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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.

Climate Politics

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.

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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/.

10 comments

1 BC Hydro’s Billion Dollar Climate Bill » coalitionoffreedom.com { 02.19.13 at 1:06 am }

[...] Hydro’s Billion Dollar Climate Bill19 Feb 2013JonBy mwalker “BC Hydro is forecast to lose one billion dollars over the next four years, as a result of [...]

2 Jon Boone { 02.19.13 at 9:20 am }

“BC Hydro became an instrument for public policy, and a new way for government to indirectly fund green energy initiatives.”

“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.”

These two quotes from this timely and very perceptive article get at the heart of the problem with electricity production as a vehicle to provide highly reliable, secure, and very affordable service to all. Virtually everyone in modern society is dependent upon the flow of electricity, with the result that revenues in the trillions can be made available for the plucking.

As soon as “entrepreneurs,” and in this group I include opportunistic politicians (are there any other kind?), discovered how to game electricity and other utilities for fun and profit, the door was opened–widely–for a panoply of scammers. The key has been (and continues to be the case everywhere) to make electricity “an instrument of public policy” and inculcate electricity consumers with the notion that electricity is, almost by its nature, a “scarce resource.” Enron’s Ken Lay understood these twinned ideas almost from his company’s getgo. And it is the basis for much chicanery all over the world today, not just in BC.

Renewables, which basically add to the sense of more volatile demand (and hence do not play a zero/sum competitive game with conventionals), along with concepts like the smart grid and smart meters, which make money by limiting demand, charging more for less product (and making consumers feel that this is the natural way of things), are only the latest schemes to separate the public from its wallet. In this, there seems to be no conscience or sense of public purpose–from regulatory agencies, a blaze of energy economists and engineers, a kettle of corporate vultures, and, not least, the vast herds of politicians.

As is the case in British Columbia, this scam is perpetuated not only by liberals in the Liberal Party, and socialists in the Socialist Party, but conservatives in the Conservative Party. There is never enough money to slake their collective desire for more. And their continued goal is to hang the fruit as low as possible.

3 Eddie Devere { 02.19.13 at 1:45 pm }

Mark,
I share your anger at legislation that mandates the purchasing of “green energy” at extremely high values. You are right to criticize this example of crony capitalism, but it’s not clear from the article what you are actually in favor of. (The status quo???)
My personal opinion is that a good way to solve the problem of high levels of CO2 in the atmosphere is to institute a CO2 tax or a cap&trade of CO2 emissions.
We must eventually regulate CO2 emissions because CO2 is (a) a greenhouse gas, (b) an acid gas, and (c) a toxic gas that can cause nausea/headaches at levels as low as ~2000-5000 ppm. Longer term exposure at levels higher than 5000 ppm can be toxic. While the levels in the atmosphere are only 400 ppm, the levels can be much higher in buildings with poor circulation.
This doesn’t mean that CO2 is evil. CO2 levels in the atmosphere right now are “good” because plants need CO2 and today’s climate is better than the ice age that would occur if there were no CO2.
But CO2 levels above 1000 ppm are dangerous because of the combination of (a) warming, (b) less basic oceans, and (c) increased levels of headaches and nausea.
I think that it’s important to provide an alternative solution rather than just criticizing other people’s attempts. In my opinion, the status quo is not an option.
Also, I take offense to your line, “The true evils of smart meters.”

Smart meters can be pro-free market because they allow companies to charge electricity based off of the actual price of electricity in the market at that time. In my opinion, the direction of increased freedom is to use smart-meters, and eventually to eliminate electricity monopolies (i.e. electric utilities.)

4 Kent Hawkins { 02.19.13 at 3:05 pm }

Eddie,

First there is no feasible (technically, financially and operationally) ‘alternative’ solution for our electricity systems for the foreseeable future, that is for the next 10-30 years or so. Currently proposed new renewables are both unreliable and far from equal to the task. Major changes are very risky. We have to be very careful how we evolve our electricity systems because it is so imbedded in everything we do. A misstep resulting in set-back of adequate, reliable electricity availability could result in a major reduction in our well-being.

Our best course for this period is to do what we do now, including using the new fossil fuel sources that are now available, but do it better.

Your characterization of smart meters is not correct. The purpose they serve today is to provide a ‘smoke’ screen behind which consumer rates for electricity can be arbitrarily increased to help finance the very high cost of new renewables, and as a means to ‘ration’ electricity to cater to the unreliable production of new renewables, unless of course we all use electricity in the late night/early morning hours. All this is obscured by the promotion of the ‘smart’ grid, which is not smart at all. We simply do not know what the smart grid should look like, and throwing present day computer and communications technology at it without proper architecture and engineering is foolish.

I suspect by the time we figure out what we want smart meters to do, and how they will do it, we will have to replace those put in place today.

Another factor is the cyber threat already existing in the grid infrastructure and this must be the matter that must be satisfactorily dealt with before we merely proceed to increase our exposure. There is likely more to this than technology.

5 mwalker { 02.19.13 at 4:01 pm }

Eddie,

Just to be clear, there is no credible evidence that increased levels of atmospheric CO2 (at least in ranges to which you refer) are either dangerous, or have any significant impact on global temperatures. As such, any public policy that proposes to alter human behaviour, in the form of taxes, rationing or any other method that disrupts the price discovery mechanism for any form of energy is based on a false premise.

Even if the threat from CO2 were real, the full cost of mitigation is substantially higher than any presumed benefit that would be achieved through mitigation.

For hydroelectricity in general, and for BC in particular, which has no coal fired generation (BC Hydro does buy Alberta coal fired power from time to time) and virtually no natural gas generation – the idea that some charge to consumers is required for non-existent emissions as a result of producing the electricity is, for all intents and purposes, a fraud.

