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The politics of power

Where do independent power projects fit into British Columbia’s plan to become energy self sufficient?
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Just how political are power lines in B.C.?

Most people agree that they’re not pretty to look at. But if you want to turn the lights on, those ugly wires are a necessary evil.

The issue that has sparked the public’s concern recently is not the hum of the wires, but the restructuring of B.C. Hydro, the significant role of private power producers on our energy supply and cost, and the impact of Bill 30 on local communities. B.C. Hydro, traditionally a well-run and efficient Crown corporation, is looking much different than it did five years ago and whether these changes will benefit B.C. ratepayers is unclear.

The sword fight between the Black Knight and King Arthur in Monty Python and The Holy Grail is one of comedy’s classic scenes. While the knight loses his arms and legs in the duel, he dismisses the consequences of having a limbless body with cries of “It’s just a flesh wound!” or “’Tis but a scratch!” To some, the dismantling of B.C. Hydro is akin to the knight’s ordeal, though much less humorous and arguably less bloody.

The provincial government states that public ownership of B.C. Hydro will be maintained, but three significant changes to its structure and function have left it a shadow of its former self. And the 2002 Energy Plan prohibits B.C. Hydro from building new power generation facilities of its own, effectively cutting the Crown corporation off at the knees.

In 2003, B.C. Hydro’s administrative functions were outsourced to a Bermuda-based company called Accenture. Prior to 2000, Accenture was the consulting arm of Arthur Andersen, the Big Five accounting firm that was implicated in the Enron scandal. One third of B.C. Hydro’s workforce was cut as a result.

Also in 2003, through Bill 39, B.C. Hydro’s transmission functions were split off into a separate Crown corporation, the British Columbia Transmission Corporation. B.C. Hydro’s website states BCTC’s role “is to ensure open and non-discriminatory access to the B.C. transmission system for all electricity producers.” Joan McIntyre, MLA for West Vancouver-Garibaldi, says the move was simply to allow private power producers to have equal access to the transmission system. “It was thought that Hydro would have an edge if it controlled access to the grid,” McIntyre said.

But according to Marjorie Griffin Cohen, SFU political science professor and former B.C. Hydro board member, that statement alone is problematic.

“The fact that private developers will have access to our grid means that power is being privatized,” said Cohen. “It is a push from the private sector and the government is accommodating that.”

In 2002, the Liberals introduced the B.C. Energy Plan, an ambitious document which discusses at length the province’s plan to become energy self sufficient, through various means, by 2016. But the plan prohibits B.C. Hydro from developing new power generation facilities itself, and will be restricted to purchasing additional power from private sources only. According to John Calvert, an adjunct professor at SFU and a board member of B.C. Citizens for Public Power, the rationale for this strategy is “hard to fathom.”

“B.C. Hydro has gone from being a generator of electricity to a purchaser of electricity,” says Calvert. “If B.C. wants to have energy security, why are we selling water licenses for a song (between $5,000 to $10,000) to private companies that will be free to sell their power to New York and California, once their contracts with B.C. Hydro expire?”

Equally troubling to Calvert is the ability of these companies to “flip” water licences for large profits, with no restrictions on foreign ownership.

The 2006 tender call by B.C. Hydro to private power producers resulted in the Crown corporation signing contracts worth $15.6 billion. On average, the price per megawatt hour is $87.50 for the 2006 tender call alone, to say nothing of future calls. The current market price per megawatt hour is approximately $55.

“We could be purchasing power from the U.S. for less. It’s a lose-lose. We end up with high prices and no assets,” says Cohen.

B.C. Hydro’s role will be restricted to maintaining “heritage assets”, the dams on the Columbia and Peace rivers, which W.A.C. Bennett built in the ’60s and ’70s. These facilities cost taxpayers millions of dollars to build at the time, but are now paid off. As a result of the low-cost energy these dams generate, (and the high prices this energy commands south of the border during peak hours) British Columbians pay the second lowest electricity rates in North America. (Manitoba Hydro delivers the cheapest power.) This will change as B.C. Hydro’s contracts with IPPs come into effect in the coming years, says Calvert. As IPPs provide a greater percentage of B.C.’s power needs, the price of electricity will rise sharply.

“After the exclusive contracts to sell to B.C. Hydro are up, the power can be sold to the highest bidder,” says Cohen. “B.C. Hydro may have right of refusal, but it will still have to come up with the right price. Hydro is going to have competition. But it will need the power because it will not have built any new power generation in that time.”

So why are private developers involved in power production? It seems logical that B.C. Hydro should be developing new power projects itself so that when those projects are paid off, the public will own the assets, leaving them less vulnerable to expensive power that can ultimately be sold on the open market.

“The pie is only so big,” responds McIntyre. “Seventy per cent of every dollar spent in B.C. goes to health and education. The millions of dollars being spent in B.C. (on private power) means we don’t have to take that taxpayer money away from hospitals and schools. Someone has to pay for it. We have found a way to leverage private sector expertise to benefit the province. We have some very innovative projects underway.”

B.C. Hydro claims that anywhere from 12-14 per cent of B.C.’s energy needs are imported. The role of IPPs in the power supply are one way to narrow that energy shortage, although it is debatable whether many small power projects have less of an environmental impact than one large project, such as the proposed Site C dam on the Peace River.

Currently, one-third of all potential run-of-river projects (projects that have little reservoir storage capacity and derive power from the natural flow of a river) are in the Sea to Sky corridor. The region is particularly attractive to investors because it has lots of steep valleys with consistent water flow. It also has heavy rainfall and close proximity to transmission.

