities Commission.

Finally, environmentalists are fond of pointing out how environmental assessment processes are mere rubber stamps and virtually no projects get rejected. Certainly the Northern Gateway experience feeds into that pattern. But with this Site C panel report, there are now some quite striking cases accumulating of EA panels being strongly critical of projects (see Prosperity Mine for example).

Next week, after ten years as Premier of British Columbia, Gordon Campbell will hand power over to Christy Clark. Natural resource policy has been one of the most dynamic areas of policy development during the Campbell era. This blog provides an overview of the most significant policy changes during Campbell’s tenure in the areas of energy, climate and forest policy. (Other aspects of the environment portfolio are not addressed.) This overview is not intended as an evaluation of the merits of the changes, but rather a ranking of the ten most consequential developments. I also provide a list of the five most significant shortcomings in policy development during the Campbell decade.

There are some deep contradictions in the list. That is by design. Climate action and aboriginal reconciliation top both the lists of most significant changes and greatest failures. In my view,  this is an apt characterization of the immense challenges of governing natural resource policy in BC during the Campbell era.

The Top Ten Natural Resource Policy Changes under Gordon Campbell

1. Climate Action: The Campbell government legislated ambitious greenhouse gas reduction targets (33% reduction by 2020 over 2007 levels) and enacted ambitious policy instruments (the carbon tax, cap and trade, and government carbon neutrality) to pursue those targets. These initiatives made the province a North American leader in climate action and won Campbell kudos from the environmental community.
2. The New Relationship with First Nations: Gordon Campbell entered government as a confrontational opponent of aboriginal rights, but by 2005 underwent an extraordinary conversion into a champion of Crown-aboriginal reconciliation. The effort to legislate the New Relationship crashed spectacularly into the political abyss between the resistance of Cabinet and the aspirations of the province’s First Nations. But real progress in power sharing has been made in specific reconciliation agreements between the BC government and First Nations along BC’s coast.
3. The 2002 Energy Plan required that all new sources of electricity generation (other than Site C and upgrades to existing BC Hydro facilities) be developed by the private sector. Independent power producers and run of river power projects ignited outrage by the BC environmental community and public sector unions, and provoked a divisive split among environmental groups.
4. The 2010 Clean Energy Act shifted the objective of electricity supply from provincial self-sufficiency to being a net exporter of power. It also strengthened BC Hydro’s conservation mandate, requiring it to meet two-thirds of new demand through conservation measures. It also punished the BC Utilities Commission for having the temerity to reject BC Hydro’s 2008 long term plan by removing many of the regulator’s powers of review of BC Hydro activities.
5. The Forestry Revitalization Plan of 2003 introduced market-based stumpage pricing, reallocated 20% of the industry’s tenure, and removed a number of levers by which government controlled industry transactions within the sector. Among other things, this economic deregulation unleashed a wave of corporate consolidations that reshaped the sector.
6. The Great Reorganization of 2010 separated the policy and operational functions of five ministries, and consolidated operations into a new Ministry of Natural Resource Operations. Among many other consequences, the reorganization effectively dismantled the BC Forest Service that has been in continual operation since 1912.
7. The 2007 Energy Plan effectively banned new coal-fired power plants, set a bold target requiring BC Hydro to meet half of new demand through conservation, and shifted the objective of electricity policy from cost-effective reliability to provincial self sufficiency with reserves.
8. The Great Bear Rainforest agreement of 2006 brought an end to a decade long land-use dispute. The decision’s increase in protected areas and more eco-friendly logging standards led Greenpeace and ForestEthics to declare victory in their campaign to save the precious wilderness area.
9. Downsizing Natural Resource Agencies: The “free enterprise” element of the Campbell government has been keen to reduce the role of government in the resource sector, and it has certainly succeeded in terms of the decreased capacity of provincial resource agencies. The budgets of all the major resource agencies in 2011 were 15% below what they were when Campbell took office in 2001, and 37% below their 2006 peak (constant 2011 dollars, see Figure 1 below).
10. Bill 30 – in response to the Squamish-Lillooet Regional District decision not to approve the Ashlu Creek run-of-the-river power project, the provincial government passed legislation in 2006 stripping local and regional governments of the power to use zoning processes to block new energy projects.

The Top Five Natural Resource Policy Failures under Gordon Campbell

1. Climate Inaction: While promoting the climate action file with Schwarzeneggerian fervour, Campbell more quietly fostered the development of the province’s carbon-loaded natural gas resources. As a result, the real Campbell legacy on climate is one of hypocrisy, revealing the enormous challenges of the climate file even in jurisdictions blessed with abundant hydroelectric resources.
2. Dismal Progress in Treaty Settlement: Despite Campbell’s 2005 conversion to champion of aboriginal reconciliation, accomplishments in reaching long term settlement with First Nations have been sparse.  When Campbell came into office, no treaties had yet been proclaimed under the treaty process that began in 1991 (the Nisga’a agreement took place outside of the official treaty process). As of March 2011, only one treaty has been finalized through the process (Tsawwassen First Nation). There are seven agreements-in-principle but they have yet to be proclaimed, and an additional 41 still being negotiated.
3. The Softwood Lumber Dispute was a vexing challenge when the Campbell government entered office in 2001. Despite massive changes in forest policy designed to address American concerns, tens of millions of dollars in legal fees to Washington, DC law firms, and a major new bi-national agreement, the softwood lumber dispute remains a vexing challenge as Campbell leaves office. In perspective, though, softwood lumber has been a challenging issue in US-Canada trade since before Confederation.
4. Forest sector employment has taken a beating during Campbell’s tenure. Despite major policy changes designed to put the sector on competitive footing, forest sector employment has decreased 38% from 89,000 jobs in 2001 to 55,000 jobs in 2010 (See Figure 2 below). The change has been wrenching for forest-dependent communities throughout the province.
5. The Working Forest has been a spectacular failure. Despite being the number one priority in their 2001 “New Era” forestry agenda, the proposal to promote commercial investment in forestry by increasing the certainty of a working forest zone crashed and burned near the end of Campbell’s first term. Struggling for policy initiatives to address the enduring crisis in the sector, the idea was reborn as the Commercial Forestry Reserve as a result of the Working Forestry Roundtable in 2009. But it has gone nowhere since being rejuvenated. Meanwhile, the Campbell government never seriously considered or proposed more serious structural reform of the province’s anachronistic system of forest tenures.

I would like to thank Stephanie Taylor for research and writing help and preparation of Resource Ministry Budget Figures, and David M. Pérez for help with employment figures.

Electricity pricing in BC is a concept that is little understood, yet frequently the subject of grumbling by ratepayers, especially when rates are going up. Recent proposals by BC Hydro to raise rates by 50% over the next five years have been criticized by media and energy experts.  In our last post on electricity pricing, we outlined current and alternative rate-setting mechanisms. We also introduced readers to the concept of conservation pricing. This post delves further into conservation pricing, exploring both its benefits and its drawbacks.

To recap, conservation pricing involves increasing the price of electricity to all or some ratepayers in order to give them an incentive to reduce their electricity consumption. Conservation pricing can be achieved in numerous ways, though increasing block and time-of-use (TOU) pricing are the most common. Increasing block pricing involves charging higher per kWh prices for additional consumption above a pre-determined level. With TOU pricing, ratepayers pay more depending on how much demand there is for electricity at that time. This technique often requires the installation of smart meters, in order to accurately track demand in real-time.

