IPPs and BC Hydro - Libs buy high, sell low.

[flamingfingers]

How we continue to be hosed by the ChristyLiberal 'friendlies':

Monday, February 4, 2013
BC Liberal style: buy high, sell low

From BC Hydro's quarterly report for the period ended September 30, 2012:

"As a result of the high inflows, the Company sold a significant volume of surplus energy in the six months ended September 30, 2012, an increase of over 4,000 GWh as compared to surplus energy sales in the first six months of fiscal 2012. The high inflows also resulted in both the Williston and Kinbasket reservoirs spilling substantial volumes of surplus water in the summer of 2012... (emphasis added)"

In the six months ended September 2012, BC Hydro purchased 5,589 GWh of electricity from private power producers for $383 million, an average cost of $68,527 per GWh. BC Hydro didn't need private power since it was generating more than it could sell domestically, despite dumping stored water without running it through generators.

Surplus electricity sold through trade markets returned $24,580 per GWh while BC Hydro paid almost three times that unit value for private power. One could calculate an apparent loss of $246 million between BC Hydro's purchase price and its selling price for private power. However, the loss is even higher because potential power, not generated when water was spilled from dams unused, could have been had for little more than zero marginal cost.

The loss noted above is for six months only. The "fiscally prudent" Liberals are costing electricity consumers more than half a billion a year. That affects residents and light industrial/commercial clients but also puts heavy industry at a disadvantage.

Kind of at odds with government advertising currently costing taxpayers millions of dollars.

Read the remarks from:
From the International Brotherhood of Electrical Workers 2013 The Hotline - LU 258's News Magazine

Here:
http://northerninsights.blogspot.ca/201 ... mment-form

[Captain Awesome]

Actually, if the blogger had done any research he'd understand the problem BC Hydro is facing. Not just BC Hydro but other electricity producers too.

BC Hydro doesn't generate enough electricity during peak time so they buy it on the open market at inflated cost. But at periods during slow demand they have too much electricity and therefore sell the extra on the open market. But when the demand is low the price is quite low too - supply and demand, hello - so, they sell at lower prices. I mean, it would be great to store electricity from slow times to used it during high demand periods, but it's impossible so they sell it off just to bring in SOME money as opposed to wasting it completely.

And that's the logical explanation to this as opposed to hatred-filled propaganda.

[flamingfingers]

^^ If that is the simple case then, why is BC Hydro forced to buy power from IPPs?

[Captain Awesome]

^^ If that is the simple case then, why is BC Hydro forced to buy power from IPPs?

It's not a simple case, it's the challenges of producing electricity these days. There just isn't enough of it when everybody needs it and plenty of it when nobody needs it. BC Hydro buys electricity on the open market - a lot of time from US, actually.

Why do you think we're slowly moving towards time of use metering? To lower the consumption during peak times and at least charge higher rates so BC Hydro can afford to pay inflated prices when they buy it from somewhere else.

[flamingfingers]

^^ The question is Captain: Why is BC Hydro forced to buy IPP power at inflated prices WHEN they are spilling water over their dams?

[Captain Awesome]

I think I tried to explain it to you - they buy when they DON'T have enough electricity. Dumping water is done when they have plenty of it. Buying electricity from private sources is a not a new thing, Fortis does the same thing. Also, while they can have plenty of electricity in one part of the province, they might be running low in the other - electricity doesn't transport without losses so sometimes it's just not economical to do so.

It's quite fascinating once you do some research on challenges of todays electricity producers - something that this blogger failed to do, I guess.

[Smurf]

Captain, I believe you should study up a bit on what you are talking about. Bc Hydro buying power on the open market is one thing. Being forced to buy it through contracts, IPP's, forced on them by the BC Liberals at prices two to three times market valve is completely different. When they are short of power and have to buy it is a totally dfferent situation than buying it at a rediculous premium when they don't even need it. can you not see the difference. It is a double loss that is totally unnecessary.

