On April 28, 2010, the British Columbia government introduced Bill 17, the Clean Energy Act, which heralds significant changes to the electrical energy regime in B.C.1
The Act was referenced in the B.C. government's most recent throne speech and has been anticipated for many months. The Act also builds on the work of the Green Energy Task Force, which the B.C. government established in November 2009. Many of the Task Force's recommendations are reflected in the Act.2
If passed in its existing form, the Act will trigger many new developments of interest to power industry participants. The Act has already drawn both praise and criticism from commentators, and seems certain to attract further examination and commentary in the near future.
The Act enshrines in legislation 16 energy objectives. These include achieving energy self-sufficiency, increasing reliance on both demand side measures (e.g., conservation and energy efficiency programs) and "clean or renewable resources" (i.e., biomass, biogas, geothermal heat, hydro, solar, ocean, wind, or other resources prescribed by government), fostering the development of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources, reducing greenhouse gas emissions to specified levels, and continuing to avoid the use of nuclear power, as well as others.
Electricity Export Opportunities – BC Hydro as Aggregator
The Act's objectives also include establishing British Columbia as a net exporter of electricity from clean or renewable resources.
The Act requires B.C.'s principal electric utility, British Columbia Hydro and Power Authority ("BC Hydro"), to submit an integrated resource plan to the government every five years. The plan must include, among other things, a description of the potential for the export of "clean" electricity, and the steps taken by BC Hydro to arrange for export opportunities. Upon receiving the plan, the government may require BC Hydro to initiate a process to acquire clean energy and capacity for export purposes, and secure any necessary transmission capacity.
BC Hydro, and supplier counterparties under export energy supply contracts, are exempt from the requirement to file the contracts with British Columbia Utilities Commission ("BCUC"), which regulates BC Hydro and other public utilities. In setting BC Hydro rates, the BCUC must not allow expenditures incurred by BC Hydro for exports.
The government has expressed its commitment to pursue export opportunities, and has indicated that BC Hydro will work to secure long-term export contracts and meet supply needs with clean power calls for renewable energy.
Additional Energy Project Initiatives
The Act provides direction on existing energy programs, and establishes some new programs.
- BC Hydro must continue a standing offer program to acquire electricity from generation projects not exceeding 10MW, which may include high-efficiency cogeneration facilities or facilities that conform with requirements prescribed by government. The government has stated that it intends to update the terms and conditions for the existing standing offer program in consultation with industry.
- Government may require BC Hydro to establish a feed-in-tariff program in accordance with requirements prescribed by government. The program may differ with respect to regions, prices and technologies. The government has stated that it intends to introduce a feed-in-tariff to promote the development of emerging technologies in renewable power production.
- BC Hydro must implement the ongoing smart meter program by the end of 2012, and establish a program to put a smart grid into operation as directed by regulation.
- BC Hydro must establish a program offering domestic long-term electricity sales contracts to prescribed customer classes, with price, volumes and contract term to be prescribed. This will provide some price certainty to these customers.
- The BCUC must set rates for public utilities, including BC Hydro, that are sufficient to enable the recovery of costs incurred in respect of a program prescribed for the purposes of reducing greenhouse gas emissions.
The government has also expressed an intention to continue the following energy initiatives:
- "Site C", a project to install a third dam on the Peace River in northeast B.C., which remains subject to environmental assessment and first nations consultation requirements. If constructed, Site C is expected to provide 900 MW of capacity, and 4,600 GWh / year of energy,
- The Northwest Transmission Line, a new transmission line intended to electrify the Highway 37 corridor in northwest B.C.,
- Turbine installation projects at the Mica dam (two new turbines) and the Revelstoke dam (one new turbine),
- BC Hydro's current 2008 Clean Power Call to acquire up to 5,000 GWh / year of energy,
- BC Hydro's current integrated power offer, involving energy purchase agreements with pulp and paper customers eligible for funding under Canada's Green Transformation Program, and
- BC Hydro's upcoming Bioenergy Call for Power, Phase 2, to acquire up to 1,000 GWh / year from larger-scale biomass projects.
The Act exempts all these initiatives from the requirement to file electricity purchase agreements with the BCUC, or obtain "certificates of public convenience and necessity" for the construction or operation of plants or systems.
The Act also establishes a "First Nations Clean Energy Business Fund" special account, which the government will initially fund with an initial payment of up to $5 million, and which government may then increase (e.g., by "a prescribed percentage of prescribed land and water revenues the government derives from power projects"). Proceeds from the account may be applied by government to facilitate the participation of first nations in the clean energy sector. The Act does not yet detail the manner in which funds may be paid out.
Integration of BC Hydro and BCTC
The Act provides for the re-integration of BC Hydro and British Columbia Transmission Corporation ("BCTC") into a single entity, and the transfer of BCTC's assets, liabilities and employees to BC Hydro. The government has stated that this measure will provide BC Hydro with the opportunity capitalize on its ability to better manage generation and transmission facilities on an integrated basis. The transaction is generally exempt from review by the BCUC. Under the Act, BC Hydro's key generation, transmission and distribution assets will remain under public ownership.
The Act does not provide detail on whether the re-integration will include rules to provide for open-access to transmission services and/or preserve a separation of the generation and transmission functions.
New Planning Role for Government and Re-Alignment of BCUC's Regulatory Function
The government has emphasized that one of the Act's key measures is the provision of a new planning role for government that "sets the broad framework for B.C.'s domestic electricity needs and advances its energy objectives and priorities without regulatory redundancy". A government backgrounder provides further clarification on this point:
The Clean Energy Act affirms and modernizes the role of the BC Utilities Commission and its relationship to the provincial government's energy policy objectives. The province's goal is to ensure that there is alignment between the government's policy priorities, how BC Hydro delivers on these priorities, and how the BCUC provides regulatory oversight.
The BCUC will continue to regulate BC Hydro's domestic supply and rates. It will also continue to regulate the safety and reliability of the BC Hydro system, as well as regulate operation, management and administrative costs, and handle complaints from ratepayers regarding BC Hydro service.3
Indeed, the Act exempts many energy related programs and activities from the requirement to obtain BCUC approval. The Act also provides government with the authority to make regulations with respect to a broad array of energy related matters. A number of commentators have already suggested that measures contemplated in the Act may result in a substantial reduction of the BCUC's oversight of BC Hydro, and more direct control by government.
It seems likely that the Act will be passed in the coming months given the profile accorded to it by the B.C. government. We anticipate that further details and insights will become available as the legislation is debated and refined. BLG will continue to monitor and keep clients apprised of these developments.
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