Evidence is mounting that the BC Utilities Commission is no longer independently regulating the provincially owned electricity utility.
Introduction
On October 22, 2024, the BC Utilities Commission (BCUC) reversed an April 2023 directive that BC Hydro submit a long-term resource plan for its non-integrated areas.
Non-integrated areas are places where BC Hydro provides electricity service, but which are not connected to its main grid. They are often small communities, and electricity often comes from diesel generators.
The BCUC has now approved all four requests to change prior decisions (known as reconsideration requests) filed by BC Hydro shortly after the government replaced the BCUC chair in September 2023.
| Proceeding | Application date | Outcome |
| F2025 DARR and TIRR and Reconsideration Related to the TIRR | October 30, 2023 | Approved February 20, 2024 |
| Westbank Station Upgrade Reconsideration of G-47-18 | November 21, 2023 | Approved March 20, 2024 |
| Reconsideration of BCUC Order G-91-23 Directive 20 | December 18, 2023 | Approved October 22, 2024 |
| Reconsideration of PBR Report Order G-388-21 | December 21, 2023 | Approved March 15, 2024 |
This is unprecedented – the BCUC’s proceedings web page shows no other year when BC Hydro had as many as four BC Hydro reconsideration proceedings completed, and it has records going back at least as far as 2004.
As Oscar Wilde might have said, to approve one reconsideration request from a utility may be considered a misfortune, to approve four looks like regulatory capture.
What’s the problem here?
The four reconsideration decisions by the BCUC were not all bad decisions (I will address the merits of the latest one in a future article, but for now let’s just say I think it has its “issues”).
The reconsideration of the Westbank Station Upgrade project, for example, was quite reasonable. The facts had changed, and with the newly available facts the BCUC would likely have made a different decision. Plus, the decision to vary the original order had no wider consequences and set no unfortunate precedents.
At the other extreme, however, the BCUC’s decision to abandon incentives for BC Hydro to manage its cost increases squandered a once-in-a-generation opportunity. We’re already starting to see the scale of the consequences of this decision in BC Hydro’s 8 percent increase in operating costs in 2024.
Regardless of the merits of each of these four reconsideration decisions, the finality of BCUC decisions is important for public confidence in the BCUC, which as I’ve previously explained, is a concern of the Supreme Court of Canada.
This lack of regulatory certainty can directly affect the rates customers pay. For example, the BCUC’s 2023 cost of capital decision increased the return on equity to FortisBC Energy Inc. (FEI) from 8.75 to 9.65 percent (and its equity proportion from 38.5 to 45.0 percent) because of the uncertainty regarding its natural gas distribution assets. This was the largest single factor behind FEI’s 8 percent delivery rate increase announced in December last year.
Just cause?
Notably, in none of its four recent requests did BC Hydro claim the BCUC had made an error, the most compelling reason to revise an earlier decision. The first three reconsideration requests to be approved were justified by BC Hydro on the ground that facts had changed since the decision was made, or the nebulous “otherwise just cause”, the catch-all in the BCUC’s Rules.
In this latest decision, however, as the BCUC acknowledged, BC Hydro didn’t even specify the grounds for its reconsideration request. This is required by Rule 26.04, without which the BCUC would have been entitled to summarily dismiss the application.
But this being BC Hydro, the BCUC kindly provided them with a reason of its own. According to the BCUC, “the opportunity to identify more productive and efficient approaches to regulatory reviews” provided sufficient just cause. The BCUC added that “it would be churlish for us to decline to review the Application in its entirety” notwithstanding the lack of compliance with the Rules.
At the risk of sounding a bit of a churl myself, applying the same rules to all participants is not churlish, it’s the basis of fair and trusted regulation. It’s one thing to be a little flexible with an inexperienced applicant, but the most experienced and best-funded applicant of all should have been held to the established standard.
Captcha!
I referred above to regulatory capture, but what is this? Here’s one typical definition:
“Regulatory capture is a process by which regulatory agencies may come to be dominated by the interests they regulate and not by the public interest.”
Has the BCUC been “captured” by BC Hydro and its owner, the provincial government? Whatever your view, it’s hard to avoid the impression that BC Hydro is getting an easy ride at the BCUC these days. And it’s not just the four recent reconsideration requests.
As I noted in an analysis of a recent FortisBC Inc. decision, a double standard appears to be emerging where BC Hydro’s project requests are getting less scrutiny and those from other utilities are getting more.
And as for BC Hydro’s long-term resource plan for its integrated area, to say that the regulator’s review lacked depth would be charitable. The BCUC cheerfully accepted the plan in March this year, despite acknowledging that it failed to identify how the utility was going to meet the electricity needs of the province as it attempted to meet its net-zero GHG emission goals.
Even the timing of the latest reconsideration decision raises questions, coming as it does a mere three days after the October 19 provincial election. The final submission in the proceeding was made August 9; the BCUC then took more than two months to write a 16-page decision. Surely the decision wasn’t delayed to avoid any embarrassment to the government in a tight election?
When the government fired the incumbent BCUC chair last September, replacing him with a candidate after no apparent “merit-based process” (required by the Utilities Commission Act), the veteran political commentator Vaughn Palmer noted that the new chair faced a “huge challenge” to prove the BCUC’s independence, given the nature of his appointment.
I think he still has some way to go.