Vaughn Palmer: Alarm bells about BC Hydro’s spending fail to trigger government action
Liberals postpone day of reckoning as utility announces another cost overrun
By VAUGHN PALMER, Vancouver Sun columnist June 29, 2013
Liberals are postponing day of reckoning as utility announces another cost overrun.
Photograph by: bill keay , Vancouver Sun
VICTORIA — Long before the recent provincial election, alarm bells were ringing about soaring spending at BC Hydro and how it would almost certainly mean higher electricity rates sooner or later.
Some snapshots from news coverage over the last two and a half years:
“BC Hydro wants to raise average rates by 27 per cent over the next three years; Hike required to pay for $6 billion in planned infrastructure updates.”
Vancouver Sun, Dec. 4, 2010.
“BC Hydro cost deferrals create huge shortfall; Billions of dollars will have to be recovered through additional rate increases or from further tax hikes.”
The Sun, Aug 18, 2011.
“Hydro rates fall short of meeting needs; multi-billion dollar spending plan far exceeds revenue from customers.”
The Sun, July 7, 2012.
This newspaper was not alone in documenting the mounting pressures for rate increases.
The provincial auditor general levelled a major blast at Hydro’s practice of putting off current spending into deferral accounts, where it would be covered by future rate increases as opposed to present-day ones: “Hydro’s bookkeeping slammed; Auditor-general warns that ratepayers could face $5 billion burden by 2015.” The Sun, Oct. 28, 2011.
Consumer advocates challenged commitments that were being made to industry: “Cheap power comes at a price. BC Hydro will lose millions supplying new mines and LNG facilities; losses that will be passed on to consumers.” The Sun, Oct. 25, 2011.
The New Democrats repeatedly rattled the government’s cage on the locked-in cost of independent power projects: “NDP projects billion-dollar loss for Hydro.” The Sun, Feb. 5, 2013.
And that’s just a sample of the stories that have run in The Sun and other provincial news outlets. Others detailed the likely impact of the billion-dollar smart meter program, the rising cost of Hydro’s own ambitious capital plan, and the botched venture into electrical self sufficiency and developing power for export.
Still for all the evidence that was already on the record, there was also room for a new angle on the cost-containment challenges at the giant utility.
Thus, this week’s update on the Hydro capital plan — particularly the $129 million overrun on the cost of the Northwest Transmission Line — had both of the major parties in the legislature professing surprise.
The B.C. Liberals said they first heard about it when the Hydro board (which approved the overrun May 23) communicated the news to the ministry of finance in time for inclusion in Thursday’s update on the budget and fiscal plan.
New Democratic Party MLA John Horgan has been on top of the case on Hydro’s cost-containment problem for the better part of a decade in his capacity as energy critic for the Opposition.
But he only learned about the latest overrun on the Northwest Transmission Line this week as well. He explained that for much of the year he’d been proceeding on the expectation that the NDP would win the election, whereupon he’d be appointed minister of energy.
Consequently he’d been thinking more about how the New Democrats as a future government would rise to the challenge of reining in Hydro and less about ferreting out details that could embarrass the current government.
Little wonder, given all the upward pressures, that both parties went into the recent election trying to say as little as possible about future rate increases.
The New Democrats promised to conduct a full-blown review of the utility and its plans, those contracts with independent power producers. But as for the possible impact, they said only that any rate increases would be the fault of the mess the Liberals were leaving behind them.
The Liberals, while vowing to hold down rates, extended until after the election (it is now due in August) the deadline for Hydro to submit to the cabinet its updated plan for meeting current and future electricity needs in the province.
Theirs is now the operative plan. But I have to think that the situation is much as my colleague Scott Simpson described it in The Sun in the first week of the campaign.
“The big issue for consumers is the potential for a big jump in electricity rates regardless of who wins the next election,” he wrote. “At present, Hydro charges customers less than what it requires to cover the cost of projects such as its $930-million smart meter initiative, billions in dam and transmission system upgrades, and the $5-billion mountain of debt that awaits ratepayers in so-called deferral accounts.
“Hydro’s mounting debt is considered so serious a problem that (stakeholder groups) are suggesting the next government will absorb billions of Hydro’s debt rather than passing it directly along to Hydro customers.”
Meanwhile Hydro’s latest service plan, tabled with the budget, provides another telling detail about the cost escalations associated with the now-priced-at $746 million Northwest Transmission line.
Turns out there’s a second phase of the project, the Iskut Extension, priced at a further $180 million, pushing the all-in price tag for both phases past $900 million. Some of the costs would be covered by Ottawa and by potential customers in the region.
Still Hydro would be on the hook for the rest, which can only add to the upward pressures on rates, never mind how long the B.C. Liberals manage to postpone the day of reckoning.
vpalmer@vancouversun.com
Read more: http://www.vancouversun.com/news/Vaughn+Palmer+Alarm+bells+about+Hydro+spending+fail+trigger+government+action/8595334/story.html#ixzz2Xx3gYz00
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