BCUC reverses its decision to oversee BC Hydro’s planning of diesel replacements in non-integrated areas, despite pleas from First Nations.
Introduction
On October 22, 2024, the BC Utilities Commission (BCUC) reversed an earlier decision that had ordered BC Hydro to develop a long-term resource plan for its non-integrated areas, and instead accepted the utility’s proposed alternative approach.
Earlier I commented on how this is the fourth reversal of a BCUC regulatory decision in the last year, which brings into question the independence of the BCUC with respect to its regulation of BC Hydro, the provincially-owned electricity utility.
In this article I examine the BCUC’s October 22 decision – was it right to give up its role overseeing BC Hydro’s planning in the non-integrated areas?
Non-integrated areas
The term “non-integrated areas” refers to places where BC Hydro provides electricity service, but which are not connected to its main transmission grid. Instead, BC Hydro delivers electricity to non-integrated areas’ 28 communities and 12 First Nations from 14 separate generating facilities. The largest serves 1,700 customers, the smallest just 18.
The electricity often comes from diesel-fueled generators, which are relatively cheap and reliable, at least compared to the alternative of connecting remote communities to the transmission grid. However, they are not popular. One intervener in this proceeding claimed that diesel use “harms our air, lands and waters” and attributes “direct and indirect health impacts” such as respiratory problems to its use.
BCUC involvement
First Nations, in particular the Zone II Ratepayers Group (which represents the Kwadacha Nation and Tsay Keh Dene Nation), have been attempting since at least 2018 to get the BCUC’s attention to address the problem that, as they perceive it, BC Hydro is not doing enough to reduce diesel use in their communities.
After limited success “encouraging” the utility to act, in April 2023 the BCUC finally ordered BC Hydro to submit a long-term resource plan for the non-integrated areas, which would address how best to meet electricity demand over a 15- to 20-year period.
Crucially, a utility’s long-term resource plan is reviewed by the BCUC in an open and transparent process, and the BCUC can require the utility and interveners to provide responses to requests for information (the utility under section 43 of the UCA; interveners under section 13 of the BCUC’s rules).
BC Hydro’s proposal
But BC Hydro didn’t like this idea. Instead, in December 2023 it proposed instead to develop a “Community Context Report” for each individual non-integrated area, containing “planning-related information” developed in consultation with local communities and First Nations.
Under this arrangement, BC Hydro would submit a Community Context Report only when it’s ready to act in a particular community – either building a replacement generating facility or signing an electricity purchase agreement to buy electricity locally. There would be no comprehensive review of BC Hydro’s priorities, and no public process for the communities in non-integrated areas to engage with BC Hydro under the watchful eye of the BCUC.
The BCUC’s decision
The BCUC considered three main factors: the need for regulatory oversight; whether a long-term resource plan would “slow down relevant policy goals, such as diesel reduction”; and the related “regulatory cost and burden.”
Despite vocal opposition from all five First Nations participating in this proceeding, the BCUC reversed its earlier order and approved BC Hydro’s proposed approach. The BCUC believes that letting BC Hydro work directly with First Nations is “better suited” to faster diesel reduction. I beg to differ.
Maybe letting BC Hydro avoid a public proceeding to review its plans will speed up the diesel replacement, as the BCUC claims, although the evidence of progress since 2018 suggests that’s wishful thinking.
The most compelling reason for the BCUC to retain oversight of the planning is that BC Hydro’s relationship with some of its First Nations customers appears to have broken down entirely.
Irreconcilable differences
The response to BC Hydro’s proposal (described by the utility as “mixed”) was, frankly, damning. While the BC Sustainable Energy Association supported it, the communities that actually live in BC Hydro’s non-integrated areas did not – they want a long-term resource plan scrutinized by the BCUC.
The Zone II Ratepayers Group representing the Kwadacha Nation and Tsay Keh Dene Nation said BC Hydro’s proposal did not sufficiently address their concerns, and that the BCUC’s review of BC Hydro’s strategy to reduce the use of diesel fuel was even more important now that the government had restricted the BCUC’s ability to review BC Hydro’s energy purchase agreements (during the proceeding the BC government took away the BCUC’s powers to review BC Hydro electricity purchase agreements in non-integrated areas).
The Nuxalk Nation did not see Community Context Reports as a sufficient substitute for a long-term resource plan, and was “deeply concerned’ about submitting them at the same time as an electricity purchase agreement. The Heiltsuk Nation described BC Hydro’s proposal as providing “more harm than benefit” to First Nations in non-integrated areas, “to the benefit of BC Hydro.”
Most outspoken was the Gitga’at First Nation (“GFN”), who submitted that BC Hydro had “fundamentally failed to address the needs and interests of First Nations” and that the “cavalier and disingenuous actions of BC Hydro” during the development of its proposal “fly in the face of BC Hydro’s own UNDRIP [United Nations Declaration on the Rights of Indigenous People] Action Plan, standing as the antithesis of their core themes of respectful relations, social and cultural well-being, decision-making, and economic relations.”
