A report released by the Ministry of Energy, Mines, and Petroleum Resources on Wednesday has found that BC’s previous Liberal government forced BC Hydro to sign decades-long contracts with independent power producers (IPPs) that will cost customers billions.
Former B.C. Treasury Board director Ken Davidson delivered the report, Zapped: A review of BC Hydro’s purchase of power from independent power producers conducted for the Minister of Energy, Mines and Petroleum Resources.
The report “details how the previous government manufactured an urgent need for power while disallowing BC Hydro to produce it, therefore requiring the public utility to buy power from private producers at inflated prices,” says the ministry.
According to the report, the 40-year contracts have already cost customers $3.2 billion, and are set to cost users another $16 billion over the next 20 years.
Besides costing customers more, the report also found that the electricity BC Hydro was instructed to purchase from IPPs was largely redundant. 105 contracts were signed with IPPs since 2002, and 71 of them are “run-of-river projects” that are only reliable during the spring freshet (when snow and ice is thawing).
The report says that BC Hydro does not need more power during this season, as demand is lower and BC Hydro Reservoirs are largely full.
“Professional staff within government and BC Hydro warned them against that course of action, but that government refused to listen,” said Michelle Mungall, Minister of Energy, Mines, and Petroleum Resources in a release.
“B.C. didn’t benefit. BC Hydro customers didn’t benefit. A small number of well-placed independent power producers benefited, and customers were stuck with a 40-year payment plan.”
The ministry says there are “no quick fixes” available to manage the IPP contracts, but that opportunities for change when the agreements expire.
The report offered 5 recommendations for future governments to consider:
- Ensure prices reflect the real market value: Moving forward, all energy should be purchased at market rate or the IPP owner can trade its energy directly with the market, which is currently an option.
- Eliminate the self-sufficiency mandate: BC Hydro’s energy planning should be able to look outwards and rely on a limited level of Powerex trading to meet its electricity supply obligations, rather than relying solely on electricity generating facilities within the province.
- Restore the oversight of the BC Utilities Commission.
- Improve transparency on the cost of energy procurement: BC Hydro should price all energy at market rates and disclose all instances where energy is purchased above market rates in an open and transparent way, including to the BC Utilities Commission.
- Eliminate the Standing Offer Program: BC Hydro already has too much non-firm IPP energy to warrant buying more, and it should not have an open energy procurement process. The Standing Offer Program is currently on hold, but should be eliminated altogether.
These 5 recommendations are part of Phase 1 of the province’s comprehensive review of BC Hydro. A deeper look at the government’s review plan can be found online here.