Bill 24 would allow cabinet to override the BCUC’s authority to regulate electricity service and rates for BC’s cryptocurrency businesses. This is neither necessary nor wise.
(Following publication of this article, bill 24 became law on May 16, 2024)
Background
In December 2022, the government directed the BCUC to suspend, for eighteen months, BC Hydro’s obligation under the Utilities Commission Act (UCA) to provide electricity to cryptocurrency “mining” businesses. The BCUC duly issued an order to this effect; the suspension period ends June 28, 2024.
The government’s order was challenged in the BC Supreme Court, where it was upheld. The Court found it was reasonable for the government to move quickly to “temporarily suspend the obligation of BC Hydro to supply electrical power to cryptocurrency projects” (my emphasis) and to give the government time “to consider the broader implications” of supplying electricity to that sector.
The Court relied on evidence from BC Hydro, the province’s largest electrical utility, which stated that its current requests from cryptocurrency projects would require 16,000,000 MWh of electricity per year, the equivalent of serving 1.5 million homes in BC.
The Court noted that, under section 28(3) of the UCA, the BCUC had the same power to relieve BC Hydro of its obligation to serve, but that the BCUC would have had to conduct a hearing before issuing such an order.
The Court concluded that “Obviously, legislative change would be required if a complete moratorium on cryptocurrency mining were to be imposed” (my emphasis).
Enter Bill 24
Bill 24, the Energy Statutes Amendment Act, 2024, is the government’s proposed legislative change to allow it to impose a “complete moratorium” on cryptocurrency projects in BC.
In fact, Bill 24 goes further than merely suspending the utilities’ obligation to serve. Cabinet would actually prohibit utilities from serving cryptocurrency projects, even if they wanted to serve them and they had the electricity available.
This certainly addresses the Court’s point that legislation is required to go beyond a temporary suspension of a customer’s right to receive service from a public utility.
But there is a better way to address the problem of electricity rationing.
Bill 24, limited as it is to cryptocurrency projects, would be the only section of the UCA to address a specific group of energy customers. The government has already demonstrated that short-term problems can be addressed through an order to the BCUC. If micromanaging is required, the government already has the tools it needs.
Longer-term solutions, however, should be addressed in a comprehensive and principled manner, not with a solution that only works for one industry sector.
And the BCUC might be a better choice than cabinet to apply such a solution.
The case for the BCUC
There are several reasons why the BCUC might be a better choice to make public interest decisions to ration electricity. It already makes public interest decisions when deciding whether expansions to the energy system are needed, why not also when deciding to ration that capacity?
As the Court pointed out, the BCUC has the powers under section 28 (3) of the UCA to relieve a public utility from the obligation to serve. All it takes is for a hearing to take place, and for the BCUC to find that serving certain customers is not in the public interest. This would likely be a rare occurrence, and decisions could be challenged in the courts if the BCUC unreasonably exceeded its powers.
Since it is clearly open to amending the UCA to address the problem, the government could amend section 28 to give the BCUC additional powers to temporarily suspend utilities’ obligation while a hearing takes place, relieving cabinet of the need to make short-term directions.
The BCUC has qualified staff and independent decision makers, its processes are transparent and evidence-based, and it provides reasons for its decisions. It also now has a handy BC Supreme Court precedent to rely on if it decided to deny service to a customer or group of customers because of their “unique electricity consumption characteristics.”
Mostly though, it’s a matter of credibility and public trust. No-one knows what evidence ministers rely on, if any, in cabinet decision making. These decisions risk accusations of favouritism, if not outright corruption, and if not by this government, then by a future one.
As we push to electrify the province, we will face this decision again, and in more contentious areas than cryptocurrency.
Consider data centres, a significant and growing source of electricity demand globally. Will we limit their presence in BC? This question is becoming more acute as businesses start to embrace artificial intelligence (AI), which requires large amounts of computing power for AI models to “learn”. These are growth businesses, and BC risks being left behind if it closes its doors to them.
The government would be wise to anticipate this. It might be helpful to have an arm’s length body make the more unpopular decisions.
Rates
The government justified its December 2022 moratorium on cryptocurrency projects as giving it time to consult, before developing “a permanent framework for any future cryptocurrency mining operations.” But Bill 24 isn’t just about continuing the moratorium; the proposed legislation would also give the cabinet the right to set rates for this category of customers.
The justification for the government taking over the BCUC’s rate-setting powers is not at all clear. If cryptocurrency projects must be rejected because there is not enough electricity to go around, fair enough. But if these projects are to receive electricity, then why does cabinet feel the need to exclude its arm’s length regulator and set rates itself?
The BCUC employs long-established rate setting principles which balance the interests of utilities, customers and the public good – customers are expected to pay their fair share of utilities’ costs, but no more. The BCUC conducts hearings at which customer representatives can make their case in front of an impartial panel of commissioners, and issues written reasons to explain the evidence relied on to make the decision, which can be challenged in the courts.
Cabinet decisions provide none of that protection. Rates set by government could include subsidies for favoured groups, intentionally or otherwise (rate setting is a complex business). Whether rates set by government are actually fair, it’s almost impossible they would be seen by the public to be fair.
Rubbing salt in this particular wound, Bill 24 specifically enables cabinet to discriminate between cryptocurrency projects. It is an established rate-setting principle that there be no undue discrimination between customers in similar circumstances. The government proposes that this principle be abandoned, allowing it not only to benefit or penalize cryptocurrency projects as a whole, but to favour one project over another.
Conclusion
I take no issue with the government’s December 2022 decision to suspend, temporarily, the rights of cryptocurrency projects to consume electricity. They are a special case, and this was a reasonable and pragmatic action to take.
Politically, the government will encounter little criticism in BC for penalizing cryptocurrency businesses. The industry is not established here, and in fact has been chased from plenty of other jurisdictions without undue pushback: China, Iran and Manitoba, for example.
But Bill 24 says more about the government’s view of the BCUC than it does about cryptocurrency mining. The government does not appear to trust the BCUC to act in the public interest in determining when electricity should be rationed, or to set rates that fairly allocate costs between customers.
Instead, the government would rather give cabinet the power to micromanage the sector.