H E R T Z O G
The Power Plant that Won’t Die
BC Hydro is trying to get around the Utility Commission’s rejection of its gas-fired Vancouver Island power plant by finessing the project to the private sector. Maybe that’s just what the government wanted.
The battle for a sustainable energy future for Vancouver Island is heating up.
Last September, citizen groups and Cobble Hill landowners had been jubilant when the BC Utilities Commission rejected Hydro's application to build a new $370 million, 265 MW gas-fired power plant at Duke Point near Nanaimo.
The Utilities Commission ruled that Hydro had not proved that its proposal was the most cost-effective way of increasing the electricity supply on Vancouver Island. During the lengthy hearing, other proposals had come forward that suggested Hydro should look elsewhere for new power.
“ The ruling also seemed to spell an end to the province’s favourite crown corporation’s plan build an associated gas pipeline across Georgia Strait to supply fuel to a new gas-fired generating plant on Vancouver Island.”
The ruling also seemed to spell an end to the province's favourite crown corporation's plan build an associated gas pipeline across Georgia Strait to supply fuel to the new plant. Called the GSX, the 113km pipeline was to run from Cherry Point, WA to a landing near Cobble Hill, with a short overland section to connect to the existing gas pipeline network on Vancouver Island.
More greenhouse gas, local pollution
Last July, after another lengthy hearing, the National Energy Board ruled that the GSX would have no significant environmental effects - despite the fact that it would contribute to increased greenhouse gas emissions and local air pollution. Full approval for the GSX was granted in November, 2003.
But without the power plant there would be no reason for Hydro to build the GSX, which was intended only to supply fuel for the high-tech gas turbines that would turn the new plant's electrical generators.
This time the Utilities Commission required Hydro to go back and issue a call for tenders for alternative sources of electrical energy. It allowed that Hydro could reapply for approval if its plant proved to be the most cost-effective, and that it was prepared to deal with the application 'on an expedited basis.'
Open door for alternative energy
The door seemed open for cogeneration projects at pulp mills, solar and wind power, and all manner of cleaner, cheaper innovations. Everything looked good for a more sustainable solution to Vancouver Island's energy needs.
“ Unfortunately, the Commission failed to define this ‘expedited&rsquol; process. Did it mean that Hydro’s expensive power plant, having been turned down once as not cost-effective, could return and be approved without a new hearing?”
Unfortunately, the Commission failed to define this 'expedited' process. Did it mean that Hydro's expensive power plant, having been turned down once as not cost-effective, could return and be approved without a new hearing?
"I'm feeling somewhat apprehensive that BC Hydro will get its way by default," said Sierra Club climate change campaigner Tom Hackney, who represented GSX Citizen's Coalition at the Commission's hearing.
"Hydro's call for tenders is not a formal and transparent process," Hackney explained. "It's Hydro's process and not directly overseen by the BCUC."
People didn't have to wait long for their fears to be reinforced. Hydro unveiled the initial terms of its tender at the end of October, filling in the details at a December 19 workshop in Nanaimo.
The terms of the tender call shocked both potential bidders and citizen groups. It was written so that only those bidders offering to buy and operate Hydro's costly white elephant were likely to make the cut. 'Alternative' energy projects using wind power or solar energy, and load-reduction or improved energy efficiency projects, would be disadvantaged.
Hydro would consider only firm power proposals between 25 and 300 MW that used proven technology; proponents must guarantee an almost impossible 97 percent availability of firm power; proposals over 150 MW would receive a transmission credit; and anyone proposing to purchase and operate Hydro's rejected power plant would receive a $50 million credit in the final evaluations.
It looked like a fix for the power plant everyone thought had been defeated.
Utilities Commission cut out of loop
“ To add insult to injury, the Commission was cut out of the loop. Bidders could comment on the process only to Hydro and would have to do this before all the final details were published. And the Commission would have to accept Hydro’s deadline of January 23 to approve a revised tender process.”
To add insult to injury, the Commission was cut out of the loop. Bidders could comment on the process only to Hydro and would have to do this before all the final details were published. And the Commission would have to accept Hydro's deadline of January 23 to approve a revised tender process.
Many major power bidders went ballistic. A rain of letters from high-priced lawyers thudded onto the desk of Commission secretary Robert Pellatt.
Norwegian multi-national NorskeCanada, which owns almost all the major BC coastal pulp mills and who had very publicly proposed a mill-based cogeneration proposal, led the charge.
"If the stakeholders and Bidders do not have an opportunity to participate fully in the approval process. there will be a clear failure of natural justice," thundered Bull, Houser & Tupper energy lawyer Brian Wallace.
After the December 19 workshop, Wallace became almost apoplectic: "What BC Hydro has implemented is a carefully-controlled process in which comments are directed to BC Hydro, in many ways an adverse party, in a form and a manner dictated solely by BC Hydro," he wrote to Pellatt.
"None of the safeguards associated with a fair hearings of an application of this magnitude are in place."
Representing the seven large pulp mills who comprise the biggest consumer of electricity on the Island, lawyer Karl Gustafson was even more blunt in his letter to Pellatt: "If the Commission approves the (tender) process, we fear that it is extremely difficult for the Commission later, in the context of an application for a (permit), to challenge the results of the (tender) process.
"Put simply, the Commission will have painted itself into a corner."
“ How could Hydro expect to get away with this? Surely even BC's largest and most profitable crown corporation might expect to have its knuckles rapped.”
How could Hydro expect to get away with this? Surely even BC's largest and most profitable crown corporation might expect to have its knuckles rapped.
Privatization push for Duke Point
The answer is to be found in the Liberal government's ceaseless push for privatization. The BC government's Energy Plan introduced in November, 2002 requires that only the private sector will develop new electricity generation, with Hydro restricted to improvements at existing plants.
Not content with that, the Liberal government last June issued an Order-In-Council specifically exempting private corporations contracting to supply power to BC Hydro or Powerex from oversight by the Commission. But public utilities applying to sell power to Hydro or Powerex would still be regulated.
Some observers believe that the government never wanted Hydro to own and operate a new electricity generator on Vancouver Island. But instead of telling it to back off, saving about $51 million in sunk costs, it let Hydro push ahead until the project could be handed over to the private sector.
The Utilities Commission is now faced with a dilemma. Does it order a public hearing to straighten out the tender process, or does it stand aside and let BC Hydro finesse what appeared to be a definite "No" into a helpless "Yes"?
“ Stay tuned. The strange story of the GSX pipeline and the plan for a second gas-fired generator on Vancouver Island isn't over yet. More powerful forces are at play than appear in obfuscatory language of the official decisions.”
Stay tuned. The strange story of the GSX pipeline and the plan for a second gas-fired generator on Vancouver Island isn't over yet. More powerful forces are at play than appear in obfuscatory language of the official decisions.
Stuart Hertzog is a Sidney-based researcher, writer and environmental campaigner with an extensive knowledge of BC energy issues and an intimate understanding of how excruciating it can be to sit through an entire BC Utilities Commission hearing.
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Copyright © Stuart Hertzog, 2004