RUN OF RIVER FAQS

1. What are the main components of a run of river project?

The 3 main components are; weir/intake, buried water pipe and turbine/generator in a power house, per the following schematic:








2. What is the maximum term of a water licence, for power purposes?

Section 12.2.2 of the Water Act includes the statement; “The Term of a license that is issued for a power purpose … is 40 years.”


3. When did water licenses start to have a maximum term?

In February, 2004, the Liberal government amended the Water Act and limited the term to 40 years. Before that, previous governments issued water license with no maximum term which effectively meant those governments issued perpetual water licenses.


4. Will all the ~500 Water License Applications turn into run of river projects?

No. A Water License Application, like a mining claim, is just the first baby-step on a long path to potentially building a run of river project. Just because a company has applied for a water license doesn't mean the project will be built. There are 12,000 mineral claims staked in the province but there are less than 12 producing metal mines operating in B.C. Similar to developing a mine, a run of river project requires dozens of permits, licenses, approvals, as well as bidding and winning an Electricity Purchase Agreement with BC Hydro, raising financing and of course actually building the facility.


5. How do run of river projects compare with other forms of power generation on environmental impact?

According to the Ontario Power Authority study done by Senes in 2006, run of river projects have the lowest environmental impact of all forms of power plants, per the following table. Note that OPA weights all the listed factors equally except Contaminant Emissions are X10, and CO2 are X20.







6. What are the facts when critics state that BC Hydro should develop new small hydro projects since their cost of production is around $6/MWh.

Building new projects is more expensive than operating old projects. BC Hydro’s Chris O’Riley, Senior Vice President of Engineering, Aboriginal Relations and Generation, stated, on February 26, 2009, during the BCUC LTAP hearing (transcript Volume 8, Page 1380 – on):
“So that's the challenge, is when you – when you re-develop these (existing BC Hydro) plants (in the 20 – 60 MW range), or put significant dollars in them, they go from a $10 or $20 a megawatt hour to, you know, $70, $80, $90 a megawatt hour. That's our, you know, the business challenge we're dealing with in terms of the ratepayer impact.”


7. Some claims were made -- particularly regarding low charges or revenues flowing back to province from IPPs while profits are huge. Could you respond to that? The fees such as water licence, capacity charge and water rental seem low. Are they? [from P.M. at Maple Ridge News following meeting involving two local MLAs, Jan 2007]

Typically about one third of the electricity revenues received by a run-of-river IPP is paid back as taxes and levies to local, provincial, and federal authorities. The construction of a recent 7 MW run of river hydro project required an investment of $15 million, created 90 jobs, and paid $ 639,000 in provincial taxes and $537,000 in federal taxes (BC Stats econometric input/output, March, 2006). Each year a typical 7 MW run-of-the-river project with a penstock that produces 35 GWh/yr will pay $67,000 in water rentals and $120,000 in property/school taxes (or $200,000 if located in a municipality rather than a Regional District), plus First Nations/Community Benefits payments, plus Provincial and Federal Income Taxes. A 10 MW run of river project built in 2003 will pay about $20 million in direct taxes, fees, water rentals, and community benefits over the life of the project.


8. Is it accurate -- that B.C. Hydro will pay $87 per megawatt hour for IPP power (Run of River) while the water rental rate is $1.08 per megawatt hour? [from P.M. at Maple Ridge News]

The $1.08/MWh is too low. For a typical 10 MW run-of-river project producing 35,000 MWh per year (a 40% capacity utilization factor), the annual water rental would be $2.15/MWh. More importantly, a run of river projects biggest costs are repaying the banks for their loan to build the project. The annual cost of interest and principal debt payments on a new 10 MW plant at a capital cost of $3.5 mln per MW, or $35 million would be approximately $2.6 million per year over 20 years, or $75/MWh. That is the biggest bite of the $87/MWh. Water rentals are to run of river projects as property taxes are to high rise buildings. The biggest costs of both are repaying the financiers for the construction.