BC has already implemented increased block pricing (which it calls its ‘conservation rate’). BC Hydro has announced plans to install smart meters in all homes in the next few years, but has not yet proposed introducing time-of-use pricing. However, in order to reach BC’s stated goal of achieving 66 percent of BC Hydro’s electricity requirements through conservation by 2020, prices will probably need to be raised further.

[September 26 update: In response to suggestions by BC Hydro that time of use pricing is an effective conservation tool, Energy Minister Rich Coleman emphatically denied the government was considering it. (Globe and Mail)]

One of the complaints most frequently voiced by critics of conservation pricing in BC is that it unduly harms low-income customers. However, this criticism need not mean that conservation pricing is unworkable in BC. It is possible to address this concern while still maintaining the benefits of conservation pricing. Pricing can be used to encourage lower electricity consumption without harming low-income customers.

In economic terms, conservation pricing amounts to a tax on electricity consumption. As with consumption taxes in general, there are concerns that conservation pricing could be regressive (International Energy Agency, 2010, p. 68); that is, the proportion of income dedicated to paying the higher rate is greater for low-income consumers than for high-income consumers. Furthermore, evidence shows that those with higher incomes consume more electricity than low-income consumers (Pineau, 2008, p. 384), meaning that the poor would pay a greater proportion of their income to reduce usage of a good whose overconsumption is due primarily to higher income groups.

Governments usually mitigate the impact of consumption taxes on low-income groups through the use of rebates, as has been the case with the Goods and Service Tax and Provincial Sales Tax (and now the Harmonized Sales Tax) in BC. However, the best comparison to conservation pricing would be BC’s carbon tax. Both are consumption taxes designed to achieve conservation-minded goals by making certain environmentally-damaging behaviours more expensive, and thus less attractive. BC tackled the regressive nature of carbon taxation by mandating reductions to the lowest two income tax brackets as well as introducing a refundable Low Income Climate Action Tax Credit. In a recent report, the Canadian Centre for Policy Alternatives and Sierra Club argue that, of the measures introduced to assist low-income British Columbians, the Low Income Climate Action Tax Credit is “the most beneficial expenditure in terms of compensating the poorest households” (Lee, 2011, p. 19). That report shows that low-income BC residents will end up paying more in carbon taxes than they will get back in credits, but that is a flaw in design of the credit, not in the concept.

September 28 update: For a specific set of proposals to deal with the fairness aspect of electricity price increases in BC, see the report from the Canadian Centre for Policy Alternatives, Fighting Energy Poverty in the Transition to Zero-Emission Housing: A Framework for BC (summary op-ed by Marc Lee here).

While some critics of the carbon tax argue that revenues should be used for purposes other than tax reduction, the carbon tax is in fact a very good model for how to devise a workable and progressive conservation pricing system for electricity consumption. Regardless of how BC Hydro chooses to raise rates (increases to the block rate, TOU pricing, or an across-the-board rate increase, for example), refunding the increased costs of higher rates borne by low-income customers through income tax credits and/or cuts would be a feasible method of eliminating regressivity. In fact, the implementation of tax credits and tax reductions for low-income consumers of electricity and energy is supported by experts. Pierre-Olivier Pineau, who is perhaps Canada’s foremost expert on electricity pricing, explains that combining targeted assistance to low-income ratepayers with conservation pricing “would expose all consumers to the correct price signal, while making sure electricity remains affordable” (Pineau, 2009, p. 25). The International Energy Agency also promotes targeted measures as one solution to the regressive nature of conservation pricing (IEA, 2010, p. 68).

Despite what critics say, it is not inevitable that conservation pricing will result in a disproportionate financial burden to low-income customers. Dismissing carbon pricing out of hand without investigating ways in which it can be made fairer amounts to a dismissal of electricity overconsumption as a legitimate problem. Solutions to regressive taxation such as income tax reductions to low-income British Columbians have been successfully implemented in the past. There is no reason to believe that we could not use similar strategies to devise an environmentally effective and economically progressive conservation pricing system for electricity in BC.

Sources:

International Energy Agency. Energy Efficiency Governance. Paris: 2010.

Lee, Marc. Fair and Effective Carbon Pricing: Lessons from BC. The Canadian Centre for Policy Alternatives and the Sierra Club. Vancouver: 2011.

Pineau, Pierre-Olivier. “Electricity Subsidies in Low-Cost Jurisdictions: The Case of British Columbia.” Canadian Public Policy 34 (3) (2008): pp. 379-394.

Pineau, Pierre-Olivier. “Rethinking Electricity Pricing in Canada: Richer, Greener and Fairer.” Working Paper, l’École des Hautes Études Commerciales de Montréal, June 2009.

In the midst of a spending blitz, BC Hydro has applied to the BC Utilities Commission (BCUC) to increase residential electricity rates by an estimated 10% per year over the next three years. BC Hydro, which announced the rate changes on December 2, 2010 expects the increase to take effect in April 2011, assuming BCUC approval. The news release explains that the Crown Corporation is investing $6 billion over three years to provide essential upgrades to aging transmission and generation  facilities, add significant new transmission capacity, increase capacity at the Mica and Revelstoke dams, and  install smart meters in every household.

While all rate-setting proposals are made public on the BCUC’s web site, the fact remains that British Columbians know very little about how their electricity is priced, why it costs what it does, and where BC electricity prices stand relative to other Canadian jurisdictions. BC Hydro’s latest rate change proposal provides us with an opportunity to investigate these, and other, questions in the hopes of better understanding electricity pricing in BC.

This post provides an overview of electricity pricing in BC. Our next post will examine the merits of using rate changes to promote conservation.

The Basics: How electricity prices are determined in BC

There are two different types of approaches to pricing electricity: cost-based pricing, and market-based pricing. BC uses cost-based pricing, and because it relies mostly on large hydro-electric dams that were built decades ago, its electricity prices are very low compared to most other jurisdictions.

Electricity rates in BC are primarily influenced by stipulations within the “Heritage Contract,” which guarantees that BC customers continue to benefit from low-cost Heritage Resources, defined as the legacy of existing generation, transmission and distribution infrastructure, including the large dams built along the Peace and Columbia Rivers in the 1960s and 1970s. According to BC Hydro, the purpose of the Heritage Contract is to maintain low electricity rates for customers while maintaining a secure and reliable energy supply. The Heritage Contract also stipulates that rates are to be maintained at a level consistent with BC Hydro’s annual revenue requirements while still remaining affordable to ratepayers (BCUC, 2003).

The most common form of rate determination in BC is known as “historical average cost pricing”, which is the method used by BC Hydro to determine the price of the guaranteed quantity of electricity to be provided by its Heritage Resources (BCUC, 2003). Under this pricing scheme, rates equal the average cost of producing one unit of electricity over the lifetime of a given generating facility. The average cost is determined through calculation of the “levelized unit cost” (LUC), which divides the capital and operating costs of a facility by the total energy that is projected to be produced by the facility over its lifetime (Healey, 2010). This common metric allows average costs for different generating facilities to be compared.

