BC TRANSMISSION CORPORATION (BCTC) (2007) It has been 30 years since the last major upgrade to BC’s electricity transmission system. This is despite the fact that BC’s economy has required 21% more power than 15 years ago and has continued to grow by an average of 3.4% per year since 2001.
BC is forecast to grow by 54,400 every year, this strong population growth will inevitably lead to a significant level of residential expansion. When this is combined with economic growth projections of over 3% per year, there will be a commensurate demand for significant new power. In fact, it is estimated that this growth will drive demand for electricity to grow by 45% in the next 20 years.
With the Lower Mainland and Southern Vancouver Island driving much of this growth, the fact that our current generation capacity is centered in the Peace and Columbia Basins means that our transmission infrastructure is fast reaching a point where it will become a hindrance to our economic prosperity.
The 500 KV system that transmits bulk supply (two-thirds of BC’s power production) from the Peace and Columbia Basins is heavily congested during peak periods and in need of ancillary support. Add to this the reality of 5%–10% line losses in transmitting power over long distances and transmission capacity – that is the amount of power actually delivered – peaks out at 90% or less of system capabilities.
In practical terms what this means with transmission capacity on the provincial grid rapidly being reached, supply from new generation – such as Site C in the Peace or coal in East Kootenay – may be stranded.
It is within this context that the BCTC operate. The Chamber has been supportive of the role of BCTC as an independent crown corporation with an independent board of directors. This initiative is fully supported by The Chamber given it will:
• Assist in protecting Powerex’s US marketing licence and sales revenues, consistent with Federal Energy Regulatory Commission requirements for transmission to be separated from generation and distribution and to be provided under open access principles;
• Provide IPP’s with non-discriminatory access to the transmission system and, hence, markets;
• Enable domestic buyers to seek new sources of supply; and
• Ensure a provincial perspective, rather than an owner perspective, regarding development of BC’s transmission system.
To provide complete transparency and rational governance, the province should include the transmission assets of all BC owners under the administrative authority of the BCTC. These include the assets of Aquila Networks Canada (now FortisBC), Teck Cominco, Columbia Power Corporation, Columbia Basin Trust and Alcan.
The BCTC will seek BCUC’s approval of transmission tariffs. The first step in developing these tariffs should be to pool the transmission costs of all transmission assets into a single baseline rate. Once a single rate has been calculated, the baseline should be overlaid with location marginal pricing, reflecting the true cost of transmission service between the producing regions and end consumers. To ensure the affordability of system additions, all new transmission projects should be rolled into the baseline as well. This will cause overall transmission costs to rise marginally, but will also make new additions cost-effective at the “margin”.
This approach eliminates distortions within the postage stamp rates, is consistent with RTO models, sends correct investment signals with respect to supply side additions and correct cost of service signals to consumers, which enhances demand side management.
The provincial economy can ill afford a transmission “bottleneck”. It is a given that new transmission investments will require general rate increases. But doing nothing to accommodate the long-term electricity interests of the province is not an option. To that end The Chamber endorses BC Hydro’s plan to increase the distribution and transmission capital replacement ratios. The Chamber would also note its support for Special Directive 9-4 which recognizes the longer lead times required to build new transmission infrastructure and requires the BCUC to consider early expenditures by BCTC to ensure long dated transmission projects can be completed in a timely manner when supply and demand factors dictate.
Chamber members have expressed a clear concern that the separation of management control over generation and transmission assets has not had the desired effect in providing enhanced export opportunities for BC Hydro and other power producers in the province. Further, The Chamber continues to be disappointed by the lack of progress towards a regionally integrated transmission market.
Both of these are goals that The Chamber believes are critical components of enhanced market development, increased exports and increased revenues. However, it is clear that these issues cannot be addressed by BCTC since it is simply a “grid” administrator. These concerns are a function of LCSM, the lack of a market facilitator and the disconnect between the aspirations of The Energy Plan and the legislated roles of existing players: BCUC, BC Hydro, PowerEx and BCTC.
The Chamber would note, based on evidence submitted to the BCUC for approval of BC Hydro’s and BCTC’s revenue requirements, that BC Hydro’s overall cost structure does not appear to have been reduced sufficiently in recognition of the fact that BCTC exists and that BC Hydro no longer has accountability for transmission planning, management and operations. The Chamber supports the creation of BCTC as an independent transmission provider to assist with IPP development and non-discriminatory access to the transmission system and in providing access to alternative markets but is concerned that BC Hydro’s cost structure does not appear to recognize the creation of BCTC and the reduction in BC Hydro’s accountabilities.
The Chamber would also note, as evidenced in BCTC’s Capital Plan filings with the BCUC, that the transmission system is ageing and in need of significant maintenance expenditures and also recognizes that new transmission infrastructure is a very time-consuming process which normally takes much longer than generation additions. From this perspective, The Chamber would note its support for Special Directive 9-4 which is one vehicle with which BCTC could more aggressively advance transmission projects.
Finally, The Chamber has followed the BCUC’s investigation into alleged abuses of BCTC’s Network Economy service and encourages BCTC to create a tariff amendment that addresses concerns raised during the BCUC’s investigation. Particularly troubling were the BCUC Review Panel’s comments that alleged abuses by BC Hydro and PowerEx of the network economy service “discourages competition and reduces confidence and participation in the British Columbia energy marketplace”.
THE CHAMBER RECOMMENDS
That the provincial government:
1. empower the BC Transmission Corporation to:
a) govern all transmission assets in the province to assure completely transparent access and a provincial perspective on system development;
b) pursue long timeline transmission projects using Special Directive 9-4;
c) calculate its transmission tariffs by:
i. pooling the transmission costs of all grid owners into a single baseline; and
ii. overlaying location marginal pricing in order to send the correct cost of service signals to producers and consumers and to foster grid investment driven by market principles; and
2. ensure that BC Hydro and the BCTC aggressively create a robust, competitive wholesale market. This may include division of the distribution network into at least four regions, serving Vancouver Island, the Lower Mainland, the north and the south. This structure will help facilitate wholesale competition, development of distributed generation projects, and facilitate true cost-of-service recovery for transmission infrastructure;
3. encourage BCTC to use Special Directive 9-4 to advance specific long lead time transmission projects;
4. ensure that BC Hydro’s cost structure properly reflects its reduced accountabilities with respect to transmission planning, management and operations;
5. ensure that tariff amendments are made with respect to Network Economy services to ensure competition can be fostered and confidence is restored; and
6. encourage closer communication between BC Hydro, BCTC and independent power producers.
