BC UTILITIES COMMISSION (BCUC) (2007)

Firstly, we must state that BC has a progressive regulatory regime. The BCUC has been very effective in performance-based regulation and alternative dispute resolution. These are highly cost-efficient processes and are far more favourable than traditional adversarial forms of regulation. The BCUC’s efficiency is also borne out by per capita cost of regulation.

However, The Chamber still has several concerns:

The BCUC has a very small number of commissioners and staff relative to its growing workload. Over the past three years BCUC has taken on full regulation of BC Hydro, BC Transmission Corporation (BCTC) and the Insurance Corporation of BC (ICBC); yet its staff complement has not increased commensurate with this increased workload.

In addition to these new responsibilities the new provincial “BC Energy Plan: A Vision for Clean Energy Leadership” (The Energy Plan) places considerable new responsibilities and considerations on BCUC, these are:

• Explore with BCUC new rate structures that encourage energy efficiency and conservation; and
• Review BCUC’s role in considering social and environmental costs and benefits.

The primary concern of The Chamber is the legislated focus of the BCUC, which is solely focused on “reliability” and “least cost” in the context of energy industry development decisions. The Chamber has expressed considerable concern that this is contrary to The Energy Plan which calls for self-sufficiency (including an “insurance’ cushion) within a framework that specifies that all new electricity generation projects must have zero net greenhouse gas emissions, as well as zero emissions from existing plants by 2016.

Given that The Energy Plan outlines a clear goal that clean or renewable generation continues to account for at least 90% of BC’s total generation the BCUC does not seem to be able to fully support the government’s drive to clean/green power. Central to The Chambers concern is that BC Hydro seems to take the position that Heritage Assets cannot be used to “shape” green power as other jurisdictions do, hence making green projects less economic and BCUC approval of green projects less likely.

The issue of difficult and non-commercial terms in BC Hydro’s Calls for Tender (CFT) and energy purchase agreements must be promptly resolved in a BCUC hearing or before another independent tribunal. The Chamber has been consistent in its belief that BC Hydro is, at least, in a perceived conflict of interest with respect to managing the CFT processes while developing its own suite of projects. As such, The Chamber believes that a BCUC-led review of BC Hydro’s contracting terms be undertaken as soon as possible. In addition there is no incentive for BC Hydro to take more risk and facilitate Independent Power Projects (IPP’s) development. Indeed, in similar circumstances in the 1980’s in gas deregulation, the Ontario Energy Board held analogous reviews of the gas purchase agreements between suppliers and gas utilities under the then new “direct purchase” and ordered the utilities to modify their contractual terms.

Unfortunately, in the Duke Point hearing, and probably due to time constraints, the BCUC not only did not review the Call for Tender/Energy Purchase Agreement terms and conditions in terms of commercial reasonableness and comparisons to other jurisdictions, but also ruled them out of scope for the hearing. In addition, the independent reviewer hired by BC Hydro failed to carry out its original mandate to make such a review. Hence, an independent review based on evidence has not occurred in BC. Restoration of the confidence of the private sector in BC’s IPP market hinges on such a review, and it should be apart from any particular project.

The issue of open access on the BCTC transmission lines is also in need of resolution as per the fall 2005 BCUC decision. The lack of open access to the province’s transmission capacity hinders export IPP developments; further action by BCUC is required.

Vancouver Island is currently supplied principally from the Mainland by underwater transmission cables, and gas fired power (principally the ICP plant) is supplied gas by an underwater line from the Mainland. Both may be subject to seismic damage, and several of the underwater power lines will be derated for planning purposes in 2007. Despite the BCUC past finding that future supply should be on-island generation, the replacement project for the Duke Point supply cancelled by BC Hydro, is further transmission supply from the Mainland. The Chamber questions this approach. The BCUC’s guidance to provide more on-island generation was best from a security of supply standpoint for the island, but is not occurring.

The Chamber also expresses the concern that the same factors which persuaded two major Canadian firms not to bid on Duke Point, and that discouraged coal and perhaps other technologies will discourage development of new demonstration technologies, and the commercialization of same, in BC. We note Quebec is taking the approach of driving wind power and economic growth with investment in turbine manufacture and the like, BC has the potential to be a world centre of excellence in wind and tidal power if the conditions are right.

As the electricity and natural gas markets evolve the BCUC will have increased accountabilities. It has, or will, achieve a number of significant milestones with respect to BC’s new Energy Policy including:

• Implementing a heritage contract;
• Regulating BC Hydro rates;
• Implementing stepped rates;
• Regulating the BC Transmission Corporation;
• Removing disincentives for distributors to invest in energy efficiency programs;
• Overseeing the initial steps in a transition to more competitive conditions in the generation sector;
• Changes to BC Hydro policy to encourage IPP and clean/green IPP energy, including load shaping;
• A formal review of the terms and conditions of BC Hydro’s Calls for Tender and Energy Purchase Agreements vs. other jurisdictions and commercial/security needs of BC’s power sector;
• Commercial unbundling and customer choice in the natural gas sector; and
• Harmonization of energy trading regulations with other jurisdictions.

In addition to the spheres of jurisdiction mentioned above, BCUC may also become accountable for regulation of private water utilities. All of the aforenoted are in addition to existing accountability for rates, return on equity, capital projects, etc., related to BC’s regulated energy utilities.

THE CHAMBER RECOMMENDS

That the provincial government:

1. undertake a review by an independent judicial body (given the quasi-judicial nature of the BCUC);

a) to ascertain the effectiveness of the Commission, as compared to other Canadian regulatory agencies;
b) to evaluate its ability to effectively and efficiently render timely and well-reasoned decisions;
c) to evaluate the relevancy of its organizational structure; and
d) to determine the need to increase staff (from a variety of commercial and regulatory sources), commissioners and operating funds given the significant workload the Commission faces over the next several years;

2. undertake a review of the BCUC’s jurisdiction to determine if further changes to the Act are required since the update a few years ago, particularly given the situation regarding the deteriorating power supply/demand balance weakening confidence of the IPP industry in BC Hydro’s contracting policies, and the BCTC network economy issues; and

3. hold an immediate generic hearing before an independent body into the terms and conditions of BC Hydro’s terms and conditions of its Calls for tender and Energy Purchase Agreements for IPP supplies.