The levelized unit cost of BC Hydro’s existing hydroelectric power – which accounts for approximately 90% of BC Hydro’s Heritage Resources – is extremely low at approximately 5.3 cents/kWh. This early investment in big hydro is why BC Hydro is able to maintain such low electricity rates. Among major Canadian cities, Vancouver’s residential electricity rates are third lowest in the country, at 7.79 cents/kWh, behind only Montreal and Winnipeg (Hydro-Quebec, 2010). There are actually three classes of prices depending on the type of user: residential, commercial, and industrial.  Commercial and industrial ratepayers pay a lower rate than residential customers, primarily because of the economies of scale ( lower transmission costs per unit) of supplying electricity to large commercial and industrial customers (Healey, 2010).

As demand for BC electricity grows, BC is adding new sources of supply. Given the remarkable economies of BC’s Heritage Resources, any new source of power will be more expensive than historical prices. As a result, increased supply puts upward pressure on prices.

Marginal Cost Pricing

The main alternative to historical average cost pricing is the marginal cost of new supply, or market-based pricing. Under this pricing scenario, the electricity price fluctuates with movements of the intersection of the supply and demand curves. The supply curve illustrates the marginal cost of new electricity supply (i.e., the cost of producing one additional unit of electricity) at various levels of production; conversely, the demand curve represents the benefit to customers that accrues from a one unit increase in production. At the intersection (equilibrium) point, the benefit to consumers and the cost of producing an additional unit of electricity are equal, which implies that benefits are maximized while costs are minimized.

Historical average cost pricing artificially maintains electricity rates below this equilibrium. While this provides a benefit to all classes of consumers through lower rates, it also promotes overconsumption of electricity (Healey, 2010).

BC Hydro engages in cross-border electricity trading, which also uses market pricing. Electricity trading, which is undertaken by Powerex, a BC Hydro subsidiary, is affected by factors such as water level variability, unforeseen power outages, and routine (i.e., seasonal and time-of-day) spikes in demand. Reflecting the basic laws of supply and demand, market prices will rise and fall as the balance between supply and demand changes. When BC has a surplus of electricity and its trading partners are facing a shortage, the price for BC Hydro exports will go up. In contrast, if demand for electricity in the region is low and abundant supply is available, the price will drop.  Market prices on the “spot market”, as it is called, are highly volatile, often changing on an hourly basis (Healey, 2010).

Much has been made recently of the contribution of independent power producers (IPPs) to electricity prices. Independent power producers are privately-owned, and often small, generators of electricity. BC Hydro periodically solicits proposals from IPPs, though this activity has increased in scope and visibility under the BC Liberal government. BC Hydro generally buys electricity from IPPs at a rate that exceeds the current spot market price, leading to concerns that BC Hydro is paying too much for this kind of power.  It is uncertain whether the prices given to IPPs will turn out to be too high over the long term. One important consideration is that the contracts with IPPs lock in a set price for electricity that may end up being cheaper than buying the same quantity of electricity on the highly volatile spot market (Healey, 2010).

Conservation pricing: A justification for higher rates?

Many environmentalists have advocated higher electricity rates in order to provide customers with an incentive to use less electricity. On October 1, 2008 BC Hydro brought in a stepped rate in order to promote conservation, charging residential customers 6.27 cents/kWh for the first 1,350 kWh they use over a two-month billing period, while charging 8.78 cents/kWh for any quantity of electricity above that initial amount.

In spite of the potential environmental benefits electricity conservation, there are genuine concerns about the relative impact that conservation pricing schemes could have on low-income households. In a subsequent blog post, we will investigate these concerns, as well as other practical implications involved with conservation pricing of electricity.

Sources:

BC Utilities Commission. In the Matter of British Columbia Hydro and Power Authority and an Inquiry into a Heritage Contract for British Columbia Hydro and Power Authority’s Existing Generation Resources and Regarding Stepped Rates and Transmission Access – Report and Recommendations. Vancouver: BCUC, 2003.

Healey, Stephen. “Peak to Peak: A Primer on Electricity Pricing in BC.” Paper presented at the Pacific Institute for Climate Solutions FutureGrid Forum, Vancouver, June 14 – 16, 2010.

Hydro-Quebec. 2010: Comparison of Electricity Prices in Major North American Cities. Montreal: Hydro-Quebec, 2010.

Note: We’d like to thank Max Stallkamp for his comments.

Premier Campbell with Brad Bennett, grandson of WAC Bennett

George Hoberg

The Government of British Columbia introduced its much anticipated Clean Energy Act today. The Act follows the government’s increasing assertions about it aspirations to become a “Clean Energy Powerhouse.” To lay the groundwork to pursue that mission, the government appointed a Green Energy Task Force (actually four related bodies) in the Fall of 2009. On April 19, the Government committed to moving the Site C Dam on the Peace River to the regulatory review and environmental assessment stage.

The two most important changes introduced in the Act are a substantial revision of the governance framework for energy policy and the articulation of new and revised objectives for BC energy policy. While these new objectives increase provincial commitments to conservation and clean energy, they also promote electricity exports and fuel-switching that could lead to significant new electricity generation projects . The most glaring gap in the new Act is its failure to explicitly create a regional planning process to address the cumulative effects of energy development.

New Governance Framework. The new governance framework involves two significant changes. First, the Act reunites BC Hydro with the British Columbia Transmission Corporation (BCTC). BCTC was separated from BC Hydro in the Campbell government’s 2002 Energy Plan as part of its effort to privatize new source generation. It was thought at the time that privately owned generating facilities needed access to transmission capacity that was not operated by the Crown utility. But that view has now changed. The effect is to increase the reach and capacity of BC Hydro. Critics of the Campbell government’s energy policies have denounced the creeping privatization of electricity in the province. The new Act does retain a big role for privately-owned independent power producers (IPPs), but reasserts the dominance of government ownership over the bulk of the electricity system.

The second significant change in governance is the substantial reduction in the regulatory jurisdiction of the British Columbia Utilities Commission (BCUC). Most importantly, the Act would remove the authority of the BCUC to approve BC Hydro’s long term plans (currently referred to at a Long Term Acquisition Plan). The Act would create a new planning process – an Integrated Resource Plan – that combines the existing functions of the Long Term Acquisition Plan with the objectives of the “Section 5 Transmission Inquiry.” The government had required the BCUC to conduct that inquiry, but then suspended it when the government decided to appoint the Green Energy Task Forces to recommend how to revise electricity governance. Instead of having the BCUC review and approve the plan, the plan is submitted to the Minister of Energy, Mines and Petroleum Resources, and then formally approved (or rejected) by the cabinet in the form of the Lieutenant Governor in Council (Sections 3 and 4 of the Act).

In addition to removing the BCUC from planning, the new Act would also remove the BCUC from the review and approval of major projects, including the proposed Site C dam, new export agreements, the Northwest Transmission Line, additions of new turbines to existing “heritage” dams, the 2008 Clean Power Call, and the new Smart Meter program. The BCUC would retain authority mainly over rate setting.

In July 2009, the BCUC took the controversial action of rejecting outright BC Hydro’s Long Term Acquisition Plan, including its proposal to reduce reliance on the Burrard Thermal natural gas plant that the government was trying to phase out. With the new Clean Energy Act, the BCUC won’t be acting as a referee any longer between BC Hydro and the government. This is a dramatic shift in the governance of electricity policy from regulation by an independent commission to direct government control.

New and Revised Objectives.  The Campbell government made substantial changes to energy policy with both its 2002 and 2007 Energy Plans, much of which was explicitly incorporated in legislation through the Utilities Commission Act. The new Clean Energy Act carries forward many of those objectives but also adds new objectives and strengthens some important existing objectives.

