B.C. Energy Minister Bill Bennett said Wednesday he will consider the use of natural gas to produce cheaper power in response to prospective massive BC Hydro rate increases.
Confidential B.C. Hydro documents show electricity rates could increase as much as 26 per cent from 2014 to 2016 to meet cost increases of $1 billion.
Industrial electricity users represented by the Association of Major Power Customers of B.C. warn the rate increases could stymie business development. The group argued Wednesday the B.C. government must reconsider using natural gas to produce cheaper power in place of hydro or independent power projects such as run-of-the-river.
The use of gas-fired power was pushed aside in British Columbia in 2007 as part of a new green energy plan brought in under then-premier Gordon Campbell.
However, Premier Christy Clark gave the green light to natural-gas fired power last year for proposed liquefied natural gas projects, declaring it clean if it was used for that specific purpose.
Bennett said current legislation — which stipulates that 93 per cent of B.C.’s electricity must come from clean energy that doesn’t produce greenhouse gas emissions — restricts him from acting on gas-fired power now.
But in an interview, he said he has an obligation to look at everything to keep rates down over the long haul.
“I’m doing something that cabinet ministers don’t normally do, which is to speculate,” said Bennett. “But I think the people who have an interest on both sides of the issue — those concerned about carbon emissions and those worried about staying in businesses employing thousands of people in these industries — I want both of them to know I am thinking about [gas-fired power].”
Bennett said a decision on gas-fired power is not needed immediately, as BC Hydro’s recent long-range plan shows new power generation is not needed for a few years.
Both the premier and Bennett have said the rate increases will not be as high as 26 per cent from 2014 to 2016, but have not put a number to the increases. A rate review is underway involving senior officials from the energy and finance ministries and B.C. Hydro.
But the pressure on rates continues into the next decade.
Rates are forecast to increase another 8.4 per cent in 2017, and cumulative increases are forecast to reach 41.5 per cent by 2020, according to the internal B.C. Hydro document from the Rates Working Group dated Aug. 23, 2013.
“When the bill comes in this big, I think it has to reopen that discussion [on gas-fired power],” said Richard Stout, executive director of the Association of Major Power Customers of B.C.
The group represents industrial users in the pulp, wood, mining, and petrochemical sectors, which consume 20 per cent of B.C.’s electricity.
Stout said the Site-C hydroelectric project in northeastern B.C. should be scrapped in favour of gas-fired power, arguing that gas is a clean energy compared to coal.
Natural gas is helping to drive down emissions globally, replacing coal, and is in favour in Europe, noted Stout.
Gas-fired power can be produced at about $50 to $60 a megawatt hour, compared to about $100 for Site-C, and an even steeper price for independent power projects, he said.
B.C. government statistics show narrower cost spreads for gas, hydro and IPPs.
Gas-fired power can also be placed adjacent to where it is needed, which reduces transmission costs, Stout said.
Calgary is building an 800-megawatt gas-fired power plant to supply about half the city’s electricity. The 900-megawatt Site-C project in remote northeastern B.C. has a price tag of $7.9-billion, which is expected to increase.
The Pembina Institute’s Matt Horne said if the B.C. government was to propose gas-fired power it would likely receive the same reaction as the scuttled Duke Point project on Vancouver Island, which came under heavy protest in the early 2000s.
In British Columbia, where much of the power is produced by hydroelectric dams, it does not make sense to use natural gas if you are serious about meeting carbon reduction targets, he said.
B.C. has legislated that carbon emissions will be cut by 33 per cent by 2020 from 2007 levels, and 80 per cent by 2050. “Gas is cleaner than coal, but not clean enough if we want to get where we are targeted,” said Horne, climate change director for the Pembina Institute, an environmental research and sustainability organization.
The B.C. Public Interest Advocacy Centre (BCPIAC) is more concerned with how the prospective, significant increases will affect the low and fixed-income power users they represent.
BCPIAC staff lawyer Eugene Kung said if industry needs more or cheaper power, perhaps they should pay for it. He didn’t dismiss the idea of gas-fired power, but said the province has to be conscious of environmental impacts.
Kung said there are households where power is consuming 10 per cent of residents’ take-home pay, which means when rates increase they are forced to make choices about necessities such as eating, heating, medications and rent.
If electricity rates increase, it’s important for the province to consider approaches taken in other jurisdictions such as California to protect low-income and fixed-income households, he said.
Those include a total ban on power cut-offs in winter and a so-called “lifeline” power rate for low-income households, said Kung.