Some claims were made -- particularly regarding low charges or revenues flowing back to province from IPPs while profits are huge. Could you respond to that? The fees such as water licence, capacity charge and water rental seem low. Are they? [from P.M. at Maple Ridge News following meeting involving two local MLAs, Jan 2007]
Typically about one third of the electricity revenues received by a run-of-river IPP is paid back as taxes and levies to local, provincial, and federal authorities. The construction of a recent 7 MW run of river hydro project required an investment of $15 million, created 90 jobs, and paid $ 639,000 in provincial taxes and $537,000 in federal taxes (BC Stats econometric input/output, March, 2006). Each year a typical 7 MW run-of-the-river project with a penstock that produces 35 GWh/yr will pay $67,000 in water rentals and $120,000 in property/school taxes (or $200,000 if located in a municipality rather than a Regional District), plus First Nations/Community Benefits payments, plus Provincial and Federal Income Taxes. A 10 MW run of river project built in 2003 will pay about $20 million in direct taxes, fees, water rentals, and community benefits over the life of the project.


9. Is there is “gold rush” on run of river hydro projects?

No. Although there is lots of prospecting and studying on many potential site there very few run of river hydro projects actually built. Since IPPs started in BC in 1989, 18 years ago, there are 35 operating RORHs. That is only 2 per year.

And they are small. All of them total only 1600 GWh, which is 2% of all the power generated in BC. All 38 of them are less than 1/3 of BC Hydro’s proposed Site C.

Critics confuse searching-for-sites with finished-building-plants. Most critics are academics who are not at all familiar with the long risky road between the tow. Of the 400 water licenses only 35 have been built. For every 10 searches there has been 1 project built.

This is much like mining where there have been over 5 million mining claims in BC and less than 40 operating mines.


10. How do run of river projects compare with other forms of power generation on Lifecycle Energy Payback Ratio?

According to Hydro Quebec’s Electricity Generation Options report in July, 2005 hydropower project have the lowest Power Plant Lifecycle Energy Payback Ratio of 13 types of power generation. The PPLEPR is the amount of energy produced by a project divided by the energy required to build, maintain & fuel it.







11. Which social and economic benefits does a typical run of river project provide better than most other types of power generation?

Run of river projects provide larger benefits in the following 5 areas:

1. Since ror projects are smallish (average operating projects is only 10 MW) to get the same amount of MW results in the creation of many projects and hence a spread of economic activity in many remote areas rather than all in one place.

2. Spreading the jobs and purchase orders around and reduces the boom bust cycle that face towns that have a nearby mega-project.

3. Run of river projects have the highest proportion of local construction jobs and purchase orders per megawatt.


12. The map at www.ippwatch.com shows applications for water licenses covering 25% of the area of BC.

The circles on the opening screen of that map are 12,000 times larger than the actual size of the average run of river project. The circles on the map cover an area of XXX square kilometers. The average 10 MW run of river project is XX square kilometers. The circles on the map cover an area the size of English Bay or Bowen Island. The average 10 MW run of river project head pond is the size of a soccer field. 12,000 soccer fields fit into English Bay.

Plus, of course, not all the Water License Applications will turn into projects. That map shows over 400 water power applications. Only 35 run of river projects exist today … after 20 years of efforts by IPPs to develop them.








13. How does the size of a BC Hydro reservoir compare with a run-of-river reservoir?

The total volume behind ALL 35 operating run-of-river IPPs in B.C. is 0.02% of the volume behind BC Hydro most recent hydro project, the Revelstoke Dam.

THERMAL POWER FAQS

1. What does a gas-fired power plant look like?

The 240 MW gas-fired co-generation plant at Catalyst’s Elk Falls pulp mill near Campbell river that started operating in 2001 is shown below.







2. What does a biomass energy plant look like?

The 60 MW woodwaste fired Williams Lake Generating Station that started operating in 1993 is shown below.

PERMITTING & CONSULTATION FAQS

1. What are the government websites for permitting and public consultation for hydro projects?

The following Province of British Columbia websites have additional information available on water power projects in BC.