·         The most significant new objective is “to be a net exporter of electricity…with the intention of benefitting all British Columbians and reducing greenhouse gas emissions in regions in which British Columbia trades electricity.” Previously, the core objective had been self-sufficiency. This new export objective embodies BC’s aspiration to become a “Clean Energy Powerhouse,” and could lead to substantial new development of energy projects.

·         The new Act would also “encourage the switching of one kind of energy source or use to another that decreases  greenhouse gas emissions in British Columbia.” Fuel switching from gasoline to electricity in the transportation sector and from natural gas to electricity in the building sector could have substantial implications for BC’s future electricity demand.

·         The Act would strengthen the obligation to meet new electricity demand through conservation measures from 50% to 66%. In its most recent planning proposal BC Hydro wanted to rely on conservation for 72%, so this seems readily achievable.

·         The Act would increase the required percentage of electricity generated from clean or renewable sources from 90% to 93%

Glaring Omission. Perhaps the most glaring omission from the new Clean Energy Act is the absence of an explicit requirement for a regional planning process to address the cumulative effects of energy development. The environmental community has persistently criticized the BC government for its lack of effective planning for new energy developments. The province dealt reasonably effectively with forest land use issues through the Land and Resource Management Planning process, but those plans did not include energy for the most part. Recommendations to include energy in a similar planning process have been proposed by a broad coalition of environmental groups in a submission to the Green Energy Task Forces. The task force on “resource development” included very specific recommendations for a new process under its Outcome 3 “Achieve world-class environmental performance for clean energy

Projects”:

1. [omitted]

2. By September 30, 2010, and using existing data and information layers, develop a renewable energy zoning map for the Province that identifies where development of renewable energy and transmission is appropriate and inappropriate.

3. Complete the Section 5 inquiry as soon as possible, focusing on transmission planning and deferring all regional planning submissions to the regional planning process.

4. Using the outcomes of the provincial zoning map (recommendation 2) and Section 5 findings  (recommendation 3), undertake regional planning in areas that are appropriate for more intensive development, have potential for industry electrification, and have potential for low cost energy clusters.  An assessment of cumulative impacts of all projects within the planning area will also take place.

Recommendation number 3 seems to have been included in the new Integrated Resource Plan, but the other two recommendations have not been explicitly incorporated into the new Clean Energy Act . The section on planning does contain a reference to a requirement to consider, as part of its transmission planning, “an assessment of the potential for developing…grouped by geographic area, electricity generation from clean or renewable resources in British Columbia.” This provision does require the sort of regional supply planning envisioned the Section 5 Transmission Inquiry Terms of Reference. But it does not explicitly address the issue of cumulative effects from multiple energy projects that has been the prime concern of the environmental community and that was clearly recommended by the Green Energy Task Force on Resource Development.

The Act does make homage to cumulative effects by amending the Environmental Assessment Act to allow the consideration of “potential cumulative environmental effects.” This is not actually a significant change because the Environmental Assessment Office had already committed (p. 26) to considering cumulative effects. More importantly, tweaking the environmental assessment process does not get at the root of the problem of moving beyond project-level assessment to considering integrated regional planning.

As debate over the new Act begins, it will be important to hear the government’s response to the strong Green Energy Task Force recommendations on regional planning. Given that a shift to an export focus and fuel-switching will increase the pressure for new energy projects, it is imperative that we get the review and approval process right.

Other Notable Changes. If enacted the new Clean Energy Act would also do the following:

·         Create a new feed-in tariff

·         Create a First Nations Clean Energy Business Fund

·         Formally legislative a “Two Rivers Policy” which precludes any new major dams in the province after Site C.

George Hoberg (with research assistance by Lisa Jung)
August 1, 2009 (updated below on September 24, 2009)

On July 27, 2009, the British Columbia Utilities Commission stunned the BC energy sector by rejecting the Long Term Acquisition Plan (LTAP) of BC Hydro. The LTAP forecasts future electricity demand growth and details how BC Hydro plans to meet its future electricity needs.

The Commission made six major determinations. It approved two major parts of the LTAP – BC Hydro’s “load forecast” for future electricity demand, and the reliance on the Burrard Thermal natural gas generating plant for 900 MW of dependable capacity. But the commission rejected four parts of the LTAP: 

1. The Commission ruled that BC Hydro “has not adequately addressed the self‐sufficiency obligation established” by the BC government.
2. The Commission rejected BC Hydro’s plan for “Demand-Side Measures” – the efforts to reduce demand by increasing efficiency – because they were not adequately supported by analysis.
3. The Commission rejected BC Hydro’s plan to reduce its reliance on energy from the Burrard Thermal unit for planning purposes.
4. The Commission did not endorse a specific target amount of electricity for the “2008 Clean Power Call,” the process through which BC Hydro acquires new power from private producers.

Because the four issues were so fundamental to the overall plan, the Commission rejected the LTAP as a whole.

The BCUC decision has provoked significant reaction from interest groups and the media. Critics of private power projects, including the BC New Democratic Party, have declared victory, claiming the decision is a rejection of the BC government’s plan to rely on private power for future electricity supply. Climate activists have blasted the recommendation to increase reliance on the fossil fuel fired Burrard Thermal plant, calling it “a serious blow to the clean energy transition and climate leadership in British Columbia.” First Nations denounced the Commission for creating roadblocks to their ability to use green power projects to promote economic development.

A closer look at the details of the decision suggests quite a different interpretation, however. For the most part, the Commission is critical of the lack of evidence or analysis underlying BC Hydro’s plan. The decision is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. The one exception to this conclusion is the refusal to endorse BC Hydro’s desire to reduce reliance on Burrard Thermal. That decision is harder to understand and seems more at odds with government policy.

Failure to adequately address self-sufficiency obligation

Arguably the most important part of the Commission’s ruling is that BC Hydro did not adequately address the self-sufficiency obligation described in law. All the other negative decisions can be linked to this core finding.

The self-sufficiency requirements arise from the BC Government’s 2007 Energy Plan, and are legally articulated in Special Direction 10 (SD 10) under the Utilities Commission Act. The policy requires that the province achieve energy and capacity self-sufficiency by 2016. In addition, the government also requires “insurance” by requiring BC Hydro to become capable of “exceeding, as soon as practicable but no later than 2026, the electricity supply obligations by at least 3,000 gigawatt hours per year and by the capacity required to integrate that energy in the most cost‐effective manner.”  BC Hydro’s LTAP did not address how this additional 3,000 GWhr/yr would be acquired, claiming that it was too early to plan for that. The Commission disagreed with what it referred to as BC Hydro’s “just in time” approach. It ruled that BC Hydro had not adequately addressed this requirement, and requested that BC Hydro focus on developing a phased in approach to meeting the requirement for self sufficiency with insurance in its next submission (p. 45). This is a clear case of the Commission applying government policy to BC Hydro’s LTAP and finding the utility’s rationale insufficient.

Inadequately supported demand-side measures plan

The 2007 Energy Plan requires that BC Hydro “acquire 50 per cent of BC Hydro’s incremental resource needs through conservation by 2020.” In its LTAP, BC Hydro proposed to go well beyond this target – it proposed to meet 72% of the increased demand through demand-side measures (DSM) (p. 74). But the Commission rejected the DSM plan because “it cannot determine whether BC Hydro’s DSM Plan complies with section 44.1 of the Act.” The relevant part of section 44.1 of the Utilities Commission Act states that the LTAP needs to contain ”a plan of how the public utility intends to reduce the demand… by taking cost‐effective demand‐side measures.”

