REVIEW OF BC HYDRO: Could Mean Loss of Opportunity For First Nations in the Energy Industry

Upnit Power Project, China Creek, Majority owner-72.5% Hupacasath First Nation.  Will these Kinds of projects continue for FIrst Nations in light of BC Hydro Review.

 

On March 1, 2011, BC Hydro applied to the BC Utilities Corporation for a rate increase over three years of 32%. The backlash of this application resulted in the Government of BC undertaking a review of BC Hydro.

The Review is out and could have large implications for First Nations including reduced or no opportunity to become a power producer, little money flowing into the Clean Energy Fund, and less money for BC Hydro to do proper consultations and a firmer resolve by government to get Site C developed. This is an issue First Nations needs to get involved in to make sure these impacts are not as severe as they could be.

BC Hydro by law has to provide low cost power to the residents and businesses within BC. People have come to look at this as “a right” as opposed to a privilege. The rates of power being paid have not allowed BC Hydro to maintain its infrastructure and provide new facilities for power. The electricity system including transmission lines in this province are aging and in need of replacement and in the past 20 years not a lot of money has gone into this. In fact all across Canada the electricity system needs to replace transmission lines and it is a huge need. In April the Conference Board of Canada released a report entitled “Canada’s Electricity Infrastructure: Building a Case for Investment.” The report concludes that the electricity sector is expected to invest $293 billion over the next 20 years to MAINTAIN existing assets and meet market growth. The Review doesn’t touch on this to any great extent even though it is a significant issue.

Many of BC Hydro’s facilities were built in the 40’s and 50’s and are in need of upgrades. For example the John Hart facility near Campbell River is needing an upgrade at a cost of $1.35 billion and will take 5-6 years to complete. Similar upgrades are happening at Mica, GM Shrum, Revelstoke, Ruskin, and Fort Nelson. BC Hydro needs to expend money on their facilities and transmission lines in order to continue servicing BC. They are also upgrading their transmission system including projects like the Interior to Lower Mainland, Northwest Transmission line, Dawson Creek/Chetwynd, and Columbia Valley. If people want to have reliable power, money must be put into the aging facilities and transmission system, in fact, all of Canada and the US must do this and soon. This means increased costs of producing power.

When the Government decided to do this review, the panel that was doing the review did not include people who were experts in the energy business. A critical review that would cause major changes to a Crown Corporation whose total assets are $13,822 million and generated revenue of$447 million in 2010 was entrusted to the Deputy Minister (DM) to the Premier, DM to Finance Minister, and the ADM of environmental Assessment office. In my opinion, this panel should have had experts on the generation of power, climate change experts, experts on First Nations issues and much more. This lack of expertise is a huge flaw in the report and the resulting recommendations.

The report concludes that it is cheaper to buy from the US and Alberta than from IPP’s and that is the way to go to keep cheap power for residents of BC. If BC Hydro buys power from other jurisdictions, it is likely power made from sources such as coal that creates greater Greenhouse gas emissions. Why should BC support buying power from dirty sources when clean/green power can be produced right here in BC. If BC has set the reduction of greenhouse gases in BC, it should live with those reductions in purchasing power from other places or risk being hypocritical and contributing to the problem. Purchasing green credits is not the solution to the global problem. Further, if BC is focused on jobs and the economy, why not create the jobs and revenue here in BC instead of creating employment in Alberta or the US?

The whole issue of pricing of firm power from IPP’s has to be reframed to focus on comparing the costs of all new forms of power as well as to the cost of power from other jurisdictions and imported (dirty) spot market power. The report mistakenly assesses the cost of power by IPP’s. There is no determination as to what percentage of the increase of the proposed rate increased-and it would be a small percentage of that increase.

I have often wondered why some people think that generating electricity should be a monopoly owned by the BC Government. In other jurisdictions such as Alberta, there are no energy companies owned by the government. What happened to free enterprise?

Recommendation 40 says that BC Hydro must cut its soft costs with respect to consultations with First Nations. You would think the DM’s and ADM that wrote this report should know how important it is to do proper consultations with First Nations that are consistent with the Honour of the Crown and all the court cases so that the government isn’t consistently being dragged back to court for inadequate consultation. Wonder what the court would say when the Crown would argue they had to cut back costs for consultation? This is a pretty outrageous recommendation in light of the legal and constitutional obligations the government has in dealing with consultations with First Nations.