A Guidebook for independent power producer development which details regulatory and legislative requirements for water power and other power project development is available by clicking here ;

Information on the status of Crown land applications and reasons for decisions is available at http://www.arfd.bc.ca/ApplicationPosting/index.jsp (includes water power projects);

British Columbia’s laws and regulations are available at http://www.bclaws.ca/;

The Environmental Assessment Office website has documentation on all power project reviews. The project reports and the specific requirements that proponents must meet as a condition of their Environmental Assessment Office certificates are available at http://www.eao.gov.bc.ca;

Water licences include requirements for minimum flows and environmental monitoring and other measures for environmental protection. All water licence information is available at the following web links: ftp://ftp.env.gov.bc.ca/pub/outgoing/lic_images/ (where licences can be found listed by licence number) and http://a100.gov.bc.ca/pub/wtrwhse/water_licences.input (where specific streams or water licence types (e.g. water power) can be searched to find specific licence numbers for specific projects); and

A document on “Opportunities for Local Government and Public Participation in Provincial Regulatory Processes for Independent Power Producers’ Projects,” describes the regulatory processes and requirements of the provincial Water Act, Land Act and Environmental Assessment Act, and is available at http://www.empr.gov.bc.ca/EAED/AEPB/AEPS/Documents/MiniGuide.pdf.


2. Where can I find info on environmental permitting requirements for projects over 50 MW in size?

For more information on the environmental permitting process for projects over 50MW in size, visit the Environmental Assessment Office website at http://www.eao.gov.bc.ca


3. Do IPPs smaller than 50 MW avoid a more rigorous environmental review than those over 50MW?

Projects over 50 megawatts (MW) are reviewed under the BC Environmental Assessment Office, rather than by the Land and Water BC office, but for all intents and purposes, the regulatory agencies and their people who do the reviews are the same people and departments, no matter what the size of the power project. The same regulatory review agencies are required to assess the project whether the project size is greater or less than 50MW (i.e. Fisheries and Oceans Canada, Canadian Coast Guard, Ministry of Environment, etc. still review the project no matter what the size of the project or which lead office is sending them the project information).

The primary reason for keeping the project under 50MW is due to accounting practices. Specifically, a project under 50MW can be depreciated faster than a project that is over 50 MW. This is the case for any and all renewable energy projects located anywhere in Canada. The project size of 49MW has nothing to do with avoiding any type of environmental assessment since a full environmental assessment was carried out under the Canadian Environmental Assessment Act.


4. What is the British Columbia Environmental Assessment process?

British Columbia has one of the most extensive Environmental Assessment (EA) processes in Canada. In some cases a project may require a Canadian EA as well and in BC these processes are harmonized through the BC Environmental Assessment Office. Both the BCEAO and CEAA have standards set out for environmental assessment.

The comprehensive assessment EA model being followed by BC includes studies of Wildlife and Vegetation, Aboriginal and public consultation, Archaeology, Culture, and Heritage Studies, fish and Fish Habitat Impact Assessment as well as Cumulative Effects.

Extensive studies in each of these areas are determined by a EA Technical Committee made up of scientists and representatives from the Canadian Environmental Assessment Agency, Canadian Wildlife Service, Ministry of Environment (BC), Ministry of Forestry (BC), First Nations and aboriginal communities, local and regional governments, Ministry of Agriculture and Lands and the arms-length neutral body of the BC Environmental Assessment Office (EAO). The EAO and committee can also decide to draw other ministries and/or groups into the process if additional issues arise or are needed to be studied. An example of an area of study: Wildlife and Vegetation gathering of sufficient data on vegetation and wildlife resources of the study area to be able to assess the potential impacts of the project using the BCEAA/CEAA standards. BC EA wildlife studies for proposed projects in the winter ungulate / furbearer track counts, owl call playback surveys, spring migration radar and audio-visual surveys, breeding bird surveys, northern goshawk call backs, rare plant and habitat assessment classification surveys, fall migration radar and audio- visual surveys, and fall bat migration surveys. In order to complete an impact assessment for wildlife and vegetation, Valued Ecosystem Components (VECs) are selected in coordination with Canadian Wildlife Service and the Ministry of Environment. Similar extensive process are used for Terrain Stability and Geology, Hydrology and Water Quality Impacts, Land Use, Cumulative Effects, Fish and Fish Habitat Impact Assessment, and Archaeology and Aboriginal and Community Consultation.


5. What are the provincial agencies focused on crown land tenure?

The Independent Power Producers Policy and Operations Branch is part of the Electricity and Alternative Energy Division (EAED) of the Ministry of Energy, Mines and Petroleum Resources. This Division facilitates thriving, competitive, reliable, efficient and environmentally responsible electricity and alternative energy sectors for the benefit of British Columbians. The Division is responsible for leading the development and maintenance of Crown land operational tenuring policies for independent power producers (IPP) projects.

