BC Hydro’s Billion Dollar Climate Bill
“BC Hydro is forecast to lose one billion dollars over the next four years, as a result of the pursuit of green electricity…. The public policies that politicians of all stripes have imposed on us to address climate change will haunt us for years.”
British Columbia, Canada’s westernmost province, is blessed with an abundant and almost unlimited capacity to generate hydroelectric power. This capacity is the result of the farsighted policies of past BC provincial governments that invested in, or encouraged investment in, a series of hydroelectric mega-projects in the 1950’s, 60’s and 70’s. British Columbia has enjoyed the benefits of inexpensive, clean electricity ever since.
Apart from stints of economic contraction that, coincidentally, accompany BC’s infrequent brushes with the government’s socialist New Democratic Party (NDP), BC’s economy has generally boomed in large part as a direct result of our hydro electric capacity.
Canada has a history of creating public utilities to generate and transmit energy, which for British Columbia is BC Hydro. BC Hydro is highly regulated with respect to rates and operations and traditionally operated as an independent, apolitical entity.
That changed when politicians from all parties, driven by the media and statist intellectuals, recognized the increased revenue potential from surcharges and “green” taxes based on the notion of CO2-induced climate change. BC Hydro became an instrument for public policy, and a new way for government indirectly to fund green energy initiatives.
BC Hydro is forecast to lose one billion dollars over the next four years, as a result of the pursuit of green electricity.
Carbon Taxes and Clean Energy Legislation
In 2008, the ruling BC Liberal party was facing a tough election. With climate change distracting the media and electorate from more mundane but important issues, the Liberals put in place the Climate Action Plan, which, among other things, ushered in North America’s first carbon tax.
In 2010 the BC Liberals passed the Clean Energy Act (Bill 17), again citing climate as a concern, and a looming threat of future electricity shortages that required new, green sources of electricity. Bill 17 created the conditions for taxpayer subsidized private electric generation, with feed-in-tariffs and rate structures that guaranteed operator return on investment. BC Hydro was mandated to facilitate program implementation and purchase electricity from the private operators at above market prices. Bill 17 also mandated BC Hydro install smart meters in all BC homes.
Surplus Electricity and Falling Prices
Predictably, rent seekers flocked to the market, with new wind and “run of river” small hydro projects. The combination of additional electric supply and poor economic conditions in major U.S. markets has led to a collapse in the export price for BC’s electricity. BC Hydro is purchasing expensive “clean energy” and selling it at loss into the export market.
BC is preparing for another election in May 2013. With the Liberals down in the polls, the socialist NDP has latched onto BC Hydro’s supposed mismanagement as an example of Liberal failed policy, and as the justification to shut down BC massive Site “C” hydro dam project, the first major hydro project in the province in over three decades. The NDP has opposed Site “C” for years on environmental grounds.
There is irony in the socialist NDP complaining about Liberal ideology driving the current clean energy policy. As the socialist party, the NDP has embraced anti-development and green orthodoxy as a means to impose its Marxist ideals.
That the NDP is prepared to sacrifice the economic well-being of British Columbians at the altar of radical environmentalism is a given. That the Liberals were prepared to do so for purely political purposes is hardly more worthy of celebration.
With the adoption of the 2008 “Climate Action Plan” and Bill 17, the so-called “Clean Energy Act” of 2010, the BC Liberals achieved three political objectives, all of which led to significantly higher energy prices for all of BC.
The Liberals imposed North America’s first “Carbon Tax”, which raised the cost of living for each BC resident and has no impact on global temperature or carbon dioxide emissions. It did negate the claim the NDP would have in the 2009 election that the Liberals “didn’t care about the environment”. BC’s Carbon Tax somehow “cost” BC nearly $1.15 billion in 2012, while generating only $962 million in revenue. Global concentrations of CO2 have risen over the past decade. The global temperature hasn’t changed in 16 years.
The second objective was related to BC’s participation in the ill-fated, but little known “Western Climate Initiative”. Essentially, the WCI was a marketing effort for energy producing jurisdictions, like BC, to sell their energy into the California market. The California energy market, while large, is being made increasingly dysfunctional by layers and layers of “green” state regulations and laws. It is interesting to note that after all BC’s efforts, even hydroelectric energy was deemed not green enough for consumption in California. Being shut out of the California market led to surplus in BC’s generation capacity.
Thirdly, the BC Liberals under Gordon Campbell and Christy Clark were encouraged by rent seekers to create the conditions under which electricity could be produced by private entities. On the face of it, encouraging private investment is justifiable. Unfortunately the concept of encouraging development to meet an anticipated imaginary demand for more green electricity has become, under the “Clean Energy Act”, an exercise in crony mercantilism.
Increasing Utility Bills to ‘Fix’ the Planet
Bill 17 provides developers of private energy the ability to milk taxpayers to ensure profitability. The Standing Offer and Feed in Tariff provisions in the Act require the government to enter into long-term contracts with power projects. The act requires the BC Hydro to pay a rate to the provider that ensures all costs are covered. The act also prohibits the BC Utilities Commission from amending rates.
Currently, BC Hydro generates hydro electricity for about $0.02/kWh. Green electricity costs up to $0.19/kWh. BC Hydro is bound to purchase all private power at rates beneficial to the private operator – and BC electricity users pay the subsidy.
The act also mandated smart meters that allow BC Hydro to charge differential rates to users based on volume consumption and time of use. BC Hydro customers are charged an increased rate after a certain volume of electricity is consumed. Typically, higher volume consumption results in a discount. In BC Hydro’s case a premium is charged, and the premium goes to finance the impacts of the Climate Action Plan and the Clean Air Act. Coming soon “time of use” premiums will be charged for electricity used during peak use times. Without smart meters, differential rates are almost impossible to impose, in a cost effective manner.
There are no health risks related to smart meters, and those who protest the meters on that basis do a disservice, by delegitimizing rational discussion of the true evils of smart meters.
Are Hydro’s Losses Political Gains?
BC Hydro’s projected billion-dollar loss, astonishing given the company’s virtual monopoly, is not the fault of BC Hydro management. It is the direct result of political meddling, this time by the Liberals, in the name of addressing “climate change.” Yet time and again, the underlying hypothesis of increased atmospheric CO2 catastrophically driving temperature is proving false.
The public policies that politicians of all stripes have imposed on us to address climate change will haunt us for years. Perhaps the BC Liberals can be forgiven for climbing aboard the climate change bandwagon for political purposes. Perhaps not. To suggest the NDP would be any different in this case is absurd. Neither party is particularly concerned about the climate. With an election at hand there’s more than just money at stake.
Mark Walker, a 30-year veteran of community newspaper publishing, writes op-eds on energy and climate-change relating to Canadian public policy. He is based in British Columbia and blogs at/as http://kootenaybob.wordpress.com/.