BC Hydro statement on incorrect interpretation of rate design hearing testimony
Mr. Dix's editorial in the Tyee contains incorrect interpretations of BC Hydro's statements during a recent BC Utilities Commission rate design hearing. These incorrect interpretations must be corrected.
Mr. Dix interprets testimony by BC Hydro's Director of Energy Planning to mean that Site C will not produce enough revenue to cover its costs. This is incorrect.
Government, as the shareholder of BC Hydro, takes a return from BC Hydro which is used to fund services like health care and education. What the testimony explains is that government, in an effort to lower cost for ratepayers, changed the formula that determines the amount of its return so that it would not increase as a result of BC Hydro building Site C or any other new capital assets. If government didn’t make this change, the amount charged to ratepayers would need to increase to fund an increase to government revenues.
Mr. Dix suggests that commercial enterprises, like BC Hydro, should ensure that money borrowed to fund projects will earn a return that more than covers the cost. Earning a return on Site C that more than covers its cost would result in higher costs for ratepayers.
Mr. Dix quotes testimony by BC Hydro's Manager of Regulatory and Rates regarding the cost of energy produced by Site C, suggesting that is not possible for the cost to have changed from $83/MWh in 2013 to approximately $60/MWh today. In fact, it is because of government changing the formula that determines its return, that the cost did change. As explained in detail in a public technical briefing in December 2014, government’s decision reduced the cost of Site C energy by approximately $26/MWh. More details can be found in this PDF document.