Private Power Producer Friendly Water Pricing

by Arthur Caldicott

When the BC Liberals took over government in 2001, water pricing for the Power-General license – that’s the water license a company needs to generate electricity for sale – had two parts: a capacity charge calculated on the generating capacity of a facility, and an energy charge, based on how much electricity was generated each year.

The energy charge was applied in two tiers. The first tier, for the first 250,000 megawatt hours (MWh) generated by a licensee, was levied a much lower rate than the second tier, which applied to everything else.

By 2008, the lowest tier had been reduced to 160,000 MWh, and a new middle tier was introduced, up to 3 million MWh.

What is not immediately apparent is how the tiers and the prices align with actual projects being proposed in British Columbia. There are two intriguing aspects to these alignments.

 49 MW and 160,000 MWh

The Ashlu Creek Hydro Project has a nominal capacity of 49 MW. Mkw’Alts Creek: 45 MW; Kwoiek and Rutherford Creeks: each 49.9 MW. This is no coincidence, and it’s not a function of stream capacity or optimized generation. 50 MW is the threshold at which a generation project must have an Environmental Assessment (EA) in BC. Independent power producers (IPPs) are all just ducking the EA threshold.

Now the intriguing part!

A 49 MW plant on BC’s south coast is able to generate up to about 160,000 MWh per year. So the lowest tier was changed to give the cheapest water rate to the disproportionate number of projects that are being engineered to duck an EA. Not gift enough, the rental rate for this first tier was reduced from an already cheap $2.417 per MWh to $1.107 – handing these 49 MW projects a bonus of about $200,000 per year.

 1027 MW and 3,000,000 MWh

The new second tier maxes out at 3 million MWh. On the south coast, stream flow characteristics dictate that a cluster of small hydro plants would need a nominal capacity of 1027 MW to generate that 3 million MWh per year.

Plutonic Power Corp.’s Bute Inlet cluster project is designed with generating capacity of … wait for it! … 1027 MW and annual production of 2906 GWh – just short of the 3 million MWh cutoff for the second tier pricing.

More than a coincidence? Which came first – the water pricing or the project? Or were the two designed together?

Watershed Sentinel March/April 2009

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