[Gone_Fishin]

Nice to see that the union is spending money making crap up as they go along. That's a prudent use of members' dues instead of using them to help members with retraining, strike funds, and member development. Better to blow money on partisan garbage rather than spend it for the betterment of its members.

The theory of supply and demand is simple economics, Captain, and you should not expect the hate-filled members of the NDP on this forum to understand anything about it, since there has never been a shred of economic know-how demonstrated within the NDP since its inception. I applaud your efforts, but when you're trying to explain why peak and low demand periods derive different pricing to people who seem to think we can carry surplus electricity around in our pockets until we need it, you're facing an uphill battle.

[logicalview]

Nice to see that the union is spending money making crap up as they go along. That's a prudent use of members' dues instead of using them to help members with retraining, strike funds, and member development. Better to blow money on partisan garbage rather than spend it for the betterment of its members.

The theory of supply and demand is simple economics, Captain, and you should not expect the hate-filled members of the NDP on this forum to understand anything about it, since there has never been a shred of economic know-how demonstrated within the NDP since its inception. I applaud your efforts, but when you're trying to explain why peak and low demand periods derive different pricing to people who seem to think we can carry surplus electricity around in our pockets until we need it, you're facing an uphill battle.

Now now. I think if you look at the NDP under Tommy Douglas, you'd see that Tommy nevet proposed a social program thst he also didn't show how it could be paid for, including health care. If Tommy wss alive today to see how his party had become so polluted and corrupted by unions he would weep. The modern day socialist is extremely lazy. They propose unlimited spending on every stupid cause under the sun, with only the weak "the rich should pay" or "we end corporate welfare" without even understanding what that phrase means. To sum up, Tommy Douglas was 100 times the guy that the pathetic NDP leaders are today.

[NAB]

Is this true or untrue?......

Unfortunately, BC Liberal energy policy severely restricts BC Hydro from building new generation, forcing the crown agency to purchase power from private for-profit companies at inflated prices. The policy also prohibits BC Hydro from storing water and purchasing electricity on the open market when prices are low.

This already bad directive was made worse by the Liberals’ “Clean Energy Act,” which formalized an artificial “self-sufficiency” requirement defined by a 50-year drought water level, plus a massive insurance requirement of an additional 3000 GWh. With these directions from the Liberal government, BC Hydro signed long-term contracts for this power at locked-in, take-or-pay rates that are many times higher than the spot market price for freshet power.

We saw the ultimate result of these deals last spring, when we lost at least $180 million dollars with BC Hydro buying private power at a cost averaging $68/MWh, when the average open market price averaged $10/MWh. Worse, much of that seasonal power wasn’t even needed to meet demand. At a time when we were spilling water over the top of our publicly owned Peace Canyon dam, we bought private power at almost seven times higher than the market price.

[Gone_Fishin]

Untrue. It's from a union that is looking to pump the NDP. Who would ever fall for BS posted on a union website? Certainly, not a self-professed free enterpriser who claims to be a fiscal conservative.

[NAB]

Since I don't know if those numbers and statements (presented as "facts") are essentially correct or not, I tend to take them largely as the truth unless someone credible can produce the same analysis / equivalent comparison proving them to be otherwise. Saying they are untrue just because of the source doesn't prove them untrue . Only facts can do that.

Nab

[twobits]

Since I don't know if those numbers and statements (presented as "facts") are essentially correct or not, I tend to take them largely as the truth unless someone credible can produce the same analysis / equivalent comparison proving them to be otherwise. Saying they are untrue just because of the source doesn't prove them untrue . Only facts can do that.

