Market News

 September 05, 2013
Conservation, New Hydro Keys to BC Hydro's Future

 BC Hydro says it will take both an ambitious energy conservation program, as well as building the controversial Site C hydroelectric project in northeastern British Columbia, to meet a projected 40-percent increase in electricity demand over the next 20 years, according to BC Hydro's recently released draft Integrated Resource Plan.

The B.C. government says the plan's recommendations will ensure BC Hydro can support the economic potential in the province's northern regions, including development of an LNG export industry.

The IRP's initial draft was released in May 2012, and this new draft will now be made available for additional public consultation and comment from Sept. 3 to Oct. 18, 2013. Following these consultations, Hydro will resubmit the plan for consideration by the B.C. government by Nov. 15, 2013.

"Predicting how much electricity B.C. will need over the next 20 years is a difficult challenge, particularly with resource industries like liquefied natural gas and mining positioned for the largest expansion since the days of WAC Bennett," said B.C. Energy and Mines Minister Bill Bennett.

He was referring to the province's longest-serving premier. The late WAC Bennett (no relation to the current energy minister) held office from 1952 to 1972 and established the province's "two river" hydroelectric policy and infrastructure on the Peace and Columbia rivers. He was also a key player in the 1964 Canada-U.S. Columbia River Treaty.

"This is why it is so important for BC Hydro to hear more from First Nations, (other) key stakeholders and the public about our future electricity needs," the energy minister added.

Among the IRP's key recommendations is a focus on electricity conservation. It provides a strategy on how Hydro can save 7,800 gigawatt-hours per year (890 aMW) by 2021. "That's the equivalent of reducing new electricity demand by approximately 75 percent," a B.C. government news release says. The IRP also supports a range of programs and incentives giving customers the ability to cut their power bills by using less electricity.

As well, the IRP recognizes that Site C -- a third dam/generating station proposed for the Peace River -- would meet long-term needs of customers with cost-effective, reliable, renewable energy. However, there's strong environmental opposition to the long-planned and previously rejected 1,100-MW project that would flood farmland in the region.

The draft plan also demonstrates that Hydro has an adequate energy supply to meet the initial electricity requirements of proposed LNG facilities -- approximately 3,000 GWh (34 aMW) annually -- through 2021 and is prepared to serve additional LNG requirements as they emerge.

Approximately a dozen proposed projects have been announced for B.C.'s northwest coast, Howe Sound and Vancouver Island to export LNG to Asian and other global markets.

The plan points out, however, that most of the LNG producers on the B.C. coast are expected to use natural gas turbines for the energy-intensive process of cooling natural gas to convert it to a liquid prior to export via special deep-sea LNG tankers.

Another key recommendation calls for a review of the various independent power producer projects not yet in operation. Currently, the utility has 128 electricity purchase agreements with IPPs and of those, only 81 are in operation. Many of these contracts have been criticized as being too expensive for ratepayers.

Additionally, the B.C. government is directing BC Hydro to seek additional feedback on the variables that can impact electricity forecasts and on its contingency plans to address those variables. "There are many variables that can impact the growth of demand, such as changing customer behavior, technology shifts, global-energy markets, economic trends and climate change," the B.C. government said.

"BC Hydro has carefully considered the many trade-offs required to serve our 1.9 million customers while planning for the electricity needs of future generations," added BC Hydro President and Chief Executive Officer Charles Reid in a prepared statement.

"The IRP renews our commitment to conservation to provide customers with the ability to reduce their electricity bills and addresses the province's long-term electricity requirements which we will meet with clean, renewable and cost-effective supply options."

However, the BC energy minister told The Canadian Press wire service that as Hydro prepares to meet the growing demand for electricity, there will also likely be an increase in rates, although he said he doesn't know how much the increase will be. "There are pressures on rates right now. The pressures are from the amount that's being invested in (BC Hydro) infrastructure and, yes, they will have to go up," he said.

The Opposition New Democratic Party was quick to jump on news of a pending rate hike.

"Energy Minister Bill Bennett is now confirming the New Democrats' prediction that British Columbians will pay for the Liberals' mismanagement of BC Hydro through hydro rate increases," New Democrat leader Adrian Dix said. "Bennett is saying on the public record 'everyone in government recognizes that rates are going to have to go up' because of BC Hydro's growing debt. This admission comes on the heels of Premier (Christy) Clark claiming she wouldn't raise hydro rates."

The New Democrats are also questioning the need for Site C and point out there's already a surplus in domestic B.C. power. "This plan is putting Site C two years further back than that the last (IRP) draft in 2012 so that tells me that Hydro is conscious of the surplus in power that we have today and the consequences of having more power than we need," said NDP energy critic John Horgan.

Horgan is also concerned that the draft IRP will not be reviewed by the B.C. Utilities Commission. The governing Liberals removed that power from the BCUC when it introduced the Clean Energy Act in 2010. This act requires that Hydro submit an IRP at least once every five years. It also requires that at least 93 percent of the province's energy must come from clean or renewable resources, although that requirement was revised last year to exclude the proposed LNG facilities that are the primary plank in the B.C. government's long-term job-creation platform.

Meanwhile, the IRP says the 40 percent in expected growth has been calculated over the next 20 years prior to electricity conservation efforts.

It noted that 20 years ago B.C.'s population was 3.5 million people. At that time, total electricity use in the province was 46,000 GWh per year.

Currently, the B.C. population stands at 4.6 million people, and total electricity use is now 57,000 GWh annually.

Twenty years from now, B.C.'s population is expected to be 5.7 million people and total electricity use -- without conservation -- is expected to increase to 80,000 GWh per year. If the annual conservation goal of 7,800 GWh is achieved by 2021, then the net use 20 years from now could be roughly 72,000 GWh.

The plan says Hydro will spend C$445 million on conservation between 2014 and 2016 alone.