The government is avoiding scrutiny and giving BC Hydro too much discretion, while at the same time rationing power to BC’s emerging economy.
Introduction
On Monday the BC government introduced new legislation, Bill 31, to “help us move faster on the North Coast Transmission Line”, a new $6 billion project to deliver power to Terrace and beyond.
The government announced a lot more than Bill 31, though. The proposals are a significant shift in energy policy, and further degrade the independent regulation of BC Hydro by the BC Utilities Commission (BCUC).
Let’s take a look at some of the issues with all this.
Limited partnerships, limited scrutiny
The first part of Bill 31 would change the Hydro and Power Authority Act, which governs what BC Hydro can legally do. If passed, Bill 31 would enable BC Hydro to enter into limited partnership agreements with First Nations to co-own the North Coast Transmission Line, which BC Hydro would then operate and maintain.
Giving BC Hydro the ability to enter into partnership agreements isn’t in itself terribly controversial – other companies do it all the time. The devil will be in the details, however, and a lot of questions remain. For example:
- Industrial customers typically pay a demand charge for the facilities they use plus an energy charge. How much of these revenues will BC Hydro give the partnerships for use of the transmission line?
- What profit will the partnerships be allowed to earn?
- What risk will these partnerships be taking? Will they receive guaranteed revenues from BC Hydro, like the winners of the 2024 Call for Power? Or will they be taking any risk that the transmission line is not as well used as BC Hydro thinks it will be?
These, and many more questions would be answered if the BCUC were to review the limited partnerships’ proposed transmission lines and BC Hydro’s agreements to buy services from them. However, the government intends to exempt these projects from BCUC oversight.
There is also the danger that other protections of the Utilities Commission Act will be lost. For example, public utilities are obliged to provide service once they’ve started, and may not discontinue service without permission (sections 38 and 41). The government intends to exempt First Nations partnerships in the North Coast Transmission Line from the Utilities Commission Act because BC Hydro is already regulated. We need to be sure that BC Hydro is still obligated to keep these transmission assets in service.
The biggest danger here, in my view, is that this will be done in secret. This government has a poor track record of being transparent about First Nations matters, as Vancouver Sun columnist Vaughn Palmer has noted.
More rationing
The second part of Bill 31 is even more troubling, and goes beyond merely enabling the North Coast Transmission Line. It would give the government sweeping powers to limit the supply of electricity to some key growth areas of BC’s economy.
If passed, electricity supply to data centres, artificial intelligence businesses and hydrogen exporters would be rationed (previously, rationing was limited to cryptocurrency miners), under a new “Electricity Allocation Framework.” The government’s claim that it is “supporting” emerging sectors of the economy by limiting the amount of electricity they’re allowed to buy is frankly nonsense.
While this framework talks about “new” projects, it’s worrying because Bill 31 is not so limited. Rather, it gives the government broad powers to prohibit “for a specified period or indefinitely, a public utility from supplying electricity” for any of these purposes. It appears the government would gain the power to deny electricity to an existing data centre, or to all data centres. This power is excessive and open to abuse.
As I pointed out last year, the BCUC already has the power under section 28(3) of the Utilities Commission Act to ration electricity if there’s a good reason, and the BCUC would be required to do it in an open and transparent hearing. Instead, Bill 31 would give this power to the government, which in turn could delegate it to a public utility such as BC Hydro without the same requirement for transparency.
Capacity casino
And the government does plan to delegate all this to BC Hydro, who will run a “competitive process” to allocate a limited amount of new power to each of the rationed sectors every two years. The first such “call for projects” will take place in early 2026, and 300 MW of power has been allocated for artificial intelligence and 100 MW for other data centres. The process will look like this:
It’s highly troubling that BC Hydro and its single shareholder, the government, will be running this process with no regulatory oversight. Bill 31 expressly allows the government or BC Hydro to discriminate on almost any basis it chooses. This raises the potential for favoritism in the selection process.
It’s not just the selection of the favoured projects that’s at issue here – the rates for the lucky winners will also be set by the government or BC Hydro. That raises the alarming prospect of BC Hydro setting its own rates. Normal enough in a competitive free market, of course, but BC Hydro is the monopoly provider of electricity for most of BC. Without regulation, it will be hard to have confidence that the rates were set fairly.
There you go again!
It’s no great surprise that the North Coast Transmission Line project will be exempted from BCUC review. Such exemptions are becoming so common with this government as to be almost routine, and further supports the argument that the BCUC is no longer independently regulating BC Hydro.
The government noted that a BCUC review of this magnitude could take 12 to 18 months. True, but this should not be such a big deal, as the BCUC’s review would typically overlap with the assessment done by the Environmental Assessment Office. But of course, the government has exempted the North Coast Transmission Line from that review too.
With no BCUC scrutiny, there will be no independent review of subjects such as:
- How strong is the demand for electricity on the north coast really, and does BC Hydro have sufficient electricity to supply these customers?
- Is BC Hydro’s proposed route the optimal balance between such factors as cost, environmental impacts, and reliability?
- What are the alternatives to the transmission line, and what are their pros and cons?
- How reliable is the cost estimate, which has already doubled from the earlier forecast of $3 billion as recently as 2023?
- Has BC Hydro done sufficient consultation with all First Nations that will be impacted, not just the ones that will co-own the transmission line?
- Will these new mining and LNG customers pay their fair share of the costs, or will all BC Hydro’s ratepayers see their bills rise as a result?
These are not merely bureaucratic issues – there are some genuine doubts as to whether the government is proceeding with the right project in the right way. I’ll be taking a look at these questions in due course.
Déjà vu all over again
We’ve been here before. The Site C Dam project was exempted from the BCUC’s review by a previous government in 2014. When an environmental review recommended the BCUC evaluate the project, the Energy Minister at the time, Bill Bennett, reportedly responded: “We won’t be doing that.”
The Site C Dam project was subject to continued criticism, especially by First Nations and environmental groups. The government that approved Site C was voted out of office, and the incoming government, led by Premier John Horgan, ordered an inquiry.
The BCUC conducted province-wide consultation, listening to hundreds of individuals, community groups and First Nations, before reporting back to the government. Premier Horgan could at least claim, when he decided to complete the project, that he had listened.
In this week’s press conference, Premier Eby said:
“We are making the decision as a government that this is in the public interest. We will be held accountable for that decision by voters. But to my mind, there is no debate about this.”
It certainly looks like there will be no debate. And to my mind, that’s poor governance.