Clean Energy BC releases response to Zapped report

Clean Energy British Columbia has issued an information bulletin and report in response to the Ministry of Energy, Mines and Petroleum Resources report issued Feb. 14 that said Crown provincial utility BC Hydro overpaid for electricity obtained through purchase agreements.

“It is important to have a fair and factual debate when discussing important issues that impact affordability for all British Columbians,” CEBC says.

CEBC says the report, entitled Zapped: A Review of BC Hydro’s Purchase of Power from Independent Power Producers, “was a political document designed to make news headlines by alleging an over spending of $16 billion dollars over 20 years; however it was based on inaccurate information.”

According to the information bulletin, CEBC’s 30-page report debunks Zapped’s allegations mainly by using statements and statistics from BC Hydro. The report counters the misrepresentations embedded in the calculation that Zapped used to make its $16 billion overspending claim.

The CEBC report debunks Zapped’s three overall allegations that, starting in 2007:

  • BC Hydro bought too much energy
  • BC Hydro paid too much for the energy it bought
  • BC Hydro undertook these actions at the direction of the government.

First, CEBC says, the surplus energy that exists today is not large, it was not intentionally created by the previous government, and it was not forced upon BC Hydro. The amount of energy BC Hydro purchased from independent power producers (IPPs) a decade ago was based on its own forecasts made before the utility and other forecasters recognized the economic impact of the global financial crisis of 2008-09.

Second, Zapped asserts that the “value of all energy is Mid-C” (the spot market price of importing energy from the USA), but this is not used by energy experts procuring new electricity supply. Since 1989, BC Hydro has bought energy through long-term contracts that contain price certainty for ratepayers. In 2006, BC Hydro executives stated that purchasing from the spot market was accepting too much volatility. While the price of renewable energy has dropped in the past 10 years, at the time the EPAs were awarded to IPPs, BC Hydro’s own reports stated that the price of energy was cost-effective.

Third, the BC Liberals’ 2007 Energy Plan was not created with “the intent to create the appearance of an energy shortfall.” In 2007, after years of high net imports and strong domestic load growth, the Energy Plan set a goal of self-sufficiency by 2016. This was supported by BC Hydro executives stating to the BCUC, in 2006, that the net imports were too high and recommending replacing imported energy with long-term contracts with IPPs in B.C.

The previous government did not force BC Hydro to sign IPP contracts after the decrease in energy demand from the financial crisis was known. In 2010, BC Hydro (and other utilities) were still forecasting significant demand growth. By August 2010, BC Hydro had already signed the IPP contracts that resulted from the calls for power.

In conclusion, CEBC says, BC Hydro’s data does not support Zapped’s allegation of a $16 billion overspend. Zapped’s estimate of the over-purchased volume is eight times more than BC Hydro’s historical record and forecasts of net exports from surplus IPP energy. Zapped’s theory of Mid-C overcharging is irrelevant to the pricing of new projects energy and is not used by BC Hydro or any other utilities in regulated markets.

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