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Changes restore independent oversight of BC Hydro

Victoria is introducing legislative amendments to further implement recommendations from the first phase of the comprehensive BC Hydro review, including restoring oversight of the corporation to the B.C. Utilities Commission.

“The old government sidelined the BCUC and made decisions forcing BC Hydro to advance its own political agenda at the expense of ratepayers,” said Michelle Mungall, Minister of Energy, Mines and Petroleum Resources, in a news release. “Acting on the first phase of our BC Hydro review, we’re re-empowering the BCUC to do its job as the province’s independent energy regulator and ensure BC Hydro works for people again.”

Proposed legislative amendments include changes that will reinstate the BCUC’s authority to review and approve BC Hydro’s Integrated Resource Plan (IRP).

The IRP is BC Hydro’s 20-year projection of electricity demand and its plans for meeting that demand. Currently, BC Hydro is required to submit its IRP to government for review and approval, bypassing the BCUC and significantly limiting the BCUC’s insight into BC Hydro’s electricity supply and demand forecasts, capital projects and energy purchase contracts.

Amendments to the Clean Energy Act, the Utilities Commission Act and the Hydro and Power Authority Act will ensure that the BCUC, not government, reviews and approves BC Hydro’s next IRP, to be filed by Feb. 28, 2021. After the 2021 IRP, the BCUC will determine when and how often future IRPs are to be submitted.

Among other proposed amendments to enhance BCUC oversight, changes to the Clean Energy Act would remove the authority for government to order BC Hydro to establish a feed-in tariff program. Under a feed-in tariff program, BC Hydro would enter into electricity purchase agreements with private power producers, likely at higher-than-market cost without the appropriate oversight of the BCUC.

The BCUC has been consulted and supports the proposed amendments.

The amendments are in addition to regulatory changes already implemented as part of the BC Hydro review to roll back past government directions that have restricted BCUC oversight.

Quick Facts:

* In June 2018 the B.C. government launched a comprehensive, two-phased review of BC Hydro to contain rate increases, control costs and position BC Hydro for future success. On Feb. 14, 2019, government announced the results of Phase 1 of the review, including:
* a new five-year (April 1, 2019 to March 31, 2024) rates forecast that reflects cost and revenue strategies to keep rates affordable; and

* a new regulatory framework which, among other things, enhances the BCUC’s authority to make decisions on rate increases, deferral accounts, capital projects and other key aspects of BC Hydro’s business.

* Phase 2 of the BC Hydro Review will start in spring 2019. Phase 2 will be informed by new government strategies, including CleanBC, and will be focused on positioning BC Hydro for long-term success within a rapidly evolving international and continental energy sector.

Learn More:

BC Hydro Review, Phase 1 results: https://news.gov.bc.ca/releases/2019EMPR0004-000231

BCUC: https://www.bcuc.com/

BACKGROUNDER
Legislative amendments clarify responsibilities of B.C.’s energy regulator

The B.C. government is proposing a package of legislative amendments to the Clean Energy Act (CEA), the Utilities Commission Act (UCA) and the Hydro and Power Authority Act that will implement recommendations from Phase 1 of the BC Hydro Review.

The changes, if approved, will help keep rates affordable, clarify the responsibilities of the B.C Utilities Commission (BCUC) and protect taxpayers from the implications of past policy decisions.

This includes:

Integrated Resource Plan (IRP):

* Amendments to the CEA, Hydro Power and Authority Act, and UCA will restore the BCUC’s authority to review and approve BC Hydro’s IRP, its 20-year plan to meet electricity demand. Review and approval of the IRP currently rests with the provincial government, not the BCUC.

* The deadline for submission of BC Hydro’s next IRP to the BCUC is Feb. 28, 2021. This gives BC Hydro the time necessary to incorporate into its long-term resource planning process the results of the Phase 2 of the BC Hydro review, the Province’s CleanBC climate plan and BC Hydro’s current revenue requirements application before the BCUC.

* After the 2021 IRP, the BCUC will determine when and how often future IRPs are to be submitted.

* Restoring BCUC oversight over BC Hydro’s IRP will be aligned with common practice in other jurisdictions (and for other utilities in B.C.) where energy regulators, and not government, review and approve long-term resource plans.

Feed-in tariff:

* Amendments to the CEA will eliminate government’s authority to order BC Hydro to establish a feed-in tariff program, a program through which BC Hydro could enter into additional new electricity purchase agreements with private power producers for the supply of electricity without the approval of the BCUC.

* BC Hydro is forecast to be in an energy surplus for the foreseeable future and does not need to purchase new electricity generation, which it may be required to sell for a loss on export markets.

Rate rebalancing:

* To help keep rates affordable, an amendment to the UCA will permanently prohibit the BCUC from rebalancing rates paid by various customer classes (residential, commercial and industrial) unless requested by a utility like BC Hydro or FortisBC.

* Without this prohibition, the BCUC may take action in the near term to rebalance BC Hydro’s rates, which would result in significantly higher rate increases for residential customers.

Expenditures for export:

* Amendments to the CEA will eliminate the concept of expenditures for export. Expenditures for export are BC Hydro expenditures on infrastructure and energy purchases associated with producing power that is surplus to BC Hydro’s domestic needs for sale on the export market. Under the CEA, the BCUC is obligated to calculate the cost of these expenditures and cannot allow BC Hydro to recover these costs from ratepayers.

* While all of BC Hydro’s current purchases from independent power producers were made to meet forecast domestic need, declines in demand following the 2008 financial crisis mean some of these purchases are now surplus.

* The amendments eliminate the risk of BC Hydro costs associated with the current energy surplus being considered expenditures for export (and therefore not recoverable from ratepayers), which could transfer significant costs on to taxpayers and/or impact the Province’s fiscal plan.

Powerex:

* An amendment to the UCA will clarify and confirm that Powerex (BC Hydro’s wholly owned marketing subsidiary) is exempt from BCUC oversight.

* Falling under BCUC oversight could challenge Powerex’s ability to compete in rapidly moving competitive energy trading markets, potentially reducing BC Hydro’s net income and negatively impacting the Province’s fiscal plan.

* Ratepayers interests will continue to be safeguarded as Powerex is subject to regulation by the U.S. Federal Energy Regulatory Commission. BCUC oversight would duplicate this existing regulatory framework.