VICTORIA — As decision day approaches, the B.C. Liberals face two main choices to meet the province's future electricity needs, both controversial.
"I can tell you that we're down now to essentially two options, one of which is Site C and one of which is the independent power project option," Energy Minister Bill Bennett told reporters recently.
The first option would see BC Hydro construct a last-of-its-kind hydroelectric dam at Site C on the Peace River.
The second would entail Hydro contracting with private operators to build smaller-scale power projects -- wind, run of river, perhaps biomass and geothermal -- that would be scattered around the province.
In disclosing the final two options, Bennett tacitly confirmed that the Liberals have dropped consideration of building either a new gas-fired generating plant or refurbishing the little-used thermal plant on Burrard Inlet.
Each of the two remaining options has its proponents and -- no surprise, this being British Columbia -- each also raises ferocious objections. Anything one might say on this file is debatable, including this statement.
The pluses for Site C, as the government sees them, are that hydro is the proven method of electrical generation in this province and it provides some of the cheapest rates on the continent. Once the construction cost has been paid out, hydro dams are reliable for the long-term and there's no need to estimate the future cost of fuel, as with a gas-fired plant.
For the Liberals, independent power projects have their good points too. "I don't think there's any issue around the reliability of the independent power industry," Bennett told reporters. "It's a good industry. We're actually very proud to have it. We get 25 per cent of our electricity today in the province from the IPP industry."
The industry, in a recent analysis (the one prepared, then withdrawn by KPMG), cited some other advantages of smaller-scale projects over the all-or-nothing aspect of Site C. IPPs could be phased in over time and spread around the province. Hydro could contract for range of power sources, including unproven-for-B.C. options such as geothermal.
Bennett, for his part, insists that the deciding factor between the two options should be the impact of each on future electricity rates. "We have to make a decision here that will have implications for many, many decades to the people who live in the province, to the businesses that operate here. We have to try to do everything we can to keep rates down, and that's the basis upon which we'll make this choice."
But having seen competing analyses on that score over the years, I doubt there's an indisputable answer to the question raised by Bennett. It all depends on the assumptions one makes going in and going forward.
Besides, other considerations have to be weighed, including the veto-in-all-but-name that First Nations exercise over resource development in this province.
One advantage for independent power involves the emerging role in such projects for First Nations as partners, developers and suppliers of services. By comparison, natives in the Peace River region have mounted a strong legal case that Site C would cause irreparable damage to aboriginal rights, title and interests.
Another factor is the impact on the provincial debt. IPPs don't entail a lot of provincial borrowing. They are underwritten in large measure by long-term contracts, which by verdict of the independent auditor general (applying generally accepted accounting principles) are listed in the public accounts as $56 billion-and-counting worth of multi-year contractual obligations but not as debt.
Not so with BC Hydro. Because of the corporation's already hefty debt load, and the government's practice of raiding its accounts for dividends, the giant utility will have to borrow much of what it estimates to be the cost of Site C, namely $8 billion.
The province is already constrained in how much more it can borrow, according to Finance Minister Mike de Jong. "I don't think we have a lot of room to move at this point," he told me during an interview Thursday on Voice of B.C. on Shaw TV.
"Those rating agencies that assess us increasingly look at other variables and other measures ... The distinction that has historically been made by these agencies between taxpayer-supported debt and the debt incurred by agencies like BC Hydro, which is self-supporting, is beginning to blur in the minds of some of these bodies. So I'm saying we have to be cautious."
Plus if Hydro is green-lighted to borrow billions for Site C, there will be that much less borrowing room for everything else. "It will likely crowd out many other projects," de Jong continued.
Not to say that debt-loading or First Nations will trump all other considerations. Only that when the Liberals say this is one of the toughest and most expensive decisions they've faced, they mean it.
As to timing, Premier Christy Clark told reporters Thursday that BC Hydro, as proponent for Site C, is pressing for a "yes" by the end of the year in order to take full advantage of the 2015 construction season.
But she also left open the possibility that the decision, being contentious, could spill over into next year.
