You’ll pay more to BC Hydro to Balance the BC Budget


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There were reports this morning that BC Hydro would be raising its rates by up to 26% to meet its revenue targets for the coming year.  Why? Because the BC Government is using BC Hydro to balance its budget.

Via CKNW, this is a pretty fascinating quote from Minister Bill Bennett:

“We did our budget prognosis essentially on the basis of receiving the dividend from BC Hydro and we intend to receive that dividend this fiscal year, we will not be able to balance our budget if we don’t receive that dividend.”

What does that mean in context?  Well, BC Hydro is owned by British Columbia. The “dividend” being used to balance the budget is the profit that BC Hydro generates.  Which is determined by the rates we pay.

So – the Government of BC is raising rates to balance the BC budget; in effect, raising taxes through the back door – or the power plug, if you please.

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Kevin is a cooperator, an always-student, and passionate about the arts. As a principal of the Incipe Cooperative, Kevin works with colleagues in a workers' co-op offering services for advocacy and nonprofit organizations. He's passionate about education policy, having been through twenty some-odd years of schooling and still thinking it changes the world. He also thinks that art changes the world, and he works with Art for Impact to celebrate art's power for social change. A Vancouver born and raised resident who is exiled from Toronto, he constantly loses umbrellas and probably rants too much.

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32 thoughts on “You’ll pay more to BC Hydro to Balance the BC Budget”

  1. Well. Lucky for them they didn’t succeed in privatizing it all the way.

    Of course it’s win-win for them; they also hope to piss us off enough at BC Hydro that we’ll be OK with privatizing it now. Wanna bet? I can’t wait–within a year we’ll have flacks talking about how the rates got hiked because of the inefficiency of the public sector. Leave aside that except for the Liberal squeeze, the main thing making BC Hydro more expensive is outsourcing production to the private sector.

  2. IPP power is cheaper than BC Hydro’s own generation.

    Take a look at BC Hydro’s F2013 annual report. It says BC Hydro is buying IPP power at the average price of $62 a MWh. While BC Hydro’s own generation cost is $73 a MWh.

    The myth that the private sector is less efficient than the public sector is just a myth, pushed by the union where some BC Hydro mid level technicians are paid more than Steven Harper. And that at the ratepayer’s expense.

    Rate increases can be traced to infrastructure rehabilitation and extreme internal costs, overhead, and inefficiencies.

      1. Actually, I wouldn’t be that surprised if the report says exactly that. After all, the Liberals did manage to outsource various accounting-related functions to the private sector. Specifically, to Arthur Andersen of Enron fame, after a name change to Accenture. It’s like having the Fraser Institute do your books in a partnership with Bernie Madoff.

        But in general, public power costs considerably less than private (and of course, the less thoroughly private power is regulated, the more it generally costs). The record is quite clear. And BC Hydro, certainly up until the Liberals started doing their best to run it into the ground, has for a long time supplied some of the cheapest, most reliable power on the continent. I must admit though that it wasn’t the left who were responsible–it was the SoCreds who, back in the day, invested megabucks in public power. That was back when even the right understood that the public sector had an important role in building the province.

        1. What is your evidence that public power costs less than private power?

          The evidence presented in the BC Hydro 2013 Annual Report is that private power is 15% cheaper than BC Hydro power.

          For future power, IPP power is about 30% less than Site C.

          1. Well, BC power is, for the most part, public.
            In the United States, most power utilities are private.
            But BC rates are among the cheapest in North America.
            So . . . shouldn’t they be among the most expensive, if public power is always more expensive than private power?

            (As a side note, apparently BC Hydro’s rates are rising considerably at the same time the private component grows considerably and everything else stays the same, using existing facilities to produce the same power they’ve been producing all this time. But apparently this is because the new power is . . . cheaper. Uh huh)

            1. BC power is cheap because of large rivers, mountains, and high rainfall. Nothing to do with public sector. Idaho has cheaper power than BC, and Alberta has cheaper power than BC. Montana rivals BC Hydro prices. So you are wrong.

              Rate rises in BC is due to 60 year old infrastructure falling apart. IPPs have nothing to do with that BC Hydro (BC Hydro claims to the contrary but that is because they dont deduct for taxes paid by IPPs).

              IPP power is 15% to 30% cheaper than BC Hydro. So how can it be responsible for rate increases?

      2. Stephen – I did provide the link. Read my post again. “BC Hydro F2013 annual report”. Read this and then get back to me.

        IPPs are cheaper than BC Hydro’s own generation. So why should IPP contracts cost over the next few decades? Electricity must come from somewhere. Wherever it comes from, it will not be free. BC Hydro can contract power from Washington State that includes coal, gas, and nuclear fired power – namely dirty power. BC Hydro always contracts in the long term because it cannot rely on the spot market to feed BC. So BC Hydro will enter into long term contracts with coal generators in Washington or Montana. The cost of this is above $60 a MWh as long term and clean power have a premium.

        Or BC Hydro will generate clean power from its own dams at 73 a MWh. So over decades that will be a huge amount of money which BC Hydro will have to charge ratepayers and pay to its union and to maintain its infrastructure, replace old facilities, etc.