The Crown Land Administration Division (CLAD) of Ministry of Agriculture and Lands is responsible for the development of a strategic and operational Crown land-use and allocation policy framework for the Province. One of CLAD’s key strategies is to lead the development of a responsive provincial strategic Crown land tenuring framework. Crown land accounts for 94% of the provincial land base and as such the province manages over 30,000 land tenures for land uses ranging from agriculture to commercial recreation to log handling to marinas to waterpower. A critical aspect of developing the framework is to ensure it is fair and considers the needs of communities, First Nations and all economic sectors whose businesses depend on secure access to Crown land and resources.

The Integrated Land Management Bureau (ILMB), created in the summer of 2005, is committed to providing high-quality, client-focused Crown land and resource management and information services. Through Front Counter BC, ILMB is providing single-point-of-contact services to businesses and individuals seeking information and authorizations for the use of Crown land and resources on behalf of a growing list of ministries and agencies. As per the Land Act, ILMB has a “toolbox” of tenure types and pricing methods to draw upon.


6. What are the “Crown Land Principles”?

A key goal of the provincial government is to increase access to Crown land for environmentally responsible economic growth that benefits British Columbians. The IPP industry is a growing business sector in British Columbia that requires the use of Crown land resources to develop, operate and prosper. The Integrated Land Management Bureau allocates Crown land for many commercial uses based on guiding principles, which include:

a) optimizing access to Crown resources – faster approvals and fewer delays in the approval process, thus an efficient
regulatory process.
b) the most suitable use of Crown land – allocation according to the highest and best use of the land as determined
by referrals and analysis will generate the greatest benefits for all British Columbians.
c) efficient use – the utilization of only that land that is necessary for the project.
d) diligent use – utilization of the land for its designated purpose within an appropriate timeframe i.e. tenure cannot
serve to reserve Crown land for future use.
e) fair return to the Crown – optimize the financial return to the province from the use of Crown land resource.
f) secondary use of the land – allocating the land in a way that will ensure potential tenures for other compatible uses where possible.

PRIVATIZATION FAQS

1. Shoudn't an essential service like electricity by run by the government?

Not necessarily. Natural gas is just as sensitive to our economy and our well-being as electricity, and Terasen has been providing that to British Columbians for almost 20 years. The privately owned BC Electric Corp., built and operated BCs electricity system up until 1962 when it was bought by the BC government and renamed BC Hydro Power Authourity. The majority of electricity produced in Alberta and the US is generated by the private sector.


2. Do all IPPs get 30 year contracts?

The contracts need not be 30 years. Since 2001 BC Hydro has offered contract terms between 15 years to 40 years. Some members of the public want them shorter to reduce BC Hydro’s commitment. Most BC Hydro customers want them longer to lock in today’s prices for as long as possible. Just like a mortgage a different length of IPP contract will impact the size of payments with longer terms resulting in lower annual payments. Long term contracts are used in many businesses. Industries that involve long-life assets (ie. hydro plants last 50 years) and/or or essential services (i.e. electricity, gas, water, transportation) typically sign long term contracts in order to optimize price and secure supply.


3. Do IPPs get a guaranteed contract?

IPP contracts are not “guaranteed”. In a typical BC Hydro-IPP contract, the IPP is at risk (partially or completely) for overruns in capital and operating costs, schedule, performance (quantity, quality, safety, efficiency), and has equity and possibly debt at risk. In certain events, such as continued poor performance, BC Hydro has the contractual right to terminate the contract and take over the operations at the private partner’s expense.

Notably, if a public sector entity (i.e. BC Hydro) develops the project, the public also takes on a long term “contract”, in the sense of being forced to pay taxes for the project, regardless of project results, and with little or no control (other than indirectly in occasional elections) over performance. BC’s Fast Ferries is one of dozens of examples. Unlike IPPs, in this public sector “contract”, there are no termination rights or financial penalties available to taxpayers.

Another risk is that governments change their minds and they also have the power to write new laws. They sometimes renege or try to renege on contracts (e.g. Kemano II, Highway 407 PPP Ontario). Private partners do not have a “guaranteed” contract.