Nab

Trouble though is what is a credible source? What is a credible opinion? Anything the BCTF puts out, as well as the Tyee are pretty much dismissed by me at the gate. On the other end of the spectrum, opinions from sources such as the Fraser institute should be read with a clear understanding of leaning as well. The actual truth inevitabley lays somewhere in the middle always.
As far as these IPP's go, I must admit I am somewhat confused about them. Are/were they good intentioned but expensive mistakes or will their benefits be realized over a longer time horizon? Right now I take the position of the old adage that if something sounds too good to be true it probably is and apply that kernal of logic to some of the outrageous claims of billions in patronage contracts for IPP's. In essence no one person or gov't could possibly be that stupid or as wrong as some of the far left leaners on here, and in partisan blogs elsewhere, would like to have us believe. The truth is probably in the middle. And until I find that elusive credible source, and it won't be in these threads, that is my solice.

[Smurf]

I believe if you get over your prejudice with unions and the NDP and do some actual checking you will find most of the information is right. The dollar amounts I'm not sure about but the losses are huge. Try checking Hydro's own financial statements. This is nothing to do with supply and demand as anyone with any understanding of the situation should know. According to the contracts they have to buy so much power at a set price whether they need it (there is demand) or not.

If you want real proof there is a problem check out Coleman's reply on the news (global) tonight. No denial whatsoever that it is true. He only says that he hopes it will work out in the end. No mention that not only will we have to make up for the loss from purchases but also for the money lost when we spill water that could have produced power which could have been sold at a profit. This is a mess and he knows it or he would have denied it.

Just do some checking before you make accusations.

[steven lloyd]

If you want real proof there is a problem check out Coleman's reply on the news (global) tonight. No denial whatsoever that it is true. He only says that he hopes it will work out in the end. No mention that not only will we have to make up for the loss from purchases but also for the money lost when we spill water that could have produced power which could have been sold at a profit. This is a mess and he knows it or he would have denied it.

Prickly Doyle heads back home, leaving some uncomfortable questions behind (including)

Doyle chronicled how deferrals have grown from a single account when the Liberals took office to almost 30 currently, and from a balance of tens of millions en route to a projected $5 billion.

He also accused the Liberals of using the deferrals to tart up the balance sheet at Hydro, thereby justifying the government’s successive cash grabs: “It seems to me that the sole purpose of this whole exercise is so that a dividend can be paid to the province.”

Moreover, Doyle reported, there was no discernible plan to retire all the deferrals and square up the accounts.

That accusation provoked a memorable exchange at the legislature public accounts committee in November 2011, when the Hydro brass were summoned to respond to Doyle’s accusations with the auditor general himself in the room.

“We could provide a plan about all our deferral accounts to the auditor general,” huffed Charles Reid, then Hydro’s chief financial officer and today its CEO. “Whether he would accept the logic and rationale is entirely up to him.”

Doyle fired back that his staff had repeatedly asked for such a plan, yet none had been produced: “I would have thought that if there was a plan, I would have it in my hand.”

Rising to the moment, Doyle went on to advise that the target of his complaint was not Hydro in any event, but rather the government and its continued reliance on deferral accounts to justify its cash grabs from Hydro.

Eventually the full $5 billion would somehow have to be paid back. “This rat-in-the-snake type of situation,” he called it, summoning a memorable image. “It’s a big bump that’s going to be there for a long time as it gets digested.”

By way of accomplishing the digestion process, Doyle offered three possibilities.

Hydro could try to make up the difference by rationalizing operations, though as Doyle noted, “$5 billion is a lot of money to recover from an operation that doesn’t turn over more than $4 billion a year,”

Or the government could reverse the siphon and begin returning cash to Hydro from its own accounts, an unlikely scenario.

Or the government could direct Hydro to make “rate adjustments.” Meaning rate increases, and mighty big ones, given the need to offset $5 billion worth of deferrals.

“I can’t think of another option that you would use,” Doyle observed. “So what’s the choice?”

Major cuts in operations. Cash from the province. Or rate increases. What’s the choice?

The question is still hanging there, no less than when Doyle asked it, no less for the current government than the next one.

John Doyle is heading back to Australia. But the problem he identified as the rat-in-the-snake will likely be with us for a long time.

http://www.vancouversun.com/opinion/col ... story.html