The other big issue with the report is the definition of self-sufficiency. The Clean Energy Act requires that BC Hydro be self-sufficient by 2016 at critical water levels and that BC Hydro have a surplus of 3,000 GWh of insurance energy at critical water levels by 2020. Basically, planning for the future including climate adaptation.

The recommendation is that self-sufficiency should be defined by average water levels, not critical water levels. Advice from climate change experts say that all predictions on water should be based on critical water levels as there is no average any more. Based on the new proposed definition of self-sufficiency, the report says that BC Hydro is basically almost at self-sufficiency.

The rationale for this is that in 2007 when the Energy Policy of 2007 was put in place and the Clean Energy Act was put into law, it was in an environment of economic growth, where natural gas prices were high and BC and other jurisdictions were cooperating to put a price on carbon through a carbon tax and/or a cap and trade. They say this is no longer the case and needs to be revised. Of course this goes against the current Energy Plan and Act and both would have to be amended. Such rationale is weak as it does not take into consideration the effects of climate change, the continuing need to reduce GHG globally, and the reasons for self-sufficiency.

What are the implications of changing the definition of self-sufficiency as proposed? Basically, BC Hydro would not be requiring any more power beyond site C, and would not be acquiring alternative energy sources.

What does this to do the economic opportunities for First Nation in the Energy business? Right now, many First Nations own and operate their own Independent Power Projects (IPP’s) or have a partnership with other IPP’s that includes ownership in IPP’s. Other First Nations are in the project feasibility and development stage. BC Hydro has said they will stand by existing contracts and probably maintain the Standing offer program but this greatly reduces First Nations ability to compete in the Energy Sector. The Clean Energy sets out as an objective that BC is “to foster the development of First Nation and rural communities through the use and development of clean or renewable resources”. Redefining self-sufficiency will definitely reduce First Nations opportunity to develop in the energy sector. If BC intends to amend the definition of self-sufficiency they would need to change the objective of the Clean Energy Act as it pertains to First Nations. If these changes are in the works, BC better be prepared to do some serious consultations with First Nations.

What about the Clean Energy Business Fund that the BC Government established under the Clean Energy Act? This included $5 million dollars and revenue sharing from IPP’s from the date of the legislation. Where will revenue come from for this fund? Will the government also back track on this fund? They have already disbursed some money from this fund. If there are no new IPP’s, there will be little sources of income for this Fund and unless the BC Government intends to put more money into it, or share revenue from their Heritage projects, they will be unable to assist First Nations who chose to develop under the Standing Offer program if it still exists. None of this was considered in the Review of BC Hydro and the hard-hitting implications of what this means to First Nations by redefining self-sufficiency.

There is also recommendations/assumptions that Site C will go ahead. Interesting that the ADM from the Environmental Assessment office sits on this panel. I hope she does not have anything to do with the Site C review or this shows that she has predetermined the results of the Environmental process.

Regardless, site C will cost $7.9 billion dollars. The cost to the environment has not been included in this. Costs will undoubtedly escalate as the years go by going through the assessment process and then through development if they get their approvals. This also does not include any compensation to the First Nations for total destruction of their sacred sites, use sites, burial sites, the 330 plus recorded archaeological sites, etc.

As noted in other articles on this Site, all the First Nations in Treaty 8 are opposed to this project as are other First Nations in other jurisdictions where water flows will affect their rights and water flows needed for human life. There is a huge barrier to get over before Site C can go ahead and this report bases a lot of its assumptions on the fact that Site C is a done deal

I have always advocated for regional independence in power as relying on several large dams could wreak havoc in instances of earthquakes, extreme weather events, droughts and decreasing snow packs that power generation depends on for spring freshets. In times of crisis, or in a competitive market, there is no guarantee that other jurisdictions will sell BC Hydro their power and then where will BC get its power? There is always the danger that California encountered when had to pay extremely high prices for power they desperately needed because there was no other choice. You cannot just build a facility over night when it is desperately needed and most projects are taking more than 4 years to develop.

This Review of BC Hydro does not reflect the values of BC First Nations, nor the values set out in the Clean Energy Act or Energy Plan. The objective was to go in and find out where costs could be cut in BC Hydro so there would not be such a large increase of cost to power. It was not the purpose of the Review to find out what was best for British Columbia in light of the challenges of the future, nor to look at the issues facing BC Hydro and how they could best be dealt with. The Government now will be acting on a report that is flawed, biased, and does not prepare us for the future. It is my hope that many First Nations leaders will speak out about this as well as other leaders, organizations and the public itself or we may be suffering from brown outs in the future or paying for very high power for dirty power imported from other jurisdictions.

 

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