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Liquid Gold: Energy Privatization in British Columbia

By John Calvert

November 4, 2013

Review By Mark Jaccard

John Calvert is a professor of political science at Simon Fraser University, but this is not the kind of book one expects from an academic. It presents a conspiracy theory in which the sole purpose of electricity policy in British Columbia under Premier Gordon Campbell is to enrich corporate friends while impoverishing BC Hydro’s small customers and destroying the environment. As with so many conspiracy books, facts and fair treatment of evidence are casualties right from page one.

Calvert claims that British Columbia’s electricity policy, since the election of the Liberals in 2001, has been nothing more than the execution of a well-orchestrated conspiracy to (1) relinquish control of the BC electricity system to private independent power producers (IPPS), (2) enrich IPPS and major industries via subsidies to BC Hydro’s industrial customers and unfair rate increases to its other customers, and (3) destroy the BC environment (if necessary) to achieve these ends. To sell his conspiracy theory, Calvert is extremely biased in his selection and interpretation of the evidence. One could provide a huge list of his distortions, but space constraints limit me to the following examples.

Calvert claims that government and industry have conspired to define biomass (wood waste) as not being a fossil fuel so that they can increase greenhouse gas emissions without admitting it. Thus, he says, “the government left open the door to fossil fuel burning through its acceptance of the use of ‘biomass’ (a term coined by industry to make burning wood seem relatively benign) to generate electricity” (12). He then he adds up energy projects from coal (28 percent) and biomass (18 percent) in the 2006 IPP contract offers from BC Hydro and concludes: “In other words, power plants burning fossil fuels accounted for roughly 46 percent of the total” (62). In reality, biomass is not a fossil fuel and the term is not an industry fabrication that was composed in order to burn fossil fuels under another guise.

Calvert conveniently confuses the terms “electricity” and “energy.” The book is about increasing private “electricity” generation, but its subtitle is “Energy Privatization in British Columbia.” In fact, the entire BC energy system is mostly in private ownership and always has been. The BC electricity system, however, is 90 percent in public ownership and, after two decades of Calvert’s “privatization conspiracy,” this may decline by a whopping 5 to 10 percent.

Calvert claims that “it is no exaggeration to say the BC Utilities Commission has become a kind of ‘club’ in which private interests have shaped the regulatory process in their favour” (33). As evidence, he refers to the “millions of dollars over the years” awarded in intervener funding to ipps and industrial customers, and he concludes that “in reality the major beneficiaries are not members of the public at all: they are corporate interests” (32). Not true. For the past decade, data from the commission show that the “major beneficiaries” were unions, consumer groups, environmentalists, and other small non-profits, at 73 percent of British Columbia Utilities Commission funding, while industrial customers and ipps received only 27 percent.

The BC Heritage Contract entitles BC Hydro customers to low-cost power from its older hydropower facilities. Calvert claims that “the prime beneficiaries of the Heritage Contract have been major industrial customers” (5). Not true. Industrial customers receive only one-third of the benefit. The “prime beneficiaries” are the small-consumer customer classes together; namely, households, small businesses, institutions, farmers, and municipal governments.

Calvert frequently speaks of the unfairness of large industrial customers paying lower rates than other customers. He conveniently fails to explain that industrial customers pay less everywhere in the world because the cost of serving them is dramatically lower; unlike residential customers, industrials have no-low voltage distribution costs and a smooth load that does not require expensive extra capacity to meet peak demand.

Calvert presents a figure that demonstrates “the growth of private energy investments since the Liberals were elected in 2001” (55). First, the figure is wrong. More IPP capacity was added under the NDP in the 1990s than his figure shows. Second, Calvert conveniently fails to point out that almost half of the 1,000 MW of ipp capacity installed since 2000 was from projects approved by the NDP. And Calvert should explain that this trend to ipps is global, as governments across the political spectrum realize the value in sharing electricity investment risks with private investors. The likely outcome is lower long-run rates for all BC Hydro customers as independent investors absorb misinvestment losses. BC Hydro ratepayers would thus have avoided losses like the $120 million from BC Hydro’s ill-conceived Vancouver Island natural gas strategy and the even larger sum wasted on the aborted Site C dam in the 1980s.

Calvert claims that “one of the other major consequences of the government’s new energy policy is its negative impact on the provincial environment” (11). He says that the Liberal’s Energy Plan in 2002, with its 50 percent requirement that energy be from clean sources, “opened the door to the purchase of new energy from pulp mills that use wood waste and coal” (47). This is wrong. Before the government established the 50 percent requirement, BC Hydro’s policy under the NDP was that 10 percent of its electricity must come from clean sources. In other words, 90 percent could have come from burning coal. The 2002 Energy Plan partly closed a door that was wide open. The 2007 plan basically shut it with a requirement for 90 percent clean.

If you love conspiracy theories, enjoy sanctimonious, inaccurate criticisms of policy crafted to stimulate righteous indignation against our politicians, and don’t care about facts and fair treatment of evidence, this is just the book for you.