In-Sights: Careless or captured?

When you read or listen to resource industry advocates, especially ones masquerading as objective political pundits, compare their concerns in 2009 about burning natural gas to generate peak-demand electricity to their recent support for burning BC natural gas elsewhere in the world in the form of LNG. The following was

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In-Sights: Circular flow of income

Dr. Eoin Finn, an expert in international business and a leading Woodfibre LNG opponent, spoke to the independent Coast Clarion and said, “The fight is nearly over.” This was a project that Christy Clark’s Liberals hoped to promote in the May election as proof their LNG strategy was not constructed

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In-Sights: Costing Site C Options

Another contribution from Richard McCandless, a former senior civil servant in British Columbia and a knowledgeable analyst who comments regularly on public affairs at BC Policy Perspectives. (Republished here with permission.) On Thursday the Liberal party promised to spend hundreds of millions on new and expanded programs, signaling the abandonment

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In-Sights: Never retreat, never retract…

BC Hydro suffers a lack of managerial competence, contempt for fiduciary responsibilities, a disregard for present day energy realities and, perhaps most important, a failure of vision. The first exists because Government turned the company into a politicized utility, with senior managers and board members selected for Liberal Party loyalty,

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In-Sights: Careless or captured? (A 2009 repeat)

When you read or listen to resource industry advocates, especially ones masquerading as objective political pundits, compare their concerns in 2009 about burning natural gas to generate peak-demand electricity to their current attitudes toward burning natural gas to liquefy natural gas. The following was first published at Northern Insight on August 4, 2009.

Despite deep cynicism about those backing Gordon Campbell’s Liberals, I’ve long held respect for the writing of Vaughn Palmer. My reservoir of appreciation seems now to have run dry. He has been bright, skilled and articulate, usually worth reading throughout 35 years with the Vancouver Sun.

Now, I don’t know. Is he distracted, overburdened, grown careless or captured by his subjects? What can explain Palmer’s early reporting about the British Columbia Utilities Commission decision on BC Hydro’s 2008 Long Term Acquisition Plan.

July 31, on his regular Vancouver radio outing, he led with this:

“I think it means the BC Utilities Commission is out of touch. You know, they said, “We’re not persuaded we need all this new green power because you’ve got the Burrard Thermal Plant sitting out there in Port Moody and it could run full time and take care of your power needs for many years.” Which, is completely out of touch. … the Utility Commission’s belief that the Burrard Thermal is the answer to any of the province’s power needs for the future just ignores its impact on air quality among other things.”

That is not merely weak reporting of the Commission’s determination. It is a reprehensible misstatement that totally fails to reflect the actual decision. I can think of only two possibilities. One is that Palmer had not read the report but relied on someone’s corrupt précis. The other is that he intentionally misled the audience for some purpose.

Sidekick Keith Baldrey, also of Canwest Global, contributed:

“And, that’s why I don’t understand why a number of environmental groups who are applauding this decision have remained silent on the fact that Burrard Thermal is to be relied on at an increasing rate because it produces dirty energy. That’s a contradictory and hypocritical position and a number of people haven’t really squared themselves with that.”

No Keith, the BC Utilities Commission simply didn’t say that.

Palmer subsequently shifted his attack, all but accusing the BCUC of joining forces with uninformed racists:

“You know, that bit about the First Nations – I mean think about this for a minute – if we go out and get public opinion on First Nations, one of the first things you hear from people is, “You know, they always want a handout from the government, they’re always taking government money.” You know, here you got a bunch of First Nations in British Columbia – some of the best led native bands in the province – gone out and they’ve found private partners to develop their own resources on their own traditional territory and the big provincial government regulator has slammed the door on their face. I mean, it’s no wonder that they’re feeling frustrated.”

