Three weddings and a funeral

Government plans for electricity in BC
May 1, 2003

The provincial government has embarked on a massive redesign of BC's electricity system. Throughout this process of radical restructuring it has repeatedly downplayed the extent of the changes and continues its mantra that BC Hydro will remain in the public sector. This is literally true, but it is a carefully crafted message. In truth, the government's new energy plan will result in "three weddings and a funeral" for BC Hydro, and by the time the ceremonies are over, the utility that has served the BC public so well will be left a shell of its former self.

The funeral is obvious: it refers to the demise of the critical role BC Hydro has played in this province. The restructured electricity system puts the future of electricity in BC in the hands of the private sector, thereby putting at risk all the public advantages that derive from the collective ownership of electricity resources. These advantages are considerable: BC has among the lowest electricity rates in North America; it is a very clean source of energy because it is hydro-based; and it is an extraordinarily reliable system because meeting future electricity needs has been the planned responsibility of BC Hydro.

The weddings refer to three extraordinary events that take crucial components of the electricity system away from BC Hydro. Unlike modern, healthy marriages between equals, these marriages are bad bargains where one partner looses most of what it brings into the marriage and its identity is wiped out. For BC Hydro--and the public which owns the very sizeable electricity assets in BC--these liaisons offer an extremely costly and unstable future.

Marriage 1, with Accenture: A private Bermuda-based company, Accenture, took over all the major services activities of BC Hydro on April 1, 2003. These involve customer services, financial services, human resources, information technology and procurement services. It was a change that cost BC Hydro $60 million and one-third of its workforce. Because Accenture is a private corporation, the details of the transaction are not public, and at no point was a business case made to the public regarding the need for this change. By all measure of efficiencies for public utilities, the administrative services of BC Hydro have historically been excellent.

Marriage 2, with RTO West: The transmission system of BC Hydro (the large system of wires taking electricity from the dams to distribution systems) will be severed from BC Hydro and become a completely separate private legal entity. This is the first step toward the turnover of transmission to a US entity known as Regional Transmission Organization West (RTO West). RTO West will completely control the transmission system, including making decisions about who has access to the transmission lines, what prices will be paid for this access, and what future investments will be made to the system. British Columbia will continue to own the wires, but its function will be restricted to collecting rents from those who use the wires. The main point of severing the transmission system from BC Hydro is to encourage private electricity production for export.

Marriage 3, with the Private Power Producers: BC Hydro will no longer plan the future electricity supply needs of the province. Rather, new electrical generation facilities will be the preserve of the private sector, with BC Hydro confined to upgrading existing facilities. This means that BC Hydro will not be able to initiate new investments in new gas, hydro, wind, or solar facilities.

Relying on the private sector for future electricity injects considerable risk into a very stable system for several reasons. First, the private sector is unlikely to bring new electricity into the market unless the price for electricity in BC rises considerably. Second, with the system increasingly oriented toward exports to the US, any private generators of electricity will have the option of exporting power, thereby benefiting from higher prices south of the border. And third, BC consumers will be competing with US customers for power. While the government intends to protect prices for a limited period of time through what it calls a 'heritage price,' it is very clear that the ultimate intent of the electricity plan is to move to an integrated North American system with North American market prices.

The government's promise to keep BC Hydro in the public sector is being kept only in the most literal sense. What remains of BC Hydro will be in the public sector, but the corporation itself will be near lifeless. The business of electricity in BC is being rapidly privatized, with a shift in focus away from meeting the needs of the people of this province and toward meeting the needs of private power producers.

These changes are radical, and under international trade agreements they will be binding. Yet they are occurring without public debate and without a clear mandate from the public. Because they are so serious and irreversible, they deserve much more public scrutiny.

Marjorie Griffin Cohen is an economist and professor of political science and women's studies at Simon Fraser University.