Subject: Western Update 5/7/01
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 7 May 2001 03:47:00 -0700 (PDT)

Executive Summary

? The likely outcome of the 16 May elections is a victory by the BC Liberal 
Party (currently holding polls at 70%), a pro-business, right-of-center party 
led by Gordon Campbell.  
? Major changes in British Columbia energy policy are likely under a Liberal 
government.
? A low snow pack, a return to regulation by the BC Utilities Commission and 
public concern about outstanding debts owed by US power consumers could force 
BC Hydro to stop out-of-province power sales once existing contracts expire
? BC Hydro,s additional generation at Williston is likely undeliverable

Liberal Party Platform

? Income tax cut that would make BC,s income tax the lowest in Canada
? Independent audit of the province,s books amid allegations of NDP 
mismanagement and incompetence
? Review of all Crown corporations (including BC Hydro) to enhance efficiency 
and management quality
? Campbell has also said that he wants to scrap the Corporate Capital Tax, 
the Machinery Equipment Tax and the Corporate Income Tax.

Energy Agenda

According to sources, under the Liberal party's rule, significant changes in 
the BC government's energy policy could include a move toward the 
privatization of some BC Hydro assets, perhaps including its transmission 
assets, as well as increased government support for independent power 
producers and coal-fired production.  At the same time, a rate review and 
attempts to establish a broad electricity strategy for the province could 
lead to a lack of clarity about the province,s overall energy strategy over 
the next few years.  Campbell reportedly is a proponent of deregulation and 
of expanding coal-fired production.  Campbell calls thermal coal, &an asset 
that we want to be able to move forward with and to encourage once again in 
BC.8  A high-ranking NDP source believes that Campbell will take the province 
back along the path of natural resources extraction rather than promoting new 
technology.  The source expects this to lead to strong protests from 
environmentalists.  &These are confrontational moves, and people will be on 
the streets.8 

Campbell's most likely choice for energy minister is Richard Neufeldt, though 
we caution that this decision depends on the make-up of the legislature after 
the election.  Neufeldt is responsible for the Liberal Party,s energy, mining 
and northern development portfolio.  Sources speculate that if right-wing 
Liberals are dissatisfied with the party,s performance after the May 
election, Neufeldt could again defect to the Opposition.  However, this gives 
Campbell even greater incentive to name Neufeldt energy minister, a 
high-profile position.

Should the Liberals win the election, Gordon Campbell has indicated that he 
would return BC Hydro to regulation by the BC Utilities Commission.  The BC 
government has derived $5.5 billion in revenue from BC Hydro since 1991 
(roughly 85 percent of its profit).  Critics say this has undermined the 
utility,s ability to pay down approximately $7.5 billion in debt and invest 
in the future. This also has left Hydro without a rate stabilization fund, 
something that sources feel may be needed this year.  Campbell reportedly 
intends to address these issues, and one can expect this to lead to calls for 
change.
 
Electricity Export Policy

Currently the BC Utilities Commission is demanding more information about BC 
Hydro,s out-of-province sales.  The Commission has warned that, given the low 
snow pack, the utility could be a net importer of power this year. Supporting 
this view, the Northwest Power Planning Council, representing BC Hydro,s key 
trading partners in the US, has said that it would not be able to rely upon 
British Columbia or Alberta during peak consumption periods over the next few 
years, and that its customers face a 25 percent chance of not making it 
through the winter without power losses.  The combination of a low snow pack, 
a return to regulation by the BC Utilities Commission and public concern 
about outstanding debts owed to BC Hydro by US consumers may force BC Hydro 
to stop out-of-province power sales once existing contracts expire.

BC Hydro Privatization

A key campaign energy issue for the Liberal party is the privatization of BC 
Hydro.  Campbell has urged greater electricity competition, saying, &We need 
to ensure the transmission infrastructure is available to all, producers and 
consumers, on an equal and non-discriminatory basis.8 He stated that 
independent power producers have been discouraged at every turn. &I want to 
change that big time,8 he told the Canadian Institute of Energy.  Campbell 
also urged more natural gas development, including pipelines and 
co-generation plants.

Campbell backtracked on this stance last week after being challenged by NDP 
leader Ujjal Dosanjh.  Campbell stated on 25 April, &We have no intention of 
selling BC Hydro; we have no intentions of selling their transmission lines, 
no intention of selling their dams, we have no intention of selling their 
reservoirs.8  Liberal Party spokesman Mike Morton also reiterated on 29 April 
that BC Hydro would not be for sale.  A high-level NDP source commented that 
Campbell has been extremely careful in his choice of words regarding BC 
Hydro, essentially saying that he would not privatize the dams, transmission 
lines or generating stations, but that he is in favor of opening the sector 
up to competition.

However, local sources believe that some parts of BC Hydro might be sold as 
part of an overall review of BC Crown Corporations to enhance efficiency.  
Likely sale prospects include BC Hydro,s distribution channels and its energy 
trading subsidiary, Powerex.  In addition, Gary Farrell-Collins, the Liberal 
finance spokesperson and possible second choice for energy minister (after 
Neufeldt), has stated that public ownership of BC Hydro,s non-core 
businesses, such as Westech, its systems division, and customer billing, 
could come under review.

BC Hydro Williston Generation

Current reservoirs levels at BC Hydro,s Williston hydro-generation facility 
are at 2,150ft, which allows BC Hydro to drop levels another 35 ft (170 
Gwhs/ft) under their current permit.  The one drawback to this plan,s 
additional generation involves the Mackenzie pulp mill that would have to 
cease operation if water levels were to fall below 2,140ft.  Sources close to 
the Minister of Mines & Energy - elect, Richard Neufeldt, indicate that 
levels at Williston probably will not be drawn down below Mackenzie,s 
operational limits due to concern over political backlash.