Organization Overview
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Our strategic framework
Our mandateBC Hydro is one of Canada’s largest electric utilities. Our mandate includes to generate, manufacture, distribute, supply, purchase and sell electricity and meet the need in British Columbia in a cost-effective and reliable manner. As a provincial Crown corporation, we receive guidance from the Province – as the shareholder – through several policy instruments, including a Shareholder’s Letter of Expectations and the 2002 and 2007 Energy Plans. The government’s expectations are expressed in three essential ways: legislation, policy and instructions. Legislation: The most important longstanding piece of legislation governing BC Hydro is the Hydro and Power Authority Act, which gives us our mandate. Over the decades, the Act has been amended as BC Hydro’s business operations have evolved. The creation of Powerex – to trade electricity – and the BC Transmission Corporation – to plan and operate the transmission system – reflect this evolution. The Utilities Commission Act gives the BCUC the power to regulate BC Hydro to ensure that customers receive safe, reasonable, adequate and fair services. It also ensures that the government, as Shareholder, earns a fair return on its invested capital and that the competitive interests of B.C. businesses are not frustrated. BC Hydro’s assets also come under the terms of the BC Hydro Public Power Legacy and Heritage Contract Act. This act ensures public ownership of BC Hydro’s Heritage Resources, which includes BC Hydro’s transmission and distribution systems, and all of BC Hydro’s existing generation and storage assets, and enabled the establishment of the Heritage Contract. The act also includes any future increases to the capacity and energy capability of these facilities. Policy: The BC Energy Plan puts forward the government’s vision and blueprint for the province’s energy future. The most recent plan, released in 2007, “A Vision for Clean Energy Leadership”, provides guidance to BC Hydro on how it should look to meet the future energy needs of British Columbians. In particular, the BC Energy Plan sets a goal for BC Hydro to acquire 50 per cent of incremental resource needs through energy conservation and efficiency by 2020, while at the same time requiring that:
The plan also commits B.C. to being electricity self-sufficient by 2016. To make energy security a reality, the plan directs BC Hydro to do several things including:
Instructions: Government guidance also comes in the form of instructions, such as the Shareholder’s Letter of Expectations, which regularly sets out objectives for BC Hydro to achieve in areas such as accountability, cost effectiveness and performance. For more information on this legislation and the policy direction from the provincial government, see the Appendices. Our purpose and valuesBC Hydro’s purpose is to provide “Reliable Power, at Low Cost, for Generations.” Our purpose, together with our vision outlined in our Guiding Principles, provides us with an enduring foundation for managing our business and allows us to develop and drive our core strategy of conserving, building and buying the electricity British Columbians need. At all times, our values of safety, accountability, integrity, service and teamwork guide our actions. Our short-term priorities and guiding principlesFor fiscal 2010, BC Hydro’s Long-Term Goals, which were adopted along with our purpose, in 2004, have been renamed “Guiding Principles”, recognizing that they are aspirational in nature. However, each of the Guiding Principles remain unchanged, and combined with our purpose and our five values, continue to provide the framework that governs how we operate. In this report, we will refer to the long-term goals as Guiding Principles. We have also made two changes to our short-term priorities in the 2009/10 to 2011/12 Service Plan to better reflect our evolving focus and government directions. For fiscal 2010, we have:
These changes will be reflected in our fiscal 2010 Annual Report. In this report, we will refer to the short-term priorities using the language laid out in the 2008/2009 to 2010/11 Service Plan. However, we will order the priorities to better reflect the changes that will occur in fiscal 2010. Our core strategyBC Hydro’s core strategy is to conserve, build and buy to provide the electricity British Columbians need. We are focussed on our strategic and operational priorities and in taking action on the projects and initiatives that will make these goals a reality. Conserving is the first and best choice for us to meet B.C.’s forecasted electricity needs in the future. By helping customers be more efficient, use their power wisely, and ultimately use less, we can collectively lower the new supply that will be needed. The second way for us to meet B.C.’s needs is to build by making important reinvestments in our heritage hydroelectric assets and by exploring potential new large-scale investments, such as Site C, a third hydroelectric facility on the Peace River. The third part of our strategy is to buy more. Even though conservation is to meet over half of our future electricity needs, BC Hydro will still consider other cost-effective, made-in-B.C. resource options to meet the balance of our requirements. For more information on our strategy see our 2009/10 to 2011/12 Service Plan. Structured decision makingTo achieve our purpose and Guiding Principles, BC Hydro continues to integrate financial, environmental, and social considerations (the triple bottom line) into how we plan and manage our business. This is included in our decision-making processes across the company and at the Board level. Our organizational structureSee Corporate Governance for information on BC Hydro’s organizational structure. Our systemBC Hydro is the largest electric utility in British Columbia, operating 31 hydroelectric facilities and three thermal generating plants. Most of BC Hydro’s 11,300 megawatts (MW) of installed generating capacity is located away from the province’s major population centres. Our hydroelectric facilities