Baldrey added:

“. . . these independent power projects have as economic partners First Nations groups. These are a huge economic development tool for impoverished First Nations and Vaughn and I were reading this morning, from the Sechelt Indian Band, a letter they’ve written the BC Utilities Commission accusing them of essentially, and I quote, “This appears to us to be nothing less than regulated racism.” So you’ve got First Nations now very much up in arms. With the stroke of a pen, the Utilities Commission has kiboshed what they saw as the number one tool to lift a lot of their people out of fairly extensive poverty and I don’t know if the Utilities Commission thought this through properly.”

I was interested to note that at 9am July 31, Baldrey and Palmer knew the contents of the Sechelt Band’s letter and were even armed with the pointed quote claiming “regulated racism.” Yet that letter was still warm from printing, being dated only one day before, July 30. I wonder how it came to be reviewed so promptly and publicly by the Victoria based journalists.

Was the Public Affairs Bureau (PAB) or the Independent Power Producers Association of BC (IPPBC) helping Chief Garry Feschuk and the shishalh First Nation circulate the letter? Were the flacks also providing pre-digested interpretations of the BCUC decision to certain journalists?

Palmer went on to provide a bit of accurate detail, saying the BCUC decision did not reject green power, private power or run of the river facilities and that, primarily, BC Hydro had to rework the scheduling of projects. Mind you, he ignored the BCUC determination that BC Hydro had been either inaccurate or dishonest in its power needs forecasting. That should have been news. At best, Palmer had part of the story correct but his headline material was worse than sloppy.

We cannot though accuse all professional journalists of faulty or inadequate reporting. Mark Hume at the Globe and Mail had no difficulty understanding the entire BCUC decision and writing conclusions based on the Commission’s actual findings. He said:

“The commission’s ruling made it clear, however, that there is no energy crisis – and that when there are energy shortfalls, such as during droughts or the period of peak demand in December, BC Hydro has a solid backup system in the Burrard Generating Station, an old, mostly idle plant fueled by natural gas.

“The commission is not saying we should run the Burrard plant, or that Burrard is a better source of energy than clean resources,” said economist Marvin Shaffer. What the commission determined is that Burrard is valuable as a backup facility, and that in that role it has the capacity of at least 5,000 gigawatt hours, not the 3,000 GWh estimated by BC Hydro.

“By refusing to accept the lower capacity, the commission called into question the need for BC Hydro to purchase backup power from IPPs.

“Had the British Columbia Utilities Commission not intervened, B.C. would have been damming its wild and scenic rivers, not in a noble fight against global warming, but in order to run air conditioners in California.”

Contrast that analysis to the one by Keith Baldrey:

“Yes, they (BCUC) just said go and use Burrard Thermal.”

One does not need to be a sophisticated media analyst to conclude that Canwest Global’s Palmer and Baldrey reported on the BCUC in a manner that is entirely below the standard set by Mark Hume. The Globe and Mail faces the same financial challenges as every newspaper publisher but in the western bureau, they employ and deploy high quality staff, particularly in comparison to the competition.

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In-Sights: Misappropriation of public wealth

Readers may tire of reports on BC Hydro but the more I examine this public utility, the more convinced I am that citizens of BC are victims of massive financial deception.

In 20 years leading up to 1996, BC Hydro’s average annual revenue from trading in North American electricity markets was $115 million. In three years ended March 2003, the utility realized gross trading revenue of  $11.25 billion, although that sum was tempered by the $1 billion or so BC Hydro paid to end a subsequent lawsuit by California.

Although the American power market had been manipulated by Enron and other criminal fixers, Gordon Campbell and his colleagues believed that British Columbia could become a permanent power supplier to the western USA. Liberals wanted the electricity to be created by private operators, but it was soon clear that private entrepreneurs were not prepared to take significant financial risks.

The provincial government was determined to proceed so it decided that BC Hydro would sign long-term contracts to purchase power produced by independents at prices that made projects attractive to investors. This effectively transferred all business risks from private operators to the public. While dumb, it’s a fairly common occurrence today when governments are keen to be seen as business-friendly.

