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The Keystone Kops (1914)

I start this exercise with a couple of general comments.

The detailed information available on the “progress” of BC Hydro since the Liberals took over in 2001 would be very difficult to pull together if we were left to government confessions of error or sleuthing by the NDP opposition. In fact, in this regard, the public are greatly indebted to Norman Farrell, Arthur Caldicott, Erik Andersen, Tom Rankin, John Calvert, author of Liquid Gold, Damien Gillis, myself and, on the question of Site C, people like Harry Swain, who have been steadily reporting and commenting, faced by stony silence from the government, since 2007 or earlier.

The Sun and the Province papers in Vancouver, with their mutual masturbation agreement with the Canadian Association of Petroleum Producers, have been in a coma where the government is involved, thus I think it imperative that The Tyee, The Common Sense Canadian, In-sights, Desmog Canada, and Laila Yuile be singled out and congratulated for providing a constant flow of information demonstrating the all-but-formal and clearly deliberate bankrupting of BC Hydro by the Campbell/Clark government.

Liberals raise Hydro’s obligations by $74 Billion

The hard fact is that under the Liberals, BC Hydro’s real debt – including all its obligations – in constant dollars has increased by 1,337%, from $6 billion in 2005 to $80.2 billion today. This total comes from Hydro’s most recent annual report (2016) and is made up by the following three categories:

  1. Regulatory (Deferral) Accounts: $5.9 Billion
  2. Long Term Debt: $18 Billion
  3. Long Term Private Power (IPP) Contracts: $56.3 Billion

It must be noted that since the Liberal reign began in 2001, Hydro hasn’t been hit by a depression, a burst dam, a substantial labour dispute, a diminution of its customer base, nor any other calamity that could explain this huge increase in debt. In fact, according to Premier Clark and the brains of the outfit, Deputy Dreamer, Rich Coleman, thanks to Liberal policies of perfection, we had absolutely Sooper-Dooper times. Just how their largest trust from the people, BC Hydro, went $74 billion in the goo and de facto bankruptcy on their watch simply isn’t dealt with, on the the theory that if no one heard the tree fall in the forest, it never happened.

During this period, Hydro has been borrowing large sums to pay yearly dividends to the Minister of Finance for his annual cooking of the books to make it appear that BC has a balanced budget, a noteworthy piece of fiction in a government noted for fiscal legerdemain.

In fact, this has been a government that doesn’t just employ puffery or exaggeration, it lies through its teeth, as if lying was its default position. I raise this because in a moment I’m going to talk about a criminal investigation being required and in such matters, believability is a critical factor and I tell you plainly that neither Clark nor Coleman can demand to be accepted as truthful people on their public record.

Unforeseen catastrophes aside, there are only three possible answers as to how Hydro could lose all this money: grossly negligent management, money being wrongly spent, or money exerting undue influence on decision makers.

In law there there’s a maxim, “res ipsa loquitur” meaning “the thing speaks for itself”, and I suggest the pissing away of $74 billion does speak loudly and fairly to bloody awful management; yet it hardly seems likely that there wasn’t some culpable conduct somewhere in the mix. There may or may not be a fire but there’s a hell of a lot of smoke. Moreover, never forget that this is a tightly controlled Crown Corporation and the government runs it using its own pet poodles.

The fix is in

Let’s turn to Premier Gordon Campbell’s radical change of policy in 2002, which forbade BC Hydro from creating any new hydro power of its own (except Site C, as it had been on the books for decades), with new power to be produced on a tiny scale – no more dams or big environmental devastation. Dr. Andrew Weaver, the leader of the BC Greens who has always supported this scheme, told me they only used water wheels! There would be no damage to the streams involved and they would be run by small “mom and pop” operations.

Well, it turned out a tad differently, with rivers blocked, with what sure look like dams, huge pipes, a substantial powerhouse, a notable lack of waterwheels, river banks demolished, fish runs destroyed, trees knocked down and run by little “Mom and Pop” operations such as Ledcor and General Electric. Incidentally, this substantial environmental loss is not computed and included in the $74 Billion loss.

These teensy-weensy “Mom and Pop” operations called Independent Power Producers (IPPs) got a very good deal, in fact the sweetheart deal of all sweetheart deals, such that if you gave the same to your family, the taxman, once he stopped laughing, would disallow it!

In simple terms, BC Hydro must take all the power IPPs produce and pay 3 times the market price. They must buy whether they need it or not and, if you guessed that means during the Spring runoffs – when the bulk of their power comes and our electrical demand is at its lowest – Hydro must buy all their power even though their own reservoirs are filled to overflowing and didn’t need it, you’d be right. If you also guessed that Hydro must have to sell a lot of excess power at large losses, you get a gold star on your report card!

Losing 72 cents on the dollar

Citizens for Public Power member and SFU professor John Calvert explained it like so:

 B.C. Hydro announced the outcome of its 2006 tender call for electricity from private energy developers. The results were startling. Not only had B.C. Hydro agreed to buy three times the power requested in the tender, it had done so at locked-in prices far above projected market rates……The core of that policy was laid out in the 2002 Energy Plan, which prevents B.C. Hydro from building new generation assets, and transforms the Crown corporation from a generator of publicly-owned electricity to a purchaser of energy from the private sector.

The rationale for this change is hard to fathom. The old policy worked very well. By generating its own power, B.C. Hydro ensured that ratepayers enjoyed, on average, the second lowest electricity prices in North America. This is because prices were based on the historic cost of production, not the current energy market price…

Flash forward a decade to Norm Farrell’s update on the situation:

…over the past decade, amounts paid to IPPs have tripled. Independent power producers, more than doubled deliveries to BC Hydro, and the utility was forced to dump surplus power outside the province, with trades sales at an average, since 2005, of just 28% of prices paid private producers. And that loss is made worse because of Hydro’s collection and distribution costs.Then years later, for every dollar we pay them, we lose more than 72 cents.