        The BC Hydro can buy clean and green power from IPPs at $62 a MWh, again long term. BC Hydro makes a substantial profit of 73 – 62 = $11 a MWh when buying power from IPPs. The longer the better. Not only this is riskless and BC Hydro does not need to borrow money but it will not be faced with cost overruns, etc. In fact BC Hydro gains over time because the IPP price raises about 1/4 of the inflation rate while BC Hydro reaps 3/4 of the inflation rate.

        Please read the Annual Report. BC Hydro does not lie.

      3. Stephen, IPP power will cost BC Hydro $62 a MWh and there are long term contracts that amount to billions of dollars (to be exact about $9B).

        If BC Hydro generates its own power, it will cost more: $73 a MWh. So it will cost BC Hydro billions of dollars more than IPP power.

        Look at it this way: BC Hydro profits $11 a MWh by buying IPP power. The longer and the more billions these contracts are, it is better for BC Hydro, the ratepayers and the province.

        So what is your point that IPPs have long term contracts?

        1. so, if the math works out so well, why wouldn’t the government and bc hydro want to eagerly release all the long term contracts with the payment schedules?

          “So, over the last six to eight years how much new debt has BC Hydro taken on in your name, as a citizen and owner; do you know or care? Besides the formal amount of $8 billion in new total liabilities it has added $2.2 billion of receivables from the ratepayer’s category. BC’s Auditor General reports that it looks like this category is programmed to balloon even more. These obligations do not take into account the present value of the secret IPP contracts that would probably add another $30-40 billion to total liabilities.”
          http://commonsensecanadian.ca/bc-hydro-exploding-debt-accident-or-design-ipp-private-power-nerc-erik-andersen/

          1. Wrong. The government has released the LCOE or the average price that BC Hydro pays for IPP power regularly. What each individual company pays is a proprietary. But the weighted average of the prices was published a long time ago.

            For NEW yet to be built IPP power, BEFORE deduction for taxes/fees/royalty/equity paid by IPPs to governments, the levelized weighted average plant gate price is $102 a MWh for hydro and $100 for wind. See

            http://www.bchydro.com/content/dam/hydro/medialib/internet/documents/planning_regulatory/acquiring_power/2010q3/cpc_rfp_process_report.pdf

            After you deduct taxes/fees, etc. paid back to governments, the price drops to about $70. Compare this to BC Hydro’s own Site C which will be $114 a MWh.

            The contract is here:

            http://www.bchydro.com/content/dam/hydro/medialib/internet/documents/info/doc/info_-_cpc_-_specimen1.doc

            Government enterprise is always costlier than private enterprise. BC Hydro employees are receiving salaries and benefits 30% higher than the market.

            1. “Government enterprise is always costlier than private enterprise.”

              can’t let that one go. that is a statement that is way too much of a generalization and sounds like an ideological assertion. it’s impossible to prove and in many cases can be proven false. a profit layer exists in private enterprise that can make it more expensive than public delivery lots of times.

              so you’re saying there are no contracts or payment schedules that have not been fully released?

              1. Let me modify this. Government enerprise is generally costlier than private enterprise.

                The reason is very simple. If you ever have been in business, you will quickly realize that you can produce the same thing at half the cost, if you work harder and be smarter.

                In private enterprise you have competition and it is your own money that you are burning. This will incentivize you to produce at half the cost.

                In governmnet enterprise, the manager doesn’t have a penny invested, and he is burning other people’s money whic his essentially limitless. He will take no risks because he will not get the benefits of the risk, but all the liability.

                That is why BC Hydro gold plates everything it builds. John Hart Dam costs a little over $600,000,000 to rebuild. But BC Hydro will be spending $1.1 billion because of its overhead, bloated staff, and staff that get paid more than Stephen Harper.

                Read the Annual Report by BCH. BCH’s cost of generation is extremely high because of overhead, high salaries, bloated staff who can never be fired, inefficiences, and mismangement.

                In private enterprise you have competition, and you can’t increase your profit past the minimum needed to keep the business alive. If you try to charge more and increase your profit, someone else will eat your lunch.

                What is your evidence that public power costs less than private power?

                The evidence presented in the BC Hydro 2013 Annual Report is that private power is 15% cheaper than BC Hydro power.

                For future power, IPP power is about 30% less than Site C.

                – See more at: http://politicsrespun.org/2013/09/youll-pay-more-to-bc-hydro-to-balance-the-bc-budget/#comment-252003

                1. i get what you’re saying. but lots of this is just economic theory and ideological stance. other things that make laissez-faire economic theory not based in the real world is that people are deemed to be rational actors and we have perfect information to make economic choices. neither of these are remotely true, which help to make economic theory with these premises the stuff of unicorns.

                  also, in the real world we have bankruptcy, limited liability and host of moral hazards that skew rational behaviour.

                  and this myth about limits to private enterprise profits neglect the reality of sweetheart corporate welfare deals, billions in federal government oil and gas subsidies and lots of other easy wins that corporations can lobby/extort out of governments. there is also a condition of radically constrained competition in some sectors which mitigate whatever theoretical gains come from pure competition.

                  but lots of this is just textbook stuff. and as i’ve said above, about as applicable to the real world as unicorns and their coffee shops and widget factories.

