Booming natural-gas sector ignites debate over BC Hydro service

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Newcomers to British Columbia's natural-gas sector may be denied access to BC Hydro's electricity services as the province looks to curb costs for Hydro's current customers.

While B.C. is aggressively pushing new industrial development, including the energy-intensive production of liquefied natural gas, a turf war has begun about who gets to share the finite supply of the province's relatively cheap hydro-electric power.

Energy Minister Rich Coleman is seeking to reassure those who are already doing business in B.C. that they won't pay the price as new development comes on line.

"They're not losing their power, they are not losing their price, so they shouldn't worry," he said in an interview.

But a debate about how to serve the province's burgeoning shale-gas development, carried out mostly within the confines of a regulatory hearing on a transmission line proposal, demonstrates that BC Hydro's customers are worried.

BC Hydro's application to its regulator to build the Dawson Creek/Chetwynd area transmission project has opened a can of worms. The hearing centres on plans for a $225-million service upgrade for the town of Dawson Creek and the surrounding industry, including five gas production facilities.

Mr. Coleman said the province is weighing the cost of providing new Hydro services against leaving those gas producers to generate their own electricity by burning fuel.

"It's our decision, not theirs," Mr. Coleman said in an interview. "We're going to look at the business case on both sides."

The producers, including Shell and Encana, argue they are entitled to the same service as any other industry in B.C. But other major industrial players are challenging the notion that BC Hydro should treat all customers the same.

And that wrangling has already delayed the upgrade project past the point where the community's hydro-electric services are expected to exceed capacity.

"It's difficult in the midst of growing, trying to promote a boom, to be told that lack of power might slow things down," Dawson Creek Mayor Mike Bernier said in an interview.

On the town's west side, a $70-million liquid-nitrogen plant is under construction at a new industrial park. In the past three years, the community of 13,000 has landed $150-million in private investment. But potential new investors are now wary about whether they will have electricity to run their plants.

Hydro's major industrial and commercial customers, worried that all these new demands will lead to higher power prices, asked why natural gas producers who are asking to be served by the new system couldn't use their own product to supply their energy needs. The hearing was also asked to consider whether new customers should pay higher rates, and if is time to change the 50-year-old "postage stamp" policy that sees Hydro charge the same rate for electricity regardless of where you are in B.C.

The Commercial Energy Consumers Association argued that natural-gas producers should be encouraged to provide their own energy rather than drive up costs for all BC Hydro's customers.

"We are concerned with the logic of a mass of strategic investment in natural gas in the province, resulting in export of very significant quantities of natural gas to be used for power supply in other countries," said the association's lawyer, Chris Weafer, "while the BC Hydro ratepayers may end up with very significant rate increases to facilitate that."

Matthew Keen of the Association of Major Power Customers raised the allocation of costs between old and new customers on the system, prompting BC Hydro to suspend the hearing for four months. By the time the hearing resumed, the ranks of interveners had swelled, with 16 lawyers representing local first nations, gas producers, the Old Age Pensioners' Organization, the Sierra Club of B.C. and others.

Don Davies, representing Murphy Oil, Encana and Arc Resources, said his clients are entitled to the same service as any other customer of BC Hydro. "And my clients have made and are making decisions and investments based on that expectation."

The provincial government's lawyer, Jennifer Champion, said the bigger question of industrial power rates will be the subject of a public review some time in the future. "Given the significant load growth that we're seeing or forecasting in the North, government is planning a broader review of industrial electricity policy."