4. How rapidly are IPPs taking over and privatizing BC’s power generation industry?

Very very slowly. Since 2001, IPPs share of energy generating assets in BC has increased from 7% to 9%. This is not a big amount in total and is not a rapid increase. More importantly, over 99% of all electricity generated by those IPPs has been sold under 15 – 35 year contracts to BC Hydro. So although the generating assets are owned privately, their output is owned and controlled by the crown.


5. What happens when the B.C. Hydro energy purchase agreements with independent producers expire?

“It is incorrect for (anyone) to assume that once the energy purchase agreements expire IPPs will have a free hand to sell this energy elsewhere at inflated prices. Water licences issued by the Province are for a maximum of 40 years. When the term is up the IPPs right to use the land and the water ends. And the improvements stay with the land or are removed if the Province requires it. The licence holder can apply for a new agreement. But the government still holds all the cards.” Steve Davis, IPPBC President, letter to Globe & Mail, November 1, 2007

“Forty years is the maximum period of time that any of these water licences can be granted for the leases. At the end of 40 years, the Crown makes a decision to renew or not renew. If the Crown does not renew, then the asset all reverts to the Crown. So, at all times the government remains in control.” Randy Hawes, Liberal MLA, Maple Ridge–Mission

“You have to ask B.C. Hydro that, but what we would hope is that there would be a situation where we could renew that contract.…I know that the common argument out there is that we would get into a situation where we would put the power on the market, but that is just not feasible.” Elisha Moreno, Spokesperson, Plutonic Power Corporation

“It is early days, so it is hard for us to say what will happen when those come up. But, essentially, we would assume that, in most cases, we would be buying the power.” Susan Danard, media spokesperson at B.C. Hydro, told the Georgia Straight, April 3, 2008




6. Since 2001 has new generation been limited to the private sector IPPs?

No. The public sector has brought on significant amounts of new generation since 2001. BC Hydro expanded Cheakamus, G.M. Shrum, Bridge River, and Seven Mile by 696 GWh for $143 million plus it spent $217 million on Burrard Thermal Upgrade. Also the public sector funded the Columbia Power Crown Corp.’s Brilliant project, GVRD’s Burnaby incinerator and the Hupacasath First Nation’s China Creek and provided the majority of funding (BC Hydro handed out large grants, not loans) for 2 large co-gens in pulp mills in Prince George and Kamloops. These projects cost ~ $550 million and produce a total of ~1200 GWh. BC Hydro is currently building another 70 GWh at the Aberfeldie project. In total these publicly funded projects brought on new generation of about 2000 GWh since 2001. That is about the same amount of energy as IPPs have brought on line in the same time period.


7. What new public sector generation is currently under development?

BC Hydro has dozens of people working on developing the $5 billion dollar 900 MW Site C project. BC Hydro has applied to the BCUC to approve spending $323 million to increase the output of the Revelstoke Dam Project by 500 MW. BC Hydro is working on plans to apply to the BCUC for similar funding to expand the Mica Dam project. The Columbia Power Crown Corporation is developing their Brilliant Expansion (2) project to add 120 MW and 226 GWh after signing an EPA with BC Hydro in August, 2006. The District of Lake Country’s is developing their Eldorado Reservoir project after signing a similar EPA with BC Hydro. The Hupacaseth First Nations is developing their Franklin River Hydro project after also signing a BC Hydro EPA.


8. Do BC IPPs charge more for new renewable power than prices across Canada?

No . BC IPPs are typically at least 30% less expensive than other parts of Canada.
Natural Resources Canada’s ecoENERGY for Renewable Power program (2007) states on page 15:

“Experiences of recent requests for proposals in Canada, as well as trends in Canadian electricity prices in both regulated and deregulated provinces, show that an acceptable average price of generating electricity from low-impact biomass, hydro and wind renewable energy sources is estimated to be in the range of 8 cents to 12 cents per kilowatt hour (kWh), depending on the size of the project, its proximity to the distribution or transmission line, the technology used and the availability of resources.

Thus NRCan has set two STP thresholds for low-impact biomass, hydro and wind technologies, based on the size of projects, to take into account the higher costs per megawatt (MW) associated with smaller projects:

1. a QP smaller than or equal to 10 MW of capacity: 13 cents/kWh or $130/MWh

2. a QP larger than 10 MW of capacity: 12 cents/kWh or $120/MWh”

These prices are at least 30% higher than the prices that BC Hydro paid to 38 BC IPPs in their F2006 Call for Tenders which averaged $86.50/MWh.