Compounding the situation was the Liberals’ misjudgment of future markets because they didn’t anticipate improved technologies and growing availability and affordability of alternative power. Consumption efficiencies, declining heavy industries and falling costs of solar and wind permanently changed the energy industries.

BC Hydro has contracted with independent power producers for increasing quantities at prices adjusted upwards each year for inflation. But, domestic demand has been flat for a decade and the export market in the last five years has returned only 2.8¢ per KWh, a fraction of the 22.8¢ gained in the heyday of 2001.

Because it is buying each KWh from IPPs at over 9¢ but has no need for the total it must buy, BC Hydro is left with two choices. One is to generate less power in its own facilities and the other is to dump power outside the province at prices less than 1/3 of the amount IPPs are paid. BC Hydro is doing both.

I’ve had utility defenders argue the company has never reduced its own output to accommodate private power so I reviewed sources of power reports for more than two decades. Here is a chart showing the last five years under Premier Clark’ leadership and the five years between 1996 and 2001.

The situation is not improving. In FY 2015, BC Hydro facilities generated 41,443 GWh of electricity. In FY 2001, those very same sites produced 49,940 GWh, which is 20% more.

However, here’s a vital point. In 2001, BC Hydro had assets of $12.6 billion. In 2015, assets had grown to $27.8 billion. The company has been spending heavily, allegedly to make the system more efficient. In fact, what is continuing is misappropriation of public wealth for the benefit of suppliers, contractors and other BC Liberal friends.

Some people believe the government intention is to privatize BC Hydro. However, I believe the present situation, with another $10 billion of public funds being thrown at Site C, is working just fine for Christy Clark, her cabinet colleagues and their sponsors.

Citizens should be asking for explanations, from politicians and the pro-media journalists who choose to ignore these facts.

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In-Sights: Twitter bits

The final item may present a clue to the current state of British Columbia’s energy market. It’s hard to believe we came to this only through the sheer stupidity of our policy makers.

Liberals didn’t sell BC’s publicly owned #BCHydro, they gave it away. https://t.co/i5lzREUAsa#bcpoli pic.twitter.com/ifOSyhSYup

— Norm Farrell (@Norm_Farrell) April 15, 2016

.@VaughnPalmer analyzes #BCHydro‘s financial status with not one mention of IPPs. #bcpoli https://t.co/i5lzREUAsa pic.twitter.com/pjv6bfp9dV

— Norm Farrell (@Norm_Farrell) April 14, 2016

We don’t have commitment liability for FY 2016 but in first 9 months, BC Hydro’s term debts were up another $1.5 billion. #bcpoli

— Norm Farrell (@Norm_Farrell) April 15, 2016

#BCHydro presently offering to pay IPPs 205% of the average price at which BCH sold power to heavy industry in Q3 (Dec 2015) #bcpoli

— Norm Farrell (@Norm_Farrell) April 15, 2016

#BCHydro is responsible for transmission network upgrade (TNU) costs so the price paid IPPs is just part of its energy costs. #bcpoli

— Norm Farrell (@Norm_Farrell) April 15, 2016

IPP contracts provide for annual price escalations and contracts #BCHydro has signed extend for up to 56 years into the future. #bcpoli

— Norm Farrell (@Norm_Farrell) April 15, 2016

BC Hydro’s obligation to independent power producers (March 2015) was $12,200 for each man, woman and child in BC. #bcpoli @VaughnPalmer

— Norm Farrell (@Norm_Farrell) April 15, 2016

For my immediate family, that’s an obligation to IPPs of $207,400. #bcpoli

— Norm Farrell (@Norm_Farrell) April 15, 2016

In @christyclarkbc‘s 5 years as Premier, average price paid #IPP rose 15x rate of increase under Campbell. #bcpoli pic.twitter.com/fNFqCqtH3b