provide 90 per cent of the total electricity we generate – between 43,000 and 54,000 gigawatt hours (GWh) of electricity per year – and are located throughout the Peace, Columbia and Coastal regions of B.C. Our three thermal generating plants provide the remaining 10 per cent of total electricity generation. We deliver electricity to our customers through a network of over 18,000 kilometres of transmission lines and 56,000 kilometres of distribution lines. This network also includes 888,399 utility poles and 323,238 transformers. BC Hydro also serves 17 communities that are not connected to our integrated system. These non-integrated areas are typically small, remote communities, served by local generating stations owned by BC Hydro, Independent Power Producers (IPPs) or the communities themselves. To meet the growing demand for electricity, BC Hydro also contracts with IPPs to buy electricity on a long-term basis, and buys power externally in the wholesale electricity markets through Powerex, our energy marketing and trading subsidiary, on a short-term basis. Canadian Entitlement The Columbia River Treaty between Canada and the United States was ratified in 1964. The Treaty resulted in the construction of three dams in British Columbia – the Duncan, Keenleyside and Mica dams – for flood control and to increase hydroelectric generating potential in both countries. The Treaty also gave the U.S. the right to build Libby Dam. Canada’s share (one-half) of the extra power produced in the U.S. as a result of the Canadian projects is called the Canadian Entitlement to Downstream Benefits and is owned by the Province of B.C. and administered by BC Hydro. The Canadian Entitlement varies from year to year, but is generally in the range of 4,400 GWh per year and about 1,250 MW of capacity. The earliest termination date for the Columbia River Treaty is September 2024, subject to either country giving a minimum 10 years notice of its intent to terminate. CustomersBC Hydro serves 95 per cent of B.C.’s population, delivering electricity safely and reliably at competitive rates to approximately 1.8 million customers. 88 per cent of our customer accounts are residential, with the remainder either commercial or industrial. Each of these three groups consumes roughly one third of the total electricity we supply. Rates and regulationThe BCUC must approve the rates BC Hydro charges for electricity. The rates allow us to recover costs incurred in serving our customers, including earning a return on equity. Both the definition of equity and the method to determine an appropriate return on this equity are defined by Special Directions from the B.C. Government. The Special Directions require annual dividend payments to the B.C. Government of 85 per cent of our net income, adjusted for capitalized finance charges and related amortization, as long as our debt to equity ratio is not greater than 80:20. For more information, see the regulatory process. Wholly-owned subsidiariesPowerex Corp. is a key participant in energy markets across North America, buying and supplying wholesale power, natural gas, ancillary services, financial energy products and, more recently, environmental products with an ever-expanding list of trading partners. Established in 1988, its energy marketing and trade activities help optimize BC Hydro’s electric system resources and provide significant economic benefits to the people of British Columbia. Powertech Labs Inc. has been providing consulting and testing services to electric utilities, gas companies, automotive manufacturers and others since 1989. Powertech combines unique testing capabilities with multidisciplinary, expert technical staff to help clients solve energy-related problems. Embarking on a new strategic direction in 2008, Powertech is focused on becoming a world class leader in implementing clean energy solutions to create value for BC Hydro and British Columbia. Strategic PartnersBritish Columbia Transmission Corporation BC Hydro and British Columbia Transmission Corporation (BCTC) operate as two independent Crown Corporations. There are significant interdependencies between the two organizations as BCTC is responsible for planning, operating and managing BC Hydro’s transmission system. The strong partnership between BCTC and BC Hydro continues to benefit our customers with a coordinated approach to system planning that ultimately provides them with reliable power. Accenture Business Services of British Columbia BC Hydro implemented an outsourcing strategy with Accenture Business Services of British Columbia (ABSBC) under a 10-year agreement, effective April 1, 2003. On any given day, thousands of transactions are handled by ABSBC in the areas of Customer Care, Information Technology, Human Resources, Financial Systems and Building and Office Services. Together with ABSBC, BC Hydro has been able to improve performance, advance customer satisfaction and achieve total gross savings of approximately $150 million to date. Independent Power Producers (IPPs) BC Hydro’s electricity procurement plays a critical role in reaching the BC Energy Plan’s objective of achieving electricity self sufficiency by 2016, as well as meeting the B.C. Government’s policy actions for maintaining competitive rates, clean or renewable electricity and the development of a vibrant and competitive IPP sector. Currently, BC Hydro has 89 Electricity Purchase Agreements (EPAs) with IPPs, including four EPAs in non-integrated areas, representing about 14,400 GWh/year of energy purchases. Of these agreements, 48 projects are in operation with most of the remaining projects scheduled to reach commercial operation by the end of fiscal 2011. During fiscal 2009, IPPs provided almost 8,400 GWh of energy to the BC Hydro system, which accounted for about 14 per cent of total domestic electricity requirements. We will continue to collaborate with IPPs, customers, Government, BCTC and First Nations to improve the procurement process for electricity and to design competitive call terms and conditions. For more information, see BC Hydro's Calls for Power. |
Last Modified: Nov 30, 2010
