Former BC government policies cost BC Hydro billions: energy minister
NDP will write down $1.1 billion in deferred expense costs to reduce the amount of rate increases.
VICTORIA — The cost of electricity in BC is going up by more than 8% the next five years but it’s 40% less than previously forecast by the former Liberal government, the province’s energy minister said Feb. 14.
An internal review at the Crown corporation found ways to cut rate increases forecast by the former government, Michelle Mungall said.
The first increase of 1.8% will be implemented April 1, if the independent regulator BC Utilities Commission approves the added expense, said Mungall. She said the rates proposed by the former government were set to rise by 2.6% this April, with further increases over the coming years.
A second increase of 0.7% is planned for April 1, 2020.
“We were committed to finding the best possible reduction, as much reduction as we possibly could from the existing plan under the BC Liberals, and we have looked in every corner to find every penny that we can pinch,” Mungall said at a news conference. “We have found that and were able to reduce the rate increases by 40%.”
Recently, BC’s auditor general Carol Bellringer said Hydro has amassed $5.5 billion in 29 deferred expense accounts, of which some are scheduled to be repaid over 40 years.
Mungall said the NDP government will write down $1.1 billion in deferred expense costs on BC Hydro’s books to reduce the amount of rate increases.
“We are able to do this because we accepted a recommendation from the review for BC Hydro to stop using the rate-smoothing regulatory account and to write off its balance to zero in 2018-19,” said Mungall, referring to an account that delays repayment of debt until some time in the future.
The government also pledged to allow expanded oversight over BC Hydro by the utilities commission.
Mungall said the utilities commission can provide BC Hydro’s outside eyes.
“Governments, they sometimes play politics, as we have seen.”
She said the review is the first step in taking politics out of BC Hydro and setting it back on a solid financial path.
Opposition critic Greg Kyllo said in a statement the government plans to embark on a misguided bid to keep rates affordable.
“BC currently has the fifth lowest rates in North America, thanks to investments made by our former government, but our system is aging and our population is growing,” said Kyllo. “That means we need to invest more than $2 billion per year in new and upgraded infrastructure.”
The announcement comes after a report commissioned by the NDP government said BC Hydro customers will pay $16 billion over the next two decades because the Crown utility was pressured by the former government to sign contracts with independent power producers.
The report says the Liberals manufactured an urgent need for electricity but restricted BC Hydro from producing it, forcing the utility to turn to private producers and sign long-term contracts at inflated prices.
Former BC Treasury Board director Ken Davidson authored the study, which estimates the cost to the average residential BC Hydro customer will amount to about $4,000 over the next 20 years, or about $200 per year.
Davidson’s report recommends all future energy purchases be made at market rates and finds BC Hydro must be allowed to meet supply obligations through a reasonable level of market trading, rather than by generating all electricity within the province.
The government launched a two-phase review of BC Hydro last June in an effort to identify cost savings at the utility.
Mungall said Davidson’s report also concludes the agreements forced upon BC Hydro were mainly with run-of-river producers, whose power is primarily available during spring run-off, a time when BC doesn’t require the power.