There are approximately 60 proposed projects on waterways in the Sea to Sky corridor, with the Ashlu being the most contentious of the projects given the green light by the province. But according to McIntyre, the number of projects that actually go ahead is small.

“There is a big jump between a proposal and an accepted project. Only one project (in the Sea to Sky region) was actually accepted in B.C. Hydro’s 2006 tender call,” she says, referring to a 9 megawatt project near Squamish. “The project must meet three criteria. First it must be on Crown land. Second, it must pass environmental assessments, and third, Hydro must sign an Energy Purchase Agreement with the producer.”

What about local input? Bill 30 was dubbed “The Ashlu Bill” by many Sea to Sky residents, as the legislation was enacted after the SLRD twice rejected the rezoning Ledcor (the company behind the Ashlu project) required to go ahead with construction.

“Bill 30 was enacted,” says McIntyre, “to allow private power producers the same rights that B.C. Hydro has now. That is, once environmental assessments are completed, the province has the right to approve the project — for the benefit of the province as a whole.

“Bill 30 was not about Ashlu,” she continues. “The process was flawed. Ledcor went through all the hoops, got all the environmental approvals, and then, after it had spent millions of dollars on the process, was opposed by local government. In the future, local government will be involved from the start, not at the tail end of the decision-making process.”

Stuart Smith, an environmental consultant and member of the Whitewater Kayaking Association of B.C., who spent months on the Sea to Sky Land Resource Management Plan on behalf of recreational users-groups, says he finds McIntyre’s explanation of the Ashlu outcome “a deflection.”

“The government established the process. Ledcor knew from the outset that it had to get SLRD approval for re-zoning,” he says. “And it knew it wasn’t a given that it would get (that re-zoning). There is a ‘how to make it happen’ attitude, not ‘will it happen’.”

“To have meetings behind closed doors the whole time and bring it before the local community at the end, and blame what happened on the process — that is really disingenuous,” says Cohen of the Ashlu decision. “Municipalities have always had the right to determine what happens in their jurisdictions, whether it is on Crown land or not. That has been taken away from them.”

Pina Belperio, co-founder of Whistler Watch and board member of the Council of Canadians is concerned with the impact of Bill 30. “Given that these rivers are public assets, why are communities not involved in how these assets are managed, and how do we ensure that a larger percentage of the profits are returned to the communities whose assets are being compromised?” she asks. “It has not been a very open and democratic process.”

After Bill 30 allowed the province to go ahead and green light the Ashlu project, Ledcor soon began construction at the site. Bryan Smith’s 2007 film 49 Megawatts (which can be viewed online at www.ourrivers.ca) documents the anger and disbelief many residents of Squamish felt about how the project was handled.

“To have spent so much time in the debate, the public process, just to have my opinion quashed, was very frustrating,” says Don Butler, a Whistler kayaking school operator.

While the Ashlu debacle remains a sore spot among many Sea to Sky residents, many rivers user groups are not set against IPPs in general.

“What we are missing is a community plan”, says Brad Kasselman, a board member of Whistler’s environmental watchdog, AWARE. “No one has studied the long-term impact of IPPs. It’s the Wild West out there. A lot of the companies developing this so-called green power do not have good track records.”

“Tackling these projects one at a time is a battle of attrition,” says Smith. “I have made this a full time job for the past seven years to get information out of the government and it has been really frustrating. I can’t get a straight answer. Looking at IPPs on a one-on-one basis is time consuming and ineffective.”

Steve Olmstead, SLRD Director of Planning and Development, says that the Ashlu project was rejected by the regional district board because it was felt that planning regarding the recreational/tourism value of the river, impacts to grizzly bear habitat, the extent of community concern and objection to the project, and lack of a regional strategy, among other factors, was not adequately addressed by the provincial government.

“Instead of pursuing a balanced, consensus-based regional energy strategy such as that suggested by the SLRD, the province ultimately decided to enact Bill 30 and remove local government as a decision maker in the IPP approval process,” he explained.

According to McIntyre, the reason the provincial government has not responded to the SLRD’s request for a regional plan on IPP development is because the number of projects going ahead is so small.

“There has been a gold-rush mentality where there have been a lot of water licenses being bought, but the number of projects that are actually being approved is very small,” she says. “It doesn’t make sense to have a plan with these numbers. In the 2006 tender call, only one project was approved in the Sea to Sky corridor. There were 30-plus other projects approved elsewhere in the province.”

To date, there are 14 IPPs in operation in the corridor, ranging in size from 0.1 to 158 megawatts.

In the debate over the future of B.C. Hydro and who can gain access to the transmission system, one simple solution may be overlooked: conservation. While PowerSmart strategies are becoming commonplace in homes, heavy industry is still the major consumer of energy in the province, using one-third of B.C.’s supply. Yet Calvert says there is little incentive to conserve, given that this user group enjoys heavily subsidized rates, and is guaranteed those rates through heritage contracts with the province. So do a bunch of small IPPs really make a difference when the incentive to conserve is so weak in that energy-hungry sector?

Stakeholders in the 125 megawatt Ryan Creek power project near Pemberton just announced plans to move ahead with federal environmental assessments, once again opening a flood of debate over the merits and pitfalls of IPPs. For residents of small communities, still feeling the sting from the passing of Bill 30, it is easy to have a cynical view. Says a local farmer in Pemberton, “We’re governed by the masses in urban areas. They want unlimited access to power — most of them don’t give a damn what happens outside their neighbourhood.”



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