The Commission was not satisfied with the level of analysis behind the DSM plan for two reasons. First, the Commission criticized BC Hydro for not having a plan for DSM after 2020, raising additional concerns about how the self-sufficiency requirement would be met. Second, the Commission criticized the way that BC Hydro assessed the cost-effectiveness of DSM. BC Hydro justified its choice to go as far as 72% by arguing that anything less would forego substantial cost savings. It justified the choice not to go beyond 72%, even though there would be cost savings over new supply sources, because it considers the deliverability of DSM at that level to be too uncertain to rely upon (p. 73). The Commission found this style of analysis insufficient. The Commission argues that to be consistent with the cost-effectiveness test in the Act, BC Hydro needs to compare the relative cost-effectiveness of DSM by calculating the unit energy costs of DSM programs on a program‐by-program basis, and then compare those to “supply‐side alternatives on an equivalent basis” (p. 85). Here again, the Commission is requiring more thorough analysis in order to make a determination about whether the LTAP is consistent with government policy.

Rejecting the proposal to reduce reliance on Burrard Thermal

BC Hydro uses the natural gas-fired Burrard Thermal plant only when needed to meet peak demand. The plant is old and expensive to run, and the air pollution impacts on the Lower Mainland of BC are significant. The LTAP proposed to continue to rely on the plant for 900 MW of dependable capacity, and to reduce its reliance on Burrard Thermal to 3,000 GWh/year of energy for planning purposes, less than half of the 6,100 GWh/yr it had relied on previously.

The Commission agreed with the plan to rely on 900 MW of capacity, but rejected BC Hydro’s proposal to reduce reliance on Burrard to 3,000 GWh/yr. Again, the Commission was very critical of the type of analysis BC Hydro presented:  “BC Hydro acknowledges that this conclusion was not derived from simple factual analysis and includes its professional judgment and careful consideration of context.” A big part of that professional judgment was an analysis of “social license” – BC Hydro argued that relying on the plant for more than the 3,000 GWh/yr would provoke so much public opposition that it would be unsustainable. The Commission rejected this argument, and recommended BC Hydro improve its “stakeholder engagement management” (p. 115). The Commission recommended BC Hydro plan for 5,000 GWh/yr, less than the 6,100 in the previous plan, but significantly more than the 3,000 proposed by BC Hydro.

The logic for this part of the Commission’s decision is more elusive than in the other areas in which it rejected BC Hydro’s proposals. However, it is consistent with the core finding that BC Hydro has not adequately provided for self-sufficiency (with insurance) as required by law, and that it might be premature to wind down Burrard Thermal as quickly as BC Hydro proposed. If that was the Commission’s rationale, it did not state it very clearly. This is also a case where the Commission decision seems to fly directly in the face of government policy. The 2007 BC Energy Plan, policy action 22, states the Government supports BC Hydro plans to phase out Burrard Thermal. The Commission maintains, and BC Hydro concurs (p. 105) that the language in this policy action is non-legislated and advisory, and lacks the force of law.

Refusal to endorse specific target for 2008 Clean Power Call

Given its forecast of future demand, its proposal for demand-side measures, and its assessment of existing and committed resources, BC Hydro argued there was a supply gap that needed to be addressed, and that it should do so in part by soliciting proposals for clean energy from private power producers. While there was some fluctuation in numbers throughout the process, BC Hydro’s formal request was that the Commission endorse a Clean Power Call target of 3,000 GWh/yr (p. 122). The Commission refuses to endorse any specific target for the Clean Power Call. It bases this decision on the fact that the other parts of the plan that provide the basis for the amount of new resources needed are so flawed — the failure to provide for self-sufficiency, the inadequate demonstration of cost-effectiveness of the DSM plan, and the lack of evidence for the reduction in Burrard Thermal – that it has no basis to decide what the amount of new resource should be.

While the Commission rejects a specific magnitude for the call for new power, its decision should not be read as a rejection of the government’s policy to rely on private power producers, whether for run of the river or other sources, for new electricity generation. The entire analysis by the Commission is done within the framework of the government’s 2007 Energy Plan, and the Commission makes clear that BC Hydro continues to have the authority to enter into energy purchase agreements with private power producers (p. 127).

Concluding Thoughts

As this analysis suggests, the Commission’s rejection of the LTAP is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. In most cases, the logic of the Commission argument seems quite clear. In one important case, the rejection of BC Hydro’s proposal to reduce reliance on Burrard Thermal, the Commission’s logic is harder to follow. Indeed, it is surprising that the Commission was so harsh on BC Hydro’s reasoning in many areas, yet so weak in its own supporting analysis on such a critical issue before it.

It is possible that the Commission’s insistence of more rigorous analysis is merely a cloak for policy disagreements with the government. While I doubt this is the case, even if it is, the government has the opportunity and the means to clarify policy by issuing more specific direction to the Commission. Indeed, the government has already signaled that it has no intention of increasing reliance on the Burrard Thermal plant.

While the decision certainly creates short term confusion, it may have valuable benefits in the medium and long term. BC Hydro will be forced to provide more rigorous and transparent justification for its decisions – the Commission requires that a new LTAP be submitted by June 30, 2010 (p. 151).

In my view, one lesson of the decision, and the controversy over it, is the illustration of the limitations of using quasi-judicial proceedings to make public policy decisions so crucial to the province. Perhaps the BC government will take this opportunity to engage in a more open, public dialogue about BC’s energy future, an argument this blog has promoted several times before.

September 24, 2009 update by Lisa Jung:

Despite the BCUC decision on the 2008 LTAP it was ‘full steam ahead’ for the plan according to Energy Minister Blair Lekstrom, and that regardless of the decision, or any decision, “the BC government has no plans to increase the use of Burrard”. Lekstrom’s reaction to the Commission directives was that it was ‘surprising’ and increasing reliance on Burrard was ‘not in the cards’ for the government, which they would be making clear. And it did become clear that the government did not accept the BCUC decision, particularly on Burrard and its impact on the government’s plans for private power (see also The Province, The Globe and Mail). At the time, all that the government would divulge was that there are some parts of the decision that need to be clarified, to both the industry and the Commission.

In its 2009 Throne Speech the BC government clarified that the BCUC “will receive specific direction.”  This statement was directly followed in the speech by an emphasis on the importance of phasing out Burrard and the government’s green energy goals. In other words, Burrard will be phased out and the BCUC will have to comply with all parts of the Energy Plan, at least eventually.

This statement has created mixed reactions: those that represent IPP interests and environmentalists who support them have been reassured that they will have a place in BC’s future for new sources of clean and renewable electricity. However those that oppose new private power generation are disappointed to say the least. Groups like Western Canada Wilderness Committee (WCWC) are critical of the speech, arguing it is ‘green-washing’ and therefore misleading. The BC Citizens for Public Power criticized the throne speech for being a ‘flagrant disregard’ for the BCUC’s decision and that there will be economic hardships imposed for some British Columbians by adopting more expensive private power alternatives.

The tensions are still high and differences remain, but all of this raises more questions: whether the BC Liberal Government has violated the BCUC’s independence by acting after the fact, and how independence will be maintained in the future if the BCUC does not endorse all of which the government wants to do.