Ontario’s Standard Offer Program offers $110/MWh to IPPs producing under 10 MW of renewable electricity. BC Hydro’s draft Standard Offer Program offered an average of $78/MWh to IPPs producing under 10 MW of renewable electricity. Again BC IPPs are 30% less expensive.


9. Since BC Hydro can borrow money cheaper than IPPs shouldn’t they build all new power plants?

No. BC Hydro’s cost of capital advantage is more than offset by IPPs more efficient development and construction costs. BC Hydro’s Aberfeldie run of river project will cost over 30% more to build than current IPP run of river projects. (See Q X for details). And BC Hydro has never built a windpower project or a biomass project. If the cost of borrowing money were the only thing that was the determinant of who should build electricity or capital intensive industries, then the governments would be developing real estate and buildings, the steel industry, the airline industry and everything else.


10. What is the difference if a public power project fails vs if a private power project fails?

If an IPP fails, its private shareholders pay. But if a BC Hydro project fails, all British Columbians pay.

A recent example; In August 2007 Plutonic Power announced that it could not get one of the final permits on its 15 MW Rainy River hydro project (on Howe Sound) due to fish impact challenges and therefore it had exited the contract it had with BC Hydro. Unless they find a fix for the fish challenge it is almost certain that the project is dead. If so there will be no revenue from which to recover the several hundred thousand dollars spent on developing the project to date. That is a loss to Plutonics shareholders. This loss is not borne by BC Hydro or its customers. In fact, to exit the contract Plutonic had to pay BC Hydro $100,000.

Lets contrast that story with BC Hydro’s efforts to develop Hat Creek Coal. BC Hydro spent over $70 million in the 1970’s and 1980’s trying to develop a coal fired plant at Hat Creek (near Kamloops). It failed. BC Hydro ratepayers paid for the loss. Similar story on the Vancouver Island Generation Project (VIGP). BC Hydro spent over $100 million from 1998 to 2003 trying to develop a 230 MW gas-fired project at Port Alberni (and then they moved it to Nanaimo). It failed. BC Hydro ratepayers paid for the loss. In 2000 BC Hydro tried to get into the wind power business. It hired people to start up that new department. It sent them to conferences across the country to learn how. It put up a dozen met towers (~$25,000+ each). It failed, they shut down that department without generating one electron. BC Hydro ratepayers paid for the loss.

Developing power projects is risky – whether by BC Hydro or an IPP - and some projects just plain fail. If an IPP fails, its private shareholders pay. But if a BC Hydro project fails, all British Columbians pay.


11. Why are IPPs better suited to developing smaller hydro power projects than is BC Hydro?

One answer is that BC Hydro doesn’t have the capability of even maintaining their own existing smaller projects, never mind building new ones. BC Hydro’s Chris O’Riley, Senior Vice President of Engineering, Aboriginal Relations and Generation, stated, on February 26, 2009, during the BCUC LTAP hearing (transcript Volume 8, Page 1380 – on):

“But we just aren't in a position to get to that, and there's a number of small plants in the kind of the 20 to 60 megawatt range that we're -- I don't like the term "run to failure", but we're maintaining them well past their -- what you would – any definition of their normal useful life, and given the more pressing issues we have around the large plants and some of the more environmentally sensitive ones, we just aren't able to get to those plants.”


12. Do leading NGOs support building new renewable energy plants in BC?

Yes. The Suzuki Foundation Submission to the BC Energy Policy Development Task Force in 2001 stated;



• In order to support the renewable energy industry, the BC government should encourage the development of low impact renewable sources of electricity such as wind, solar and micro-hydro through specific initiatives such as net metering and portfolio standards. These will encourage utilities to purchase renewable energy, or to encourage producers to build new projects.
  


• By nurturing a provincial renewable energy industry, British Columbia will be well positioned to take advantage of emerging energy markets worldwide.
  


• … potential mechanisms for taking advantage of renewable energy in British Columbia. These include renewable energy portfolio standards, which require electrical utilities to purchase renewable energy; environmental cost adders, which equalize the cost of renewable energy sources; tax rebates and incentives for renewable electricity producers;
  


• To date, BC Hydro has committed to acquiring up to 10 per cent of its new resources from small scale renewable energy projects, if they are commercially competitive and cost effective. One can only assume that any utility would purchase all of its energy from these sources if it met these criteria, since they have no future greenhouse gas liability.
  