— Norm Farrell (@Norm_Farrell) April 16, 2016

SNC-Lavalin, a favourite of @christyclarkbc and #BCLiberals. Gee, wonder why. #bcpoli https://t.co/IbXSQoh3qo pic.twitter.com/Z6Dgjnnzvw

— Norm Farrell (@Norm_Farrell) April 15, 2016

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In-Sights: Twitter bits

The final item may present a clue to the current state of British Columbia’s energy market. It’s hard to believe we came to this only through the sheer stupidity of our policy makers. Liberals didn't sell BC's publicly owned #BCHydro, they gave it away. https://t.co/i5lzREUAsa#bcpoli pic.twitter.com/ifOSyhSYup — Norm Farrell (@Norm_Farrell)

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In-Sights: News from the echo chamber

Columnist Vaughn Palmer reports concerns expressed by Moody’s Investors Service about growing BC Hydro debt. The agency stated the obvious, which is that numerous capital projects are adding billions to the public utility’s debt and higher electricity rates or contributions from government are inevitable.

Palmer repeats Moody’s judgement that Hydro’s financial metrics “are among the weakest of Canadian provincial utilities.” However, the Vancouver Sun pundit provides an inaccurate explanation of why the situation exists. Readers here know about sixty billion reasons for weakness, from independent power producers alone. Buying massive amounts of unneeded power at three times market value certainly contributes to weak financial metrics. So does selling to heavy industry or exporting electricity for less than the price BC Hydro pays to purchase power. Perhaps that information wasn’t in the press notes provided by BC Liberals.

Palmer blames not the Liberals who’ve held power for 15 years; the predecessors must share responsibility, even if dramatic financial changes are recent. Palmer wrote:

Successive provincial governments have siphoned $6 billion in dividends from Hydro over the past quarter century, about two thirds of it borrowed, as Rob Shaw reported in The Vancouver Sun Tuesday.

It is silly to suggest only 2/3 of BC Hydro’s payments to government were borrowed funds. Since 2001, BC Hydro has paid $10.3 billion to governments for dividends, water use, capital taxes and local services. Had those transfers not been made, the retained cash would have paid for new investments and kept term debt near zero at least until Christy Clark took control of the Premier’s office.

Palmer writes about other problems with BC Hydro financials:

Then there’s Hydro’s massive expansion into the realms of deferred accounting under the B.C. Liberals…

But, we need not worry about dividends, or about deferred expenses, he implies, even if BC’s Auditor General recently expressed major concerns. Palmer tells us:

The Liberals have begun to rein in both abuses…

In addition to that reassurance, we’re told the Liberals have been conservative. The Moody’s report is quoted:

No income nor economic impacts from LNG development and activities have been incorporated in its budget forecast.

The claims of income and economic impacts have certainly been incorporated in Liberal Party pronouncements but no self-respecting finance ministry officials took the promises of LNG income seriously. They could not when Liberals had signed away the right to taxes and gas resource rents from LNG companies. Government loyalists in the Press Gallery bought the Prosperity Fund nonsense but, unlike officials, they rely on press releases, not facts.

Palmer continues the current Liberal messaging:

Looking ahead, the main risks that could tip the outlook from stable back to negative include political pressures leading to “a loss of fiscal discipline…”

Loss of fiscal discipline is code for spending on education, healthcare, disability benefits and other social needs. Liberals are OK with billions spent on bridges, roads, dams, transmission lines and other projects that put money into the pockets of their financial supporters. But, Premier Clark’s Government views expenditures on needy citizens as undisciplined. They want that message repeated by friendly media.

Some political pundits are like movie stunt fighters, throwing what seem to be heavy punches but never landing hurtful blows. The faux-journalists carry messages for causes they support or for organizations that hold their sympathies but, to be effective, they must create appearances of fair-minded neutrality. Without that, a pundit might as well work for Black Press.

As usual, let us look at BC Hydro’s financial statements to see what the debt trends look like. However, remember that BC Hydro owes tens of billions of dollars to private power producers and that’s a creation entirely by Liberals.

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