Talk delivered to PowerUp Canada Green Economy Dialogue, April 7, 2009

Controversy over renewable energy in British Columbia has been swelling over the past year, particularly over “run of the river power” projects being developed by independent power producers. This conflict has been magnified by a complex, overlapping set of issues whose character and interrelations are poorly understood. My objective here is to attempt to contribute to a more constructive dialogue by untangling the nest of issues fueling controversy, and promote a focus on the most critical issues.

I come from the perspective of an academic political scientist and policy analyst, but one trying to make a contribution to real policy discourse. I teach a course in Sustainable Energy Policy and Governance jointly offered by the Department of Political Science and the Conservation Program in the Faculty of Forestry at UBC.

I’m pretty sure that at an abstract level, all stakeholders could agree on an overarching objective:  Acquiring the energy we need at the least economic, social, and environmental cost. But as I describe below, this grand objective obscures a number of crucial disagreements about a number of concepts embedded in this statement, in large part because of different worldviews on a complex set of issues.

To start with, who “we” is, is surprisingly complicated. What “we need “ is contested and value laden. And we have very conflicting views of economic, social, and environmental costs.

In my mind, there are eight related issues underlying this controversy.

1.       Conflicting interests.  There are competing economic and political interests at stake in the dispute. Some of these clashes of interests are economic, such as profits from private energy vs. the loss union jobs. Others involve recreational interests, such as kayakers’ access to free flowing rivers, or even non-material interests, such a strong affinity with wild, free flowing rivers.

2.       How much energy do we need? Future energy needs are uncertain because of what Yogi Berra noted years ago:  “It’s tough to make predictions, especially about the future.” Demand forecasting and the efficacy of demand side management (DSM) are both highly complex. But it’s more than just the inherent uncertainties of forecasting. This issue becomes so hotly contested because it also embodies value differences about what kinds of lives we should be living, i.e., whether we should be enabling “high impact” lifestyles or promoting greater frugality. What seems surprisingly absent from this part of the debate is a collective mobilization to reduce electricity use. If only we could find a way to channel a fraction of the cognitive and political energy spent on the IPP controversy to unleashing innovative demand side management initiatives. BC Hydro has become the province’s visionary voice on DSM. We need a stronger non-governmental champion of demand-side management

3.       Self sufficiency or clean energy exporter? One of the primary drivers behind future energy demand is what our provincial objective is. The BC Energy Plan commits us to provincial self-sufficiency with a reserve. But we also have the potential to be a clean energy export economy for either provincial income or the displacement of fossil fuels use in other jurisdictions. This issue becomes highly controversial because it opens the question of what is the appropriate jurisdictional scale to use as the unit of analysis. Is it the province, or some larger regional entity representing western North America? When this question gets opened, raw value differences enter about the relative merits of localism, nationalism, and globalism.

4.       Private vs. public. Perhaps the most divisive issue in the green energy controversy in BC has been the appropriate role of government and private firms in the various functions of delivering electricity. The Campbell government’s decision in 2002 to rely on private independent power producers for new sources of electricity has provoked a vehement backlash by a coalition of environmental  and labour groups.

5.       Community jurisdiction. The controversy over Ashlu Creek and the provincial government’s decision with Bill 30 to remove the ability of local government to block new power projects, has certainly fueled the controversy. In addition to removing a venue for place-based groups to be represented in the process, this aspect of the controversy has tapped into strong ideological differences on the appropriate scale of governance for resource decision making. This issue is certainly not distinct to BC – the conflict between local and higher level governments over the siting of new energy facilities is part of the emerging new politics of renewable energy across this country and throughout the developed world.

6.       Price. Part of the critique of independent power projects in BC is that they are too expensive and will lead to unnecessarily high electricity rate. But all new sources of power are going to be more expensive. We need to adopt an ethic that, because of the need to reflect their true environmental costs, energy prices will need to go up, and go up significantly. This fact creates a profound tension with the incentives of reelection-minded politicians to avoid imposing costs on potential supporters.

7.       Resource and size. What energy resource technology should we be using? Should we be building big facilities, small facilities, or both? It is noteworthy that despite its obvious centrality to sustainable energy decision making, this issue has not been part of the current controversy.

8.       Location and siting process. Assuming we need new sources of energy supply, where should new facilities go, and how do we decide? At present, the province lacks a coordinated, integrated process of energy facility decision making. The government’s decision to rely on IPPs for new sources of power aggravates this problem. Like the previous issue of resource and size, despite its centrality to sustainable energy decision making, this issue has not been an important part of the political controversy.

In my view, the dynamics of our green energy policy controversy have generated a tremendous amount of heat, but not enough light to allow us to focus on the most important issues.

We need to be respectful that there are a variety of interests at stake, but also mindful of how those interests might motivate different arguments. But we also need to rise above the cacophony of special interest arguments in the search of a broader public interest.

We need to project how much energy we need after aggressive, cost-effect conservation measures are adopted, and in order to do so we need a vision for the provincial electricity sector. The issue of public vs. private has dominated the dispute, yet it is arguably the least important. Private business can be compatible with societal objectives, given the right governance framework.

We need to find a governance framework that effectively represents place-based interests without having them unjustifiably veto projects that are in the provincial interest.

We need to get the price right, but in a way that acknowledge the need for energy prices to rise, and insulates progressive politicians from electoral backlash.

We’ve been paying so much attention to ideologically charged issues that we aren’t even thinking systematically about the most important ingredients to a sustainable energy policy:

·         After a concerted effort at demand side management, what are our energy needs?

·         What kinds of new supply should we have?

·         What governance framework do we need to effectively site and regulate new facilities?

As part of a course on Sustainable Energy Policy and Governance, students participate in a simulated multistakeholder consultation about topical policy issues. Half of this year’s students simulated a debate about how to fill the forecasted electricity supply gap in British Columbia.

The scenario was presented as follows. The BC government forecasts a substantial future shortfall in electricity supply. After a series of site-by-site conflicts, Premier Campbell announced a new multistakeholder planning process to establish a province-wide strategy for developing new sources of electricity.

The learning objectives of this exercise are to develop practical skills — teamwork, research, and communication — necessary for constructive participation in policy development, while simultaneously developing a deep understanding of one crucial component of energy policy. While I feel confident that these simulations perform this educational purpose, I often wonder whether they might provide insights into real-world policy dynamics.  I’m reporting on the process and results here in the event that others inside or outside the ivory tower might benefit from our experience. In this case, it felt a bit like we are acting like a focus group for the province.

NOTE:  None of the statements in this blog refer to any actual positions or statements of real people or real groups, unless explicitly referenced. The views below are only those of UBC students pretending to be actors in the BC electricity supply controversy.

Participating students were randomly divided into nine groups reflecting different stakeholders involved in the process: BC Ministry of Energy, Mines, and Petroleum Resources; BC Ministry of Environment; Department of Fisheries and Oceans; BC Hydro; Independent Power Producers Associations; Joint Industry Electricity Steering Committee; BC Sustainable Energy Association; Save our Rivers Society; and the First Nations Summit. The groups submit 2000 word briefs designed to articulate the position of the group. We then meet for a 4 hour session to try to develop a consensus. I act as facilitator of the process.

