BCUC Regulatory Updates (2015-2019)

BCUC Regulatory Updates (2015-2019)

BCUC Regulatory Updates


Review of Capital Expenditures

Clean Energy BC has intervened in the British Columbia Utilities Commission process to investigate BC Hydro’s allocation of capital. Between 2008 and 2027, BC Hydro will have spent a total of $50 billion on capital investments, yet their allocation of capital is surprisingly basic.

As an example, BCH does not include the amount of revenue that will be generated by a capital investment in its comparative analysis. This means investments that result in an increase in revenue and demand do not rank any higher in priority than investments that don’t increase revenue and demand.

Consequently, potential new demand may not materialize if the necessary infrastructure does not exist. This may lead to lost electricity sales to BC Hydro and opportunities for IPPs to sell electricity. The review is about guidelines and not tangible rules.

EV Charging Service

CEBC submitted a short argument that stressed the need for open competition as opposed to utility control over EV charging; except in areas where the market will not be served by competition. In these areas, regulation is acceptable only when there is a level playing field that includes taking into account BCH’s zero cost of equity. The second phase of the review is now underway.

EV Charging Service Part 2

In Phase 2 of the BCUC Inquiry into the Regulation of Electric Vehicle Charging Service, the BCUC is looking for feedback on economic or market-related problems. The most complex issue is the perception that there isn’t enough business to attract investment in EV charging services in the more “remote geographic locations” within the province.

CEBC is skeptical that the solution to economic or market problems can be solved by the use of BCUC’s regulatory powers. Perhaps the best option would be for senior governments to help provide financial assistance for EV charging services, thereby leaving the Non-Exempt Utilities such as BC Hydro and Fortis BC to maintain generating, transmitting, and distributing electricity.

The provision of EV charging services is in its infancy and the technology continues to rapidly evolve. This provides all the more reason for Non-Exempt Utilities to stick to their core business; as they often make long-term investment decisions on electrical equipment that is not undergoing the same rapid technological change. The market should therefore be allowed to do its work and the “winners and losers” be decided accordingly.

Alternatively, if the BCUC does decide that the participation of Existing Public Utilities is indeed required in the market, these utilities could potentially provide loans to Exempt Public Utilities and existing utility customers, such as businesses and homeowners, in order to purchase and install EV charging equipment.

BC Hydro has had a loan program for funding investment energy conservation measures as part of its Power Smart Program. The investment risk would rest with the borrower and not the Existing Public Utility except in the case of default.

Waneta Dam 2/3 Purchase

CEBC emphasized where that the cost of alternatives is dropping and BCH must therefore include a reasonable return on equity in its financial evaluations. The BCUC specifically stated that in relation to BCH’s long-run marginal cost: “The Panel is also satisfied that using $60/MWh for wind resources is appropriate.” BCH used a value of $106/MWh.

Currently BCH uses a 0% return on equity for its rate impact analysis and an 8.75% return on equity for present value analysis. This is not reasonable. CEBC also pointed out that the Waneta generation is very heavily concentrated in the spring freshet and has to be shaped by the BC Hydro system. It is low value energy.

Site C Review

CEBC made multiple submissions regarding Site C. This included BCH’s use of 0% equity in its financial evaluations and capital, artificially low operating and financing costs, artificially inflated renewable energy costs, over-estimated sunk costs, termination and remediation costs, and minimization of estimated saving from the termination or suspension of Site C.

That being said, the playing field between IPP projects and Site C was not level. For comparative purposes, the BCUC modelled a wind portfolio equivalent to Site C and asked for submissions about the accuracy of this modelling exercise. The BCUC’s model corrected many of the biased assumptions inherent in BCH’s portfolio model; such as the cost of wind generation and integration costs.

CEBC provided a very detailed analysis of the portfolio that supported the work done by the BCUC. Ultimately the BCUC concluded that despite the money spent to date on Site C, if the Provincial Government cancelled the project, the cost of cancellation would be equivalent to the cost savings provided by the portfolio.

2017-2019 Revenue Requirement

CEBC pointed out that while there has been substantial growth in BCH’s capital investment and operating costs – causing ever increasing electricity rates – there has been a stagnation in load growth. It is not IPP contracts that are driving increases.

From fiscal 07 to 16, the increasing cost of energy was only 3.3% out of a total 66% increase in revenue requirements. Load growth has stagnated in part because of the customer response to rate increases of 70% since 2007 and Power Smart expenditures of $1.2 billion.

BCH attributes almost any decline in demand to rate increases to Power Smart, which has been artificially inflating its success. BCH was not pursuing low-carbon electrification despite the climate objectives in the Clean Energy Act and the then recently issued OIC’s 100 and 101.

CEBC aggressively pursued the matter of the electrification of the Montney. BCH did not possess the same mindset. It also requested that any revenue Powerex receives from selling renewable energy credits for BC IPP projects to be shown as a reduction in the cost of purchasing IPP electricity.

Rate Design Application 2015

This was a multiple phase hearing, part of which dealt with the creation of an interim freshet rate. CEBC requested that BCH provide full details of BCH’s apparent freshet surplus. From previous proceedings it is apparent that the main source of the surplus is from BCH’s generating projects, as will be further exacerbated by Site C and not IPP projects.

The pursuit of this information is being continued in the workshops that BCH has recently convened to make this rate permanent. CEBC supported the elimination of the two tiered rate structure for commercial customers and argued for its elimination for residential customers.

It also advanced the position that the 2015 RDA contained no significant measures to advance the BC Government’s goal of reducing GHG emissions as set forth in the Clean Energy Act. CEBC also commented on the need to reduce the LRMC because of the continuing decline in wind and solar costs.

David Austin and Jim Weimer have been instrumental in contributing to CEBC’s regulatory submissions to the BCUC.

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