Power Racketeering: Behind BC Hydro's 55 Billion Dollar Black Hole

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The $55 Billion Private Power Racket and the Real Story Behind Hydro's Debt
by Damien Gillis - TheCanadian.org
 
British Columbians have been hearing a lot lately about BC Hydro's shocking debt situation - which is far worse than it's being described. Newly-minted BC Liberal Energy Minister Bill Bennett is supposedly on the warpath, looking for ways to trim the fat from the crown corporation's bulging belly. The Liberal Government was "surprised" by last-minute cost revisions to a few Hydro projects, skewing its budget calculations, we're told.
 
Bollocks.
 
There is no "surprise" here - any suggestion thereof is political theatre. Strike that. Let me call it what it is: LYING.
 
The ballooning cost of the Northwest Transmission Line, cited as the key cause of this budgetary hiccup, represents but one tiny fraction of Hydro's real financial mess - and the BC Liberal Government knows it.
 
Why? Because they caused these problems themselves.
 
 
The mainstream media, as is to be expected, is largely parroting the government's cover story and ignoring the real problem: BC Hydro and its ratepayers are in a world of hurt because of 12 years of very deliberate and disastrous BC Liberal Government policies, pushed on the public utility.
 
First and foremost of these was the forcing of BC Hydro to purchase $55 BILLION worth of sweetheart, long-term contracts with private power companies, which we didn't need. As our resident, independent economist Erik Andersen - supported by figures and confirmation from the Auditor General - has demonstrated through a series of investigative pieces over the past 3 years, BC Hydro has chronically overestimated domestic demand for power. Historical estimates by Hydro have projected our current use at well over 60,000 Gigawatt hours (GWhrs) of electricity per year, when, instead, we've been flat-lined at around 50,000 for several years and show no real sign of growing beyond that (unless, of course, we build massive new capacity to subsidize mines and gas projects - more on that in a moment).
 
But you can't merely blame BC Hydro for getting the numbers wrong. Forecasting power demand has, unfortunately, always been a more of a political exercise than a statistical one. Hydro's masters are under enormous pressure to justify the government's energy agenda. Those who question it - even at the top of the crown corporation's executive ladder - pay the price.
 
Two CEOs who presided over a significant portion of this era - Bob Elton and Dave Cobb - were both pushed out after making cryptic references to the problem of private power contracts.
 
As for the Northwest Transmission Line? This project was pushed on Hydro in order to support the province's agenda to open up new mines in northwest BC - again, highly subsidized by taxpayers. Why aren't these mines building the line themselves (they're kicking in only a fraction of the cost)? Why were the federal government and mining companies' contributions capped, with BC Hydro left holding the bag for the entire cost overrun, now in the hundreds of millions of dollars?
 
Has BC Hydro done a poor job managing costs on the project? Is the Pope Catholic? But that's largely beside the point. This project is the BC Liberal Government's baby and now, when it goes sideways, they blame the public utility...and act surprised about it? How cowardly and dishonest can this bunch get?
 
The way this is all playing out should be of great concern to British Columbians. The Liberal Government and its private power pals are taking a page out of the neoliberal handbook, which aims to privatize anything of value, while unfettering "the market" of all "regulation" (which you and I would call "laws"). Here's how it works:
 
1. You saddle a valuable public utility or asset with enormous debt through private sector contracts it doesn't need (of course, the stated rationale is the opposite - i.e. saving the public money through "private sector efficiencies", which somehow NEVER, EVER materialize).
2. Blame the utility and its managers for the debt load when it becomes unbearable.
 
3. Use this as a justification to break up and sell off the utility, for pennies on the dollar, to the very private sector players who were instrumental - along with their government puppets - in bankrupting it in the first place.

Somehow, magically, the problem becomes the solution. This has happened all around the world, as Australian author Sharon Bedder details in her vital book Power Play: The Fight for Control of the World's Electricity.
 
The same pattern has repeated itself, all across the United States, Central and South America, Africa, you name it. It's a tried and true formula, designed to steal the public's most valuable assets out from under them - and, mark my words, they will try to do it here next.
 
My colleagues Rafe Mair, Tom Rankin, Gwen Barlee, John Calvert, Andy Ross, Erik Andersen and I have been warning about this - and documenting and sharing it with the public - for years now. Everything we predicted has come to pass. EXACTLY as we predicted it would - from the unchecked destruction of fish and wildlife habitat through these unnecessary, highly inefficient and costly private river power projects, to the precise nature of Hydro's present financial troubles.
 
Now it falls to the BC public to ensure the right corrective measures are taken to prevent the theft of our crown jewel. And the mainstream media needs to hear that its readers, listeners and viewers will not buy the official party line - this sob story of the poor government, betrayed by reckless managers at BC Hydro.
 
Our resident economist Erik Andersen has laid it out like so: either we raise power bills by 35-40% right now (politically impossible), or, preferably, we "un-saddle" Hydro of these private power contracts. He suggests doing so by removing them from Hydro's books and dealing with them as their own category of government liability (which is, in fact, where they belong, since Hydro really had nothing to do with taking them on).
 
Moreover, Andersen advises, we should not be building the $10 Billion Site C Dam to subsidize the mining and natural gas industries with cheap electricity, while regular British Columbians and small businesses pay 3 times as much for their power. This is a practice - the public subsidization of large-scale industrial corporations with highly-discounted hydro power - that needs to be rethought under the present circumstances.
 
I would go one step further. These $55 Billion of secret, private power contracts need to be opened up to public scrutiny - and unwound, to whatever extent is legally possible. The BC Liberals should consider such steps to save their own skin, now that they are being confronted with the full consequences of their decisions over the past decade. Most of these projects are in blatant non-compliance of the terms of their agreements. Others are experiencing serious operational challenges, which gives you a sense of what a botched deal this is - even under these favourable terms, akin to highway robbery, they can't help but screw things up.
The Liberals should consider unwinding whatever contracts they can to give themselves some budgetary breathing room going forward and avoid the need to jack up power bills to unacceptable levels.
 
Above all, they need to face a massive public backlash over the mere suggestion of breaking up BC Hydro. They must be made to understand that this is not a viable political option. Think the fact they've been re-elected for another term and face a weak NDP opposition means they can get away with whatever they want? Three words: Harmonized Sales Tax.
 
The four cheapest districts in North America for electricity have historically been - not coincidentally - the only remaining public power states and provinces: Quebec, Manitoba, Tennessee and BC (though not for long, at this rate). This is no accident. For all the rhetoric of "private sector efficiencies", the record of evidence is clear: private power is a racket, designed by the likes of Enron for one purpose - to suck maximum dollars out of the pockets of unsuspecting citizens.
 
This program is legalized fraud, plain and simple. Yes, I am quite comfortable using that word here - which Merriam-Webster defines as "intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right." We British Columbians cannot, under any circumstances, allow ourselves to be the next in a long line of suckers duped by this agenda. If we do, we can look to the likes of Greece, Ireland and Spain for some sense of what's in store for our future.

Damien Gillis is a Vancouver-based documentary filmmaker with a focus on environmental and social justice issues - especially relating to water, energy, and saving Canada's wild salmon.

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