                  1. Stephen, thanks for your thoughts. However the part where you confuse private enterprise with cronyism comes out of thin air. If you ever had to deal with the government, you will quickly find out it is not the case in BC. Oil&Gas is not subsidized but get a tax break.

                    Can you give me 3 example of cronyism in BC?

                    Agree that competition is constrained by government in the form of lawful trusts, such as the milk board or the wheat board (demolished by Harper).

          2. IPP contracts are not secret see the two links below.

            Those obligations include capital contracts, contracts with subsidiaries, contracts with mining companies, etc. You need to itemize it.

            Once you itemize it, Hydro IPP contracts are about $9B. Since IPP power is 15% to 30% cheaper than high cost wasteful BC Hydro (some mid-level employees get paid more than Stephen Harper), BC Hydro will make a profit of $2 billion from Hydro IPP contracts, without lifting a finger.

            1. wow. i can really see your hate-on for wasteful bc hydro and its over paid employees.

              i find it not all that useful to argue about who gets paid more than some famous person. lots of staff in the bc liberal government make more than people in the west wing of the white house. and the sedins make more than elementary school special needs teachers, who arguably provide a more important service to society. so market wage rates versus other ways of measuring worth are like apples and oranges. and i see in another of your comments you referred to market rates. so it’s all about comparing incomparable paradigms.

              1. BC Hydro’s salary rates (including benefits) are 30% above market. And the place is bloated with costs and expenses going through the roof as no one wants to take risks, and there is always money approved by BCUC to throw at problems.

                Lets not get into rhetoric. No need for Sedins and gov. salaries. The statistics says it all. 30% higher salary than market, with no chance of getting fired, and unlimited ratepayer money, essentially says it all. There are public union technicians in BC Hydro that get paid $320,000 a year.

                IPPs have nothing to do with rate increases as IPPs cost BC Hydro less than its own cost of generation.

                1. can you toss in a link to show the 30% above market? i’d like to see a breakdown of hydro wages along with the market wages you are comparing them to as well as the source of the data for those market wages.

                  otherwise, it’s just an assertion, unfounded.

                  how do you know so much about internal bc hydro bloat/operations and bcuc dynamics?

                  so, regarding statistics over rhetoric, please provide the statistics that support your assertion.

          3. Accenture was a competition between multiple firms.

            IPPs is the toughest competition. BC Hydro solicits blind bids, and only selects about 1/3 to 1/4 of them. An IPP can only sell to one monopoly. But BC Hydro can buy from about 30 competing entities on its own terms. The terms are ominous. See my link before.

            Since you are versed in economics, do you know which way the price goes in a monopsony?

            Why do you think IPPs are cronyism? Name me one IPP that received a contract unfairly. You need to back it up.

            1. If you read the BC Hydro 2013 AR, it gives you the cost of generation, finance, depreciation, etc. and divide by MWh produced and you get $72.83 a MWh. This cost does not included taxes/fees/dividends paid by BCH.

              In the same document it says IPP power costs BC Hydro $71.23 a MWh. This cost includes tax/fee/royalty/equity paid to governments which is about 15% of revenue. For example IPPs pay prop tax and equity to first nations – BCH pays none. This brings down the true cost of IPP power to about $62 a MWh.

          4. Stephen, I have about 6 comments that is awaiting moderation. I have answered all your comments.

            The actual rate is proprietary as BC Hydro does not want an IPP to see how they were swindled when another IPP gets a better rate. The weighted average LCOE says it all.

            I have calculated the total liabilities to hydro IPP, and it is under $9B. About 1/3 of that is attrition, so the true number is $6B. But so what? BC Hydro gets a lot of cheap power below its cost of production. The more liabilities, the more merrier.

            Now if BC Hydro is taking on debt or putting that in deferral accounts, that has nothing to do with IPPs. Nice thing about IPPs is that they cannot play such games with the public. You’ll have to admit that.

            1. yeah, 5 comments. i was offline for a while. real life and all.

              you have answered all the comments you didn’t ignore. that’s fine though.

              we’re not talking past each other as you base lots of your arguments on data [bc hydro, as agency of this government] that i deem to be pre-spun.

      4. Wholesale cost of wholesale power in Alberta (100% private producers) averaged in the past few months:

        $30, $31, $37, $43 a MWh.

        Average price of BC Hydro power (retail) is $75.10 a MWh (see AR).

  3. You can google a study that recently came out of the Fraser Institute which indicated BC Hydro salaries are 12% above market and if you include benefits and pension (but not expenses) they are 30% above market.

    None of the left leaning think thanks bother to track this data, because it is so embarrassing, and should be kept away from people’s eyes.

    Also VanSun has a database of all public employees, and you can search for BC Hydro unionized technicians making $320,000 a year.

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