‘We Just Want the Truth’: Commercial Customers Warn B.C. Hydro’s Forecasts Could Lead to Costly Oversupply

An association representing B.C.’s commercial sector and business interests says it has compelling evidence that B.C. Hydro has over forecasted electricity demand over the past 50 years — leading to anticipated revenues “that won’t show up” and creating a large existing electricity surplus roughly equal to the power from the Site C dam.

The end result, according to David Craig, the executive director of the Commercial Energy Consumers Association of B.C., could be cumulative new hydro rate increases so significant that that some industries in B.C. may no longer be able to compete as well in their world markets, potentially risking the viability of some businesses and the jobs they support.

Craig confirmed that his association is challenging B.C. Hydro’s projections of power demand — known as “load forecasts” — in an on-going proceeding at the B.C. Utilities Commission, the agency responsible for approving hydro rate increases.

“We just want to get the truth,” said Craig, who previously spent more than 20 years working for B.C. Hydro in various management positions, including as the head of the utility’s accounting group and internal audit function.

“Hydro’s been buying too much energy at very expensive prices. It’s in the interests of all commercial customers in B.C. and all ratepayers to find out what the facts are.”

Craig’s comments come only weeks after Premier Christy Clark’s statement on the campaign trail that cancelling construction of the $8.8 billion Site C dam on the Peace River would “literally put British Columbia families and business in the dark.”

The premier’s statement is “just not accurate for a whole bunch of reasons,” according to economist Marvin Shaffer, a professor in SFU’s Public Policy Program.

“If Site C didn’t go ahead, there are other sources of supply,” explained Shaffer, who has said it is not cost effective to cancel Site C right now even though there “never was a business case for the government’s rush to build the Site C project.” (A recent UBC report, on the other hand, concluded that cancelling the controversial project by the end of June would save between $500 million and $1.6 billion.)

Craig declined to respond to Clark’s statement about the pressing need for Site C, saying that his job is “to get in, get the data, see if I can find the truth of what’s there and…present fact-based debate and argument.”

“We don’t get to prosecute the past but we do get to plan the future,” said Craig, whose association represents the commercial sector energy consumers by consulting with industries and organizations that include the B.C. Chamber of Commerce, Landlord B.C., the Building Owners and Managers Association, and the B.C. Greenhouse Growers’ Association, as well as B.C.’s municipalities.

According to B.C. Hydro’s own data, energy demand in B.C. has been stagnant for the past decade in the residential and commercial sectors.

Yet, during January’s cold snap, B.C. Hydro issued a news bulletin announcing that electricity demand in the province was at an “all time high,” and reassuring customers that “the power will be there on the coldest, darkest days of the year — without brownouts or without having to import expensive power from other jurisdictions.”

Investments like Site C, said the same B.C. Hydro bulletin, would help meet the “growing demand” for electricity in the province and ensure reliable power in the future.

When the government announced its final approval of Site C in December 2014, former Energy Ministry Bill Bennett told the media that B.C.’s electricity needs were forecast to increase by 40 per cent over the following 20 years. “It’s clear that to keep rates low, we must choose the option of building Site C,” Bennett said.

In a 2013 submission to B.C. Hydro’s Technical Advisory Committee, Craig’s association warned of the risks of proceeding with Site C and other power acquisitions when the electricity was not needed, saying that “this future power supply…needs to be avoided for as long as possible.”

“The risks of oversupply are the most prevalent risks in the B.C. Hydro system,” said the association. “The future rate increases for all B.C. Hydro customers, which come with these choices, will be significant if the power is supplied at existing rates.”

At the time, the association highlighted energy conservation measures as a cost effective way of helping to defer new energy purchases like Site C.

“We’ve spent money on conservation and efficiency and it’s working,” explained Craig, who is also the vice-president of the B.C. Advanced Conservation and Efficiency Association, a non-profit organization that advocates for enhanced conservation and energy efficiency practices.

But B.C. Hydro has backed away from energy conservation measures since 2013, the year before Site C’s final approval. It has reduced plans for energy conservation and efficiency for the next 20 years and expects energy savings to decline dramatically as Site C and other planned energy acquisitions are forecast to come on-line.

As part of the BCUC proceeding, the Commercial Energy Consumers Association asked B.C. Hydro to share its “load forecast” information and figures on actual energy demand for the past 50 years so it could do its own number-crunching.

Craig said that led to the emergence of the pattern of “systemic” over-forecasting, “decade by decade.”

“Why is B.C. Hydro still over forecasting after 10 years of declining use?” he asked.

Craig said the association’s goal is to ensure that if something is awry in B.C. Hydro’s data definitions it is corrected, so that load forecasts will be more accurate and B.C. does not continue to end up with large amounts of surplus power that could lead to higher hydro rates.

Right now, the province has so much electricity that B.C. Hydro is paying independent producers millions of dollars a year not to generate power.

Yet rising hydro costs are already challenging some of B.C.’s biggest industrial power users, including some pulp mills, to look for ways to manage their costs to remain competitive in their markets, including developing their own natural gas-fired power generation.

“[The] impact of over-forecasting is that their plans end up anticipating revenues that won’t show up,” explained Craig. “And when those revenues don’t show up it turns into rate increases. And when they acquire more energy than they need and sell it for less, that turns into rate increases.”

On April 28, B.C. Hydro corrected two “load forecast” figures it had provided to the BCUC, apologizing for the revisions.

The corrections were made to the 2003 and 2013 load forecasts — which project electricity demand for many years beyond those dates — and Craig said the “size of the error in the data for the 2013 forecast was substantial.”

He also confirmed that the Joint Review Panel that examined Site C for the federal and provincial governments — concluding that there was no need for Site C’s energy in the timeframe presented by B.C. Hydro — was given the same 2013 load forecast figures contained in B.C. Hydro’s corrections, and not the erroneous forecast.

Craig said far more than two years of load forecasts will need to be corrected in order to begin to address the problem of over-forecasting. “If they’re only correcting the data point for a couple of years that will not make any significant difference.”

He said the next step in the process is for the association to file its argument with the BCUC, and for B.C. Hydro to file counter-arguments.

“At that point you’ll have the debate open and transparent in front of the utilities commission and the utilities commission will make a decision on it.”

B.C. Hydro did not respond to two requests for comment.

B.C. Hydro Forecast Revisions Submission to B.C. Utilities Commission by DeSmog Canada on Scribd

Image: B.C. Hydro president Jessica McDonald at a Site C announcement. Photo: Province of B.C. via Flickr

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