Therefore, climate and CO2 are handy covers for the unnecessary price increases – increased revenue to government is the only goal – and smart meters enable utilities to create consumer pricing differentials for what is a globally traded commodity – hydropower should be priced at the low end of any pricing interval as the input costs of production are minimal, and the primary input is “free” since it is god given water that turns the turbines.

I do not support the status quo, but would rather have the public utilities revert to their original mission of protecting consumers from government sponsored monopolistic market activities.

6 Jon Boone { 02.19.13 at 5:05 pm }

For those who want more information about what a dumb idea Smart meters are, consider reading this brief analysis from Consumer Digest:
http://www.consumersdigest.com/special-reports/why-smart-meters-might-be-a-dumb-idea/view-all.

As for an idea better than that implemented for electricity consumers in British Columbia while keeping production relatively “clean” (though hardly “green”), how about a hydro/natural gas tandem–combined with an eradication of any wind/grid solar applications that may be playing footsie with grid stability? All this in preparation for phased in nuclear generating plants over the next forty years. Moreover, why not invest in burying as many transmission lines as feasible to serve the goals of reliability and security in the region? Invest, too, in substantially increased preventative maintenance for transmission lines, maintenance that has in many areas been drastically reduced to return more yield to investors.

Puddling around with CO2 reduction schemes devolving around tax and cap and trade regimens is a sure way of getting fleeced while obtaining no benefit. Moreover, as I mentioned in a comment to Rob Bradley’s article on Julian Simon a few days ago, there are ideas worth considering about what should constitute “healthy” dosages of CO2, both for individuals and the world generally. But those who do so should carefully separate their inquiry from the cant and sloganeering invoked by climatism.

Those who want to understand my arguments about this should consult comments 3, 5, and 9 made after last year’s MR post by Chip Knappenberger: http://www.masterresource.org/2012/09/unloading-hansens-climate-dice/#comments.

Finally, those who hand wring about human induced global warming precipitated by excessive burning of fossil fuels in the production of electricity while braying about the need for social justice should be priests at nuclear’s altar. Or what’s a heaven for…?

7 Jon Boone { 02.19.13 at 6:33 pm }

Those concerned about a better electricity future in British Columbia should note that 90% of the province is powered by hydro, with no CO2 emissions. As Mark has noted, there is virtually no natural gas generation involved, although evidently BC is actively pursuing changing this situation. See: http:
//www.newsroom.gov.bc.ca/2012/02/natural-gas-fuelling-new-economic-opportunities.html

The primary thermal generation seems to be burning wood, yet another–uh–renewable. See: http://en.wikipedia.org/wiki/Electricity_sector_in_Canada#Generation.

There are also evidently no wind projects in BC, though there are, as Mark states, plans afoot. See: http:
//www.bchydro.com/energy_in_bc/energy_technologies/wind_energy.html

Since these projects would have no firm capacity, they would insure a more impoverished and diminished system for the province. But, hey, at least BC Hydro is “doing something,” isn’t it, even if that something is retrogressive, politically motivated for craven reasons, and much more expensive–while doing absolutely nothing to–uh–reduce those horrid greenhouse gasses, which aren’t a “problem” in the first place….

8 mwalker { 02.19.13 at 7:06 pm }

There are, as near as I can determine, three wind projects in BC. The Dokie project near Chetwynd, which is huge as planned but unlikely to produce at more the 10% of capacity if completed. Shinish Creek, which is a planned 15 MgW project, again unlikely to produce much electricity if it ever gets off the ground.

Both projects are fully subsidized by BC electricity consumers. All costs, including the cost of construction of transmission lines to the grid are being covered by feed in tariff rate structures.

The third includes a solitary windmill atop Grouse Mountain ski area in Vancouver. The tower was erected in time for the 2010 Olympics and is visible from just about anywhere in the Vancouver market – but has yet (along with it’s sister towers hidden away in a nearby valley) to produce any useable electricity.

It did however help the 2010 games claim to be the “greenest’ games ever.

In the meantime (past 16 yrs) CO2 concentrations increased, and the global temperature (whatever that is) remained unchanged.

9 Jon Boone { 02.21.13 at 8:20 pm }

Mark:
Your critique of BC Hydro finally shook loose a recent memory about how the outfit put to use the “idiot defense,” a take on the old plausible deniability theme used to such–uh–effect initially by the CIA as cover for the Kennedy Administration’s Bay of Pigs fiasco, escalated by Ehrlichman/Haldeman during the Watergate mess, and brought to a contemporary sheen by BC Hydro execs via its Smart Meter program. Here’s an excerpt from Wikipedia about the latter, which may resonate with you:

“In 2012, having been over-billed for electricity usage in British Columbia, customers were told by representatives from BC Hydro that they had consumed excessive amounts of electricity during the previously mild winter, when in fact the newly installed smart meters had malfunctioned. The Minister of Energy and Mines, Rich Coleman, had previously called overcharging smart meters “an urban myth.”

“According to BC Hydro’s director of Customer Care, it was because nobody in the highest ranks of the company and government was aware that a smart meter had malfunctioned at the Kamloops home of Trapper Cameron, who was sent a bill for over $1,000. ‘Only parts of the organization knew there was a problem with this meter in February,’ BC Hydro’s Jim Nicholson said. ‘It did not get escalated to me.’ He maintained the information also did not get ‘escalated’ to Coleman or to Reid or to BC Hydro’s media-relations department. ‘We should have heightened awareness,’ Nicholson said. ‘It should have made its way to people who are communicating [to the media].’”

“Getting escalated” deserves some sort of modified, limited hang0ut in our lexicon….

10 Weekly Climate and Energy News Roundup | Watts Up With That? { 02.24.13 at 10:39 pm }

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