EXCLUSIVE: BC Hydro Paying Millions to Independent Power Producers to Not Produce Power Due to Oversupply

A state-of-the-art gas thermal power plant in Campbell River sits idle 90 per cent of the time, but — under a contract that runs until April 2022 — BC Hydro is paying about $55-million a year to ensure emergency power is available if needed, DeSmog Canada has learned.

The Island Generation plant, with a 275-megawatt capability, meaning it is capable of powering about one-third of Vancouver Island homes, is owned by Capital Power Corp., and is fired up only for peak power demands or when there are problems with subsea cables from the mainland that usually power Vancouver Island.

The company only incurs minor expenses as there is a skeleton crew of about 14 people and few maintenance problems, meaning it is similar to being paid for parking a vehicle in a garage, said a former employee.

“All the money they are getting for not running the plant is free,” said Kerry McRae, former construction superintendent for the plant who is questioning why BC Hydro is forging ahead with plans to spend $9-billion on the Site C dam when it is not using power from existing facilities.

It is a question that Adrian Dix, NDP critic for BC Hydro, would like answered, but during Question Period in the Legislature Tuesday, Energy and Mines Minister Bill Bennett took the question on notice, meaning he will answer later when he has more information.

‘We Are Paying Money for Nothing’: Dix

BC Hydro is paying Independent Power Producers across the province, in communities such as Nanaimo and Prince George, to not produce power because of over-supply, Dix told DeSmog Canada.

Most of the affected IPPs use biomass and are connected to pulp and paper operations as it is more difficult to stop run-of-river or wind power production, he said.

While the Campbell River plant has a role as an emergency power producer in low water years, other producers are simply being told BC Hydro will not take the power and, since contracts are in place, Hydro is paying penalties, Dix said.

“We are paying money for nothing,” he said.

“BC Hydro dramatically miscalculated energy demands in the current context. They overbought IPPs, which is one of the reasons we are in the catastrophic financial situation we are in now.”

The problem goes back to cabinet instructions under former premier Gordon Campbell’s government to buy enough energy from IPPs to be self-sufficient in low water years and now, with energy demands dropping and no sign of significant increases in industrial demand, there is a dramatic surplus while ratepayers are facing hefty cost hikes, Dix said.

“It was a cabinet decision to overbuild, but BC Hydro has effectively mismanaged the system,” he said.

“According to BC Hydro they are losing $1.4 billion in IPP power.”

The larger problem will come when the Site C dam comes into operation in about a decade, putting massive amounts of power into the system.

Site C is being built without any economic justification, the power will probably have to be sold at a significant loss and the influx could cause independent biomass power plants to go down, Dix said.

“Site C is a catastrophe for the economy,” he said.

However, BC Hydro spokesman Kevin Aquino said Site C is being built to meet the long-term electricity needs of BC Hydro customers and forecasts show that electricity demands in the province will increase by about 40 per cent over the next 20 years.

“Once complete, in 2024, Site C will provide clean, reliable and cost-effective electricity in the province for more than 100 years,” he said, pointing to a section of the Joint Review Panel report that says the Site C dam project, after an initial burst of expenditure, would lock in low rates for many decades.

The same report, however, stated that demand for the project couldn’t be proven, adding: ““Justification must rest on an unambiguous need for the power and analyses showing its financial costs being sufficiently attractive as to make tolerable the bearing of substantial environmental, social and other costs.”

When asked about the Campbell River Island Generation plant, Aquino said BC Hydro has a responsibility to ensure power is available when customers need it.

“We need to meet the needs of British Columbians on the coldest, darkest days of the year and that’s why we need to have back-up sources of power, such as the Island Co-generation plant,” he said.

Hydro has had a contract with the Campbell River plant since 1998, when it was a co-generation plant, attached to the Elk Falls pulp and paper mill. The mill closed in 2008 and the power plant was converted to run solely on natural gas instead of sending steam to the mill.

It is the largest power producing plant on Vancouver Island and has been a key source of emergency energy, Aquino said.

“We cannot afford to not have backups in place.”

Neither Hydro nor Capital Power, which bought the plant in 2010, would confirm the contract figures, but the Communications, Energy and Paperworkers Union previously estimated that Hydro was paying $150,000 a day or $55-million annually.

“Island Generation is fully contracted under a long-term tolling agreement with BC Hydro until April 2022,” said company spokesman Michael Sheehan.

During 2015 the plant produced 79 GWh of power and is an important source of power during periods of peak energy demand or when the main transmission lines to Vancouver Island are out of service, Sheehan said.

But a former employee, who cannot be named because of an agreement with the company, said, for the last three years, the plant has run less than 10 per cent of the time even though it is extremely efficient and clean.

“The strangest thing is (the company) is making more money than if they had it running,” he said.