As for the proposal itself, GFN argued that it wasn’t a plan in any conventional sense, but rather a “retrospective justification for a decision that has already been taken” whereby the BCUC will never see a community’s preferred approach to diesel reduction and clean energy development if that approach does not accord with the energy purchase that BC Hydro prefers.”
GFN submitted that BCUC oversight of the planning process and its result is necessary because “BC Hydro has, to date, failed to demonstrate a willingness to work cooperatively and effectively” on non-integrated area issues, and has “lost the necessary trust to make its proposed approach workable.”
The balance of power
It’s hard for individual customers or communities to take on a monopoly utility. An essential aspect of the BCUC’s role is to attempt to level the playing field and ensure that ratepayers’ interests are fairly considered.
A planning process overseen by the BCUC might have evened up the balance of power between the utility and the communities it serves. The BCUC could have used its powers to ensure that BC Hydro provided the information required to ensure its plans were reasonable. Equally, the BCUC could also have ensured that the First Nations’ criticisms of BC Hydro were justified.
As an example of the power of a public process, consider how in this proceeding BC Hydro modified its proposal part way through by offering to produce Community Context Reports for all fourteen non-integrated areas, rather than only for the ones where it will file electricity purchase agreements with the BCUC. This came as a direct result of the withering response to its original proposal. Without the ability for parties to comment in this public BCUC proceeding, it’s unlikely BC Hydro would have made that change.
The alternative
It’s true that the BCUC is not obliged to demand a long-term resource plan from a utility, and it typically doesn’t require one from small utilities. But this is hardly a typical situation, with some pretty compelling evidence that BC Hydro has failed to meaningfully consult with the First Nations involved (even BC Hydro acknowledges “shortcomings”). This alone was a good enough reason for the BCUC to retain oversight to ensure the public interest is served.
It’s also true that there’s unlikely to be a “one size fits all” solution to reduce diesel use in these communities, and one standardized plan would probably not serve them well. But that’s not a good reason for the BCUC to step away – there was an alternative way to proceed, if it had wanted to.
The BCUC could have insisted on a scaled-down long-term resource plan for each non-integrated area. The BCUC had recognized early on that the plan for the non-integrated areas would be quite different to that for BC Hydro’s integrated system, and the regulatory process could have been adapted for the smaller scale of the energy systems involved, for instance by limiting the information required of BC Hydro.
Poor substitute
The BCUC did acknowledge the First Nations’ concerns around the content of the Community Context Reports, dispute resolution mechanisms, and lack of BCUC oversight. However, its response was to direct BC Hydro to file an annual compliance report on its progress developing Community Context Reports. This is a poor substitute for a proactive, public process.
While the BCUC is generally transparent with its public proceedings, compliance reports disappear into a regulatory black hole when they’re filed. They’re not posted on the BCUC’s web site, so unless the BCUC decides to start a new proceeding as a result, it’s possible no-one will even know that one has been filed, let alone what’s in it.
The BCUC also recognized First Nations’ concerns surrounding BC Hydro’s engagement with them in preparing its proposal. Its response, though, was only to “encourage” BC Hydro to demonstrate in its next revenue requirements application that it had made improvements to its engagement process. The BCUC could have used its powers to direct that this evidence be filed, but it did not.
Conclusion
The decision is hardly unexpected, following the BCUC’s approval of the previous three BC Hydro requests to roll back regulatory decisions, but it is disappointing for anyone hoping for active BCUC regulation of BC Hydro’s non-integrated areas.
The regulatory pressure is now off BC Hydro to find alternatives to the use of diesel in remote communities, and the First Nations’ frustrations with BC Hydro are likely to continue.
It’s a shame that the BCUC has relented in this area of regulation in particular. The BC government only returned the BCUC’s legal jurisdiction to review BC Hydro’s long-term resource plans in 2021, prior to which the government reviewed the plans itself with no public process. Now, it seems the BCUC does not want to use these powers.
It’s beginning to feel like the BCUC is trying to avoid regulating BC Hydro.
Historical footnote
A long time ago in a regulatory world far, far away (OK, in 1994), the BCUC first demanded that BC Hydro submit a long-term resource plan, consistent with its then recently issued February 1993 “Integrated Resource Plan Guidelines.” While the order was later overturned by the BC Court of Appeal, the BCUC clearly thought in 1994 that BC Hydro’s long-term resource plans deserved public scrutiny.
Who led the BCUC when its February 1993 guidelines were issued? And who signed the order demanding a long-term resource plan from BC Hydro in 1994? None other than the current BCUC chair, in his earlier leadership stint. How times change…