Consumer demand was not growing, private power supplies were rising and export markets were soft. BC Hydro could only dump power outside the province for little revenue or reduce its internal production. Again, the utility’s own reports lead to a conclusion.

The following numbers are drawn from BC Hydro’s annual and quarterly reports and from U.S. Department of Energy market recaps. They demonstrate that in nine months, BC Hydro paid more than $600 million above market to independent power producers – having purchased the power from IPPs at $85,261/GWh, while the market for selling electricity to the US market was just $28,930 CAD per unit. Unfortunately, the rate of loss is accelerating…

…Dr. Calvert’s warnings were insufficient and subsequent Liberal actions even more egregious. The professor noted early independent power producer (IPP) contracts locked BC Hydro (and BC taxpayers) into financial commitments of up to 40 years. Recently, contracts have extended to 60 years and all are indexed to protect suppliers against inflation. Some required large public expenditures for distribution. Calvert said IPP prices were double the market value but they’ve since risen to even more.

Now here’s a little observation from Mr. Farrell that will make you feel warm and fuzzy all over: “We also know that, instead of costing between $400 million and $500 million every year, IPP payments have climbed beyond $1.3 billion yearly, a number that has increased 188% since 2011 when Christy Clark was appointed Premier.”

Now, none of this would have been possible if this the recipients of this government largesse with our money didn’t have friends on the inside. Campbell before her knew and now Clark knows that BC Hydro’s potential profitability and financial strength guaranteed corporate raiders would attack, seeking to convert public wealth to private. To be successful, they needed cooperation of modern political rulers and, whether explained by incompetence, philosophical bent or desire for covert rewards, the Liberals have cooperated fully.

It will only get worse

Even if the Liberals are given the boot in May, Hydro’s skyrocketing debt won’t stop here. Additional costs already baked into the crown corp’s plans will see its obligations rise to the hundred billion dollar range in the coming years. So serious is the problem that BC Hydro alone could cost BC its prized triple-A credit rating, as The Times-Colonist reported – albeit belatedly:

…projects like Site C are pushing up B.C. Hydro’s debt levels, and adding to concerns about the province’s overall ‘high debt burden’ compared to its peers, Moody’s also wrote in its credit opinion. B.C. Hydro’s debt has increased from $8.1 billion in 2008 to a projected $18.1 billion last year, and there is a further $20 billion expected in the future for infrastructure projects, a $2-billion annual upgrade program and the Site C dam.‘The anticipated increase in debt continues to pressure the province’s rating since it raises the contingent liability of British Columbia,’ wrote Moody’s…

And that’s assuming Hydro keeps Site C on track at $9 Billion – which is impossible to believe, given the Liberals’ track record with major capital projects more than doubling in cost. Dams are especially prone to wild cost increases (see Muskrat Falls), as recent geotechnical issues with Site C illustrate. Hydro is trying to tamp down concerns over a 400 meter-wide tension crack at the dam site, but locals have been warning for years about the unstable ground upon which the project is being built.

Grandson helps destroy grandpa’s legacy

Ironically and to me sadly, among today’s political facilitators of the utility’s destruction is W.A.C. Bennett’s grandson, and my late friend Bill Bennett’s son, BC Hydro Chair Brad Bennett, who is, I’m told, is a Liberal apparatchik and close Christy Clark pal. Another is Hydro CEO Jessica McDonald. She was Deputy Minister and confidant to Gordon Campbell in 2006 when the premier’s office invited predators to get rich on electricity.

 The companies give generously to the Liberals but it’s hard to get full and accurate figures since, as we now know from Elections BC, who recently sent their investigations of Liberal fundraising to the RCMP, donations are often laundered through individuals, and companies have been known to lie through their teeth on this subject.

One way to get a general picture is to go back to 2008 when the long-term contracts were handed out and there was a call for independent power projects, 75 proponents registered with B.C. Hydro. From July 1, 2008 to September 30, 2010 – when B.C. Hydro was making its decisions – 14 proponents donated $268,461 to the Liberals. Ten of the 14 were successful.

Shouldn’t someone go to jail?

The duties and powers of the Attorney General, Suzanne Anton, for the purposes of this article, are set out in admirable simplicity by the ATTORNEY GENERAL ACT. Under Section 2, Duties and Powers, article b) states:

The Attorney General must see that the administration of public affairs is in accordance with law.

Bearing in mind the enormity of the losses and complete lack of explanation by the government for this incredible emptying of the public purse, where is the Attorney General?

By the simple statement of the law as quoted above, her duty is clear. By long tradition, she sets aside her political role – especially when evidence of a crime comes to her attention – and it is reasonable to assume colleagues are involved.

I place before you my opinion in plain terms. There is a great deal of money involved here and plenty of people who feel entitled to share it. We have a premier who, in a political context, has the morals of an alley cat. The deputy premier, also in charge of gas, is hardly any better. It’s surely fair to say that when politics is involved, a fairy tale is second nature, their default position.

The death of BC Hydro has nothing to do with the ordinary risks of the business world and there are no events beyond human control here. Of considerable importance, the premier and the minister in charge are struck dumb on the question of how a thriving monopoly on power could rack up $74 billion in unwarranted costs, with a full clientele and the means to meet all demands.

Ms. Anton, if you don’t order a full inquiry forthwith on the evidence before you, in light of the statutory requirement of the Attorney General Act and your sworn oath to “see that the administration of public affairs is in accordance with law”, it would be open to fair conjecture that this inaction is to protect your political colleagues.

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