The session began with each group giving a 5 minute presentation outlining their initial position. The student groups very accurately reflected the positions of their real-world counterparts. The IPPBC spoke about the merits of green energy and the benefits of having the private sector take the lead in proposing, building, and operating new sources of electricity generation. Representing large industrial consumers, the Joint Industry Electricity Steering Committee (JIESC) focused on the financial risks of building new sources of power, the relative merits of demand-side management, and the critical need to maintain low electricity prices. The First Nations Summit spoke to the importance of having any new facilities respect the emerging New Relationship between the Crown and First Nations. The BC Ministry of Energy, Mines and Petroleum resources lauded the merits of the government Energy Plan. BC Hydro outlined its plans as articulated in the 2008 Long Term Acquisition Plan currently under review at the BC Utilities Commission. The BC Ministry of Environment expressed some concerns about strengthening the environmental assessment process being applied to independent power projects. The federal Department of Fisheries and Oceans expressed its concerns about protecting fish habitat and stressed the need to strengthen the environmental assessment process. The BC Sustainable Energy Association delegate (arriving late due to a cycling incident) emphasized the importance of conservation first, and the desirability of pricing reform to promote conservation. The representative from Save of Rivers Society made an impassioned plea to cancel the BC Energy Plan and its privatization of new sources of generation, to avoid the need for new dams by taking advantage of existing sources of electricity, and restore a strong community voice.

After the initial presentations, a heated debate erupted between representatives of the IPPBC and Save our Rivers Society, and the facilitator had a difficult time steering discussion in a productive manner towards the issue at hand and creating the space for other delegates to make their case. Eventually, the group was able to agree on a list of eleven issues at dispute.

·         Should new sources be public or private?

·         Should the price of electricity be increased to encourage conservation and renewable?

·         Should IPPs under 50 MW be exempted from BC Environmental Assessment processs?

·         Should the Canadian Entitlement to downstream benefits of the Columbia River Treaty be taken as electricity rather than revenue?

·         Should the assessment of cumulative effects of projects be increased?

·         What types of new sources of electrical power should be built?

·         What role should First Nations play?

·         What role should communities play?

·         Should self sufficiency on an annual basis be the provincial objective?

·         What is the actual size of the BC electricity supply gap?

·         Should the province continue to rely on the gas-fired Burrard Thermal plant?

With such a daunting list, the facilitator sought to identify an area of potential commonality first. We began to debate issues around the environmental assessment process. Environmental groups, DFO, and the BC Ministry of Environment were all strongly committed to eliminating the 50 MW threshold for reviewingprojects in Section 10 of the Reviewable Projects Regulation. The representative of the IPPBC was strongly opposed to the proposed change, claiming that IPP projects already had to get 50 permits, licenses, approvals and reviews from over a dozen provincial and federal agencies. A compromise was struck on this issue that received unanimous approval: 

The <50 MW exemption was eliminated, and replaced by a screening process like that existing under the Canadian Environmental Assessment Act that provided for a preliminary review of all projects, and allowed those with no significant environmental impact to be exempted from further assessment. In exchange for agreeing to this change, government officials committed to streamlining the overall approval to reduce its complexity.

Concerned about losing focus on the question of the day, the facilitator (assisted by TA Tom Berkhout) attempted to directly tackle filling in the forecasted supply gap. We put a simple excel spreadsheet up on the screen, using figures from the mammoth table on p. 6-54 of the most recent BC Hydro LTAP. We agreed to use 2026 as the end date. Existing and committed supply for 2026 is projected to be 56,000 GWh/year. Depending on whether you use the mid or high-range demand forecast, the forecasted supply gap is between 21,700 and 27,700 GWh/yr.

The group then went to work nominating candidates to fill the gap. BC Hydro suggested a demand-side management figure of 13,800 GWh/yr, a somewhat conservative figure given the utility’s current thinking, but the figure was not challenged by the other groups. Once DSM is included, the projected gap was reduced to between 6,300 and 12,300 GWh/yr.

Everyone was in favour of BC Hydro’s Resource Smart upgrades to existing Revelstoke and Mica dams, yielding a modest 210 GWh/yr. The Save our Rivers Society urged the inclusion of existing large sources of electrical power in the province or to which the province has access:  Rio Tinto Alcan’s surplus power from its Kitimat operation that is sold to BC Hydro, the power exported by the Teck Cominco smelter operation in Trail, and the Canadian Entitlement to the downstream benefits of the Columbia River Treaty. Neither Alcan nor Teck Cominco were represented by groups in the room, and no one objected to including them in the proposal. However, the Ministry of Energy, Mines, and Petroleum Resources objected to including the Canadian Entitlement, noting that the provincial budget was reliant on those revenues. After discussion, the Ministry softened its position and allowed the CE to be included. Plugging these numbers (7110 GWh/hr) into the spreadsheet, the group was elated to see that we had already closed the gap for the mid-range demand forecast, and were within 5200 GWh/hr for the high demand forecast.

But things got more heated again when we began to discuss next steps. BC Hydro made an eloquent plea for the Site C dam on the Peace River, which would add an additional 4600 GWh/yr. The delegate from the First Nations Summit raised concerns about Site C in light of BC Hydro’s history with First Nations, and the representatives from the BC government worked hard to convince the First Nations group that the project would be pursued in the spirit of the province’s New Relationship through some form of shared management. The representative from IPPBC was strongly opposed, arguing that the project was uneconomical compared to independent power projects. IPPBC put forward a proposal to include 3000 GWh/yr of IPP power, as in BC Hydro’s Clean Power Call. Before other delegates even got a chance to consider the proposal, the representative from Save our Rivers Society jumped in to oppose IPPBC’s proposal, arguing that it was wrong to be damming BC’s rivers for private profit. We got stuck in finding the next increment, with IPPBC strongly opposing Site C unless the Clean Power Call was included as well, and Save our Rivers Society strongly opposing the 3000 GWh/yr call for private power.

With time running out, however, the Save our Rivers Society offered a concession. Stressing the need to keep as much of BC’s electricity supply in public hands as possible, he expressed a willingness to allow the IPPBC proposal to go forward as long as Site C was also built by BC Hydro. Everyone agreed. The gap was closed, with virtually enough to spare to phase out the natural gas fired Burrard Thermal unit (3200 GWh/yr), and make BC’s electricity production virtually carbon-free. The final numbers are represented in the table below.

After the formal meeting adjourned, there was a lot of discussion about whether the concession by Save our Rivers Society could happen in real life, or whether it was just an effort by a thirsty student to allow the group to come to an agreement. Most felt it was unrealistic; that there was little evidence of willingness to compromise in the group’s current positions and rhetoric. A minority felt it was not necessarily unrealistic. While more rivers would be put at risk, the solution of repatriating the Canadian Entitlement and pursuing a new government project at Site C allowed the group’s interests in maximizing public control over electrical power to be satisfied in part.

While this class exercise is obviously a terribly simplified version of reality, it did leave me somewhat more optimistic about the province’s ability to address the looming electricity supply gap. It also strengthened my view that BC Hydro and the BC government should find better ways to involve stakeholders and the public in a deliberative process on solutions to addressing BC’s electricity needs. While some of these questions are addressed in BC Utility Commission proceedings, the overly formal, quasi-judicial nature of those proceedings is not conducive to building public understanding and legitimacy about electricity supply choices and consequences.

This exercise, and the one earlier this week on oil sands, also greatly strengthened my impression of the creativity of university students and the value of these sorts of simulations in teaching public policy.