EXPORT FAQS

1. Is the electricity from IPPs destined for the United States?

No. Over 99% of the electricity generated from all the IPP projects built and recently contracted is sold directly to BC Hydro. Most IPPs have 20-40 year sales contracts to provide electricity to BC Hydro and their BC consumers. There has never been an IPP built in the province to export electricity to the U.S. On the other hand, BC Hydro, through its subsidiary Powerex, exports significant amounts of power to the U.S. each year.


2. How much long-term electricity do IPPs export?

None. No IPPs have been built in B.C. to serve the export market.


3. Do IPPs prefer to export or to sell to BC Hydro?

The high cost of transmission to, through, and beyond the B.C. border strongly motivate IPPs to sell their electricity to British Columbians. Very limited and expensive capacity at the B.C.-U.S. transmission intertie also motivates IPPs to sell within B.C. After opportunities to sell to the domestic market are exhausted IPPs may look to export. B.C.’s forestry, mining, oil & gas, fishing and agriculture industries follow this same logical preference of near-by sales over far-away sales. B.C. consumers of those commodities benefit from the economies of scale and skill enhancement that result from participating in export markets.


4. Are IPPs trying to shorten their contracts with BC Hydro so they can export power sooner?

No. IPPBC’s March 3, 2005 letter to BC Hydro requested that they increase the length of their Electricity Purchase Agreements so IPPs could commit to them for up to 40 years. The length of IPP contracts has increased from 20 years in the early 1990’s to over 30 years currentl


5. How does Canada's National Energy Board Act protect BC consumers from power shortages?

To export electricity the Applicant must get an Energy Removal Certificate (ERC) from the National Energy Board.

My super summary of the ERC process is that the NEB Act states that no person shall export any electricity except in accordance with a permit or licence issued by the Board. To get an export permit from the NEB the Applicant must:

1. inform all those who have declared an interest in buying it
2. give them an opportunity to buy it on equally favourable terms
3. publish public notification in local newspapers
4. on some occasions hold a public hearing
5. limit contract to 30 years.
6. report on a monthly basis
7. conform to the permit conditions or risk revocation or suspension.

The NEB Export Application requires about 30 specific pieces of info from the applicant.

These requirements to be sufficiently conservative to protect Canadian electricity consumers yet not so onerous as to prohibit mutually beneficial trade. They have been around for over 15 years.]

NEB Act is at: http://www.neb.gc.ca/clf-nsi/rpblctn/ctsndrgltn/ct/ntnlnrgybrdct-eng.html

Sections most relevant to electricity export start at Part IV: DIVISION II - ELECTRICITY section 119.02 onward at http://www.neb.gc.ca/clf-nsi/rpblctn/ctsndrgltn/ct/ntnlnrgybrdctprt6-eng.html



6. Have electricity prices in Washington and Oregon (who have been selling power to California for decades) risen to California levels?

No. Residential electricity rates (in $/MWh) in San Fransisco, Portand, Seattle, and Vancouver are $200, $75, $70, and $65, respectively. (see HydroQuebec Comparison of Electricity Rates in Major North American Cities, April, 2006, below). Seattle’s rates are quite close to Vancouver’s rates and very much lower than San Fransisco’s rates – despite Seattle area IPPs selling to San Fransisco for decades. Industrial and Commercial rates in also drop significantly as one goes farther north from California.





7. Will the ability of IPPs selling to California result in BC prices increasing to California levels?

No. BC prices will not increase to California levels just because BC IPPs may sell to them. Like any business, IPPs want to sell their power to the customer that offers the highest price at the IPPs plant gate. BC Hydro can buy at the plant gate with little or no transit cost. Californian buyers must pay for transmission to the border, through the border, and from the border to their area. Plus energy losses due to resistance in the wires is about 6%. Adding those together means current transit costs total about $30/MWh. IPPs that won recent BC Hydro contracts will receive about $75/MWh. A California buyer would have to offer over $105/MWh to beat BC Hydro's price.

Several non-price factors further widen that price gap including "buy local" preferences and the need to pay significant deposits to pre-book transmission capacity - and book it for say 30 years.