PDF here for printing and better graphics

The conflict

Electricity policy in British Columbia has become increasingly controversial over the past several years. The conflict has focused on new hydroelectricity projects being developed by private sector “independent power producers” (IPPs). Environmentalists and unions have been highly critical of the Campbell government’s decision to rely on IPPs for new sources of electricity. The critics have raised concerns about losing public control over water resources as well as the cost-effectiveness and environmental consequences of multiple, small, privately operated hydro facilities. IPP advocates emphasize the environmental advantages of hydropower compared to other, especially fossil fuel sources of energy, and the complex review and approval process required.

Part of the conflict over IPPs stems from differences about how much new electrical power we need in BC. IPP advocates point to economic and population growth, and BC Hydro forecasts electricity demand will increase by 32% over the next 20 years (from 59,000 GWh/yr to 78,000 GWh/yr).  They also note that BC Hydro has become a net importer of electricity over the past decade. IPP critics question the need for so much new power. They emphasize the potential for conservation, but also claim that BC has been a net exporter of electricity.

Whether the province is a net importer or exporter of electricity has thus become an important part of the dispute. For example, Western Canada Wilderness Committee’s Gwen Barlee claims. “According to B.C. Stats, the province has been a net exporter of electricity for seven out of the last 11 years.” Steve Davis, President of the Independent Power Producers Association of BC, claims “Prior to fiscal 2008, BC Hydro was a net importer of electricity for seven consecutive years.” At first glance, it is hard to imagine that both claims can be true, and it seems counterproductive to have a dispute about what would seem to be a question easily resolved by examining official statistics.

Our objective

We’ve tried to address this factual issue by digging into the sources and numbers. The situation is indeed complex, but not so complex that it needs to be mystifying or an unresolvable conflict. We believe a somewhat more nuanced approach produces a clear picture of the situation. We’ve provided a detailed analysis below in the hopes that it will help resolve some of the factual conflicts and make way for a more productive dialogue on the real issues at dispute in the controversy over private power in BC.

Analytical challenges

There are several confounding factors which contribute to this difficulty, including having several different power producing entities in British Columbia, an international agreement that includes power transmission, the fact that BC imports and exports power for profit, and multiple sources of data. Despite these confounding factors, Statistics Canada has collected data on BC’s electricity generation and trade for over three decades, and some clear patterns emerge from this data.

Context Fact #1:  BC Hydro electricity trade is not the same thing as BC electricity trade. BC Hydro is not the only source of generation in the province – Fortis BC operates in the Kootenays, and large industrial generators also provide power to the grid, most notably Alcan in Kitimat, and Teck Cominco in Trail. Last year, the industrial producers contributed 20% of total BC electricity generation – the figure has fluctuated only slightly between 19 and 22% over the past 5 years. Despite how it dominates our thinking about electricity in BC, BC Hydro only generates less than 80% of the province’s electricity (we were unable to find figures separating out BC Hydro from other BC utilities). This critical fact allows the apparently competing statements by Barlee and Davis above to both be correct. Barlee is correct because BC Stats uses Statistics Canada and National Energy Board figures which include all sources of generation (see below). Steve Davis is correct because he’s only referring to BC Hydro (that data is shown at the bottom of this post).

 Context Fact #2:  Through the Columbia River Treaty, BC is entitled to power generated in the US — this is the so-called “Canadian entitlement to downstream benefits.” BC agreed to build dams on the Canadian portion of the Columbia to help the US with flood control, and our dams also increase the amount of power the US can get from their dams. In exchange, we received an entitlement of about 1200 MW of power, compared to BC Hydro’s total capacity of about 11,280 MW. While the US officially delivers this power to BC, we don’t take it as power to be used in the province. Instead, Powerex, the BC Hydro subsidiary that handles cross-border trades, sells it in the US market, and BC gets revenue without ever importing the power (The most recent budget (p. 142) reports this amount as $255 million for fiscal year 08/09). IPP critics argue that the so-called CE – the Canadian entitlement – should be considered part of domestic power resource. If we did, the net trade balance would look more favourable.

Context Fact #3:  BC Hydro does a lot of electricity trading to take advantage of the market to raise revenues, not to address changing power needs to BC customers. As a result, the trades flows in the Statistics Canada data are higher than they “need to be” to serve BC power customers. Unfortunately, it is hard to separate out these flows designed to take advantage of fluctuating prices from those designed to address actual power needs. However, these revenue-oriented exports and imports are likely to balance each other out, so while they may inflate the magnitude of total trade flows, they shouldn’t affect the net flows significantly.

Context Fact #4. There are multiple sources of data. BC Hydro has its own data, but it does not address imports and exports outside the BC Hydro system. The National Energy Board reports monthly statistics for BC, but they only measure flows across the Canada-US border, not interprovincial flows. Statistics Canada data reports trading from all BC entities, and includes international trade from the NEB as well as interprovincial trading. The basis for the Statistics Canada data is provided here. These are complex issues, and if you disagree with our interpretation, please comment below or email.

What the data say

1.       Historically, BC has been a net exporter of electricity.  As Figure 1 below shows, in the past 32 years, there have only been five years in which BC has imported more power than it has exported. One thing apparent from the long-term data is a significant amount of fluctuation in imports and exports. These fluctuations result from changing environmental conditions that affect supply and demand, such as the amount of precipitation filling BC reservoirs and weather impacts on demand for heating and cooling.

 2.       BC’s trade surplus in electricity is declining, and over the past five years a small trade deficit has emerged.  BC was in a deficit 4 of the last 10 years. Three of the past 5 years have been deficit years. Over the past 5 years (2004-08), BC imports exceeded exports by 4,807 GWh, 1.5% of the 327,271 GWh generated in BC over that 5 year period. Figure 2 shows the electricity trade balance of the last 10 years. Figure 3 puts these trade flows in perspective of total BC generation.

3.       The Canadian Entitlement to the downstream benefits of the Columbia River Treaty is not included in current trade statistics. If it were included as a BC generation resource, BC would have access to 1,200 MW of capacity. Table 1 compares that figure to other BC projects. Essentially, it is somewhat larger than one very large new dam project.

The CE would provide an additional 4,300 GWh/year of electrical energy to BC. If we had been using that energy, it would have eliminated the trade deficit for all put one of the past 5 years. Pooling the past 5 years together, if we’d used the CE it would have turned a 5 year deficit of 1.5% into a 5 year surplus of 5.1%. That compares to BC Hydro’s forecasted increase in demand of 32% over 20 years, or a 16% increase in electricity generation if the province meets the BC government requirements that half that increase in demand be met with conservation. BC Hydro’s current planning assumes even higher potential for conservation – they believe 72% of future demand growth can be offset through conservation, meaning that demand could be met with only a 9% increase in new sources of electricity. Including the downstream benefits of the Columbia River Treaty doesn’t eliminate the forecasted gap in BC electricity supply, but it does narrow it.

Whether or not BC should take the Canadian entitlement as power is a complex policy question that should consider, among other things, that at present that power is currently displacing fossil and nuclear sources of generation in the US. Our purpose here is merely to put the magnitude of the CE in perspective.

Some other notable patterns in the data

The following two figures show the sources of BC import and the destination of BC exports. They reveal that trade across the 49^th parallel is far more important than trade across the Rocky Mountains. We also include a table of BC Hydro trading statistics for the record.