Could Sell Energy to California Utilities : British Columbia May Build $2-Billion Dam

Chester Johnson is tired of watching one of North America’s last great natural power sources rush unbridled through British Columbia’s mountains. It’s like watching money flow through his fingers and into the ocean.

As chairman of the British Columbia Hydro and Power Authority, Johnson has control over the generation and supply of all electricity in Canada’s westernmost province, a land mass more than twice the size of France.

British Columbia’s rivers hold the potential of producing a hydroelectric capacity of more than 40,000 megawatts--enough to turn on every light bulb in California--and only a quarter of that power has been tapped.

B. C. Hydro wants to start construction on a $2-billion dam, known in planner’s jargon as Site C, on the Peace River, 500 miles northeast of Vancouver.

Fixed Contracts

The provincial government wants to devote the 900-megawatt dam to long-term fixed contracts with California utilities, if the price is right. Work could begin within six months after the signing of U.S. contracts.

“Site C is just the tip of the iceberg in terms of this province’s potential,” Johnson said.

Until recently, B. C. Hydro had been prohibited by government policy from building beyond the projected needs of the province’s 2.7 million residents.

In 1983, Site C was shelved on the advice of the British Columbia Utilities Commission because its power would not be required domestically until the next century.

But that policy was dramatically changed Sept. 17 at the official opening of B. C. Hydro’s 1,800-megawatt Revelstoke dam, when British Columbia Premier Bill Bennett proclaimed that the province would pursue U.S. markets.

“In the eyes of the government, export wasn’t a dirty word anymore,” Johnson said. “They have changed their policy. It is an aggressive one, and I think it’s good for the province.”

Sudden Reversal

Bennett’s sudden reversal, made without consulting the legislature or public, holds out the lure of 2,000 jobs during peak construction of Site C.

And jobs are what Bennett needs if he hopes to win another term in office. British Columbia’s resource-based economy has been dogged by 14% unemployment during recent years.

Bennett’s conservative Social Credit government, lagging behind the socialist New Democratic Party in polls, is expected to call an election by the end of the year.

In times of trouble, the government has traditionally used B. C. Hydro as a job-creation tool through rate subsidization or dam building.

“You’ve got to understand one thing. Hydro is the economic future of this whole economy, don’t ever forget that,” said Johnson, a long-time associate of the premier’s. “As far as I’m concerned, where (B. C.) Hydro goes and what we do . . . are the critical things to the ongoing good of this province.”

B. C. Hydro can also use the cash. The company’s debt load totals more than $5.5 billion, and in the previous fiscal year it spent more than $500 million servicing that debt.

Despite a current energy glut, California seems eager to oblige B. C. Hydro with 20- to 25-year contracts for Site C power.

Compared to coal or nuclear power, hydro is relatively clean and inexpensive, and the Western United States has already exhausted most of its water resources.

Require New Sources

The California Energy Commission expects the state to require large new energy sources by the mid-1990s.

Eldon Cotton, assistant chief engineer for the Los Angeles Department of Water and Power, described B. C. Hydro’s Site C plans as “ideal” in both timing and cost.

“All of the folks down here are basically in the same situation,” Cotton said. “We have an excellent (power) base to take us into the next decade . . . but this is a very attractive project in terms of future needs.”

California utilities are confident of B. C. Hydro’s ability to generate electricity but uncertain about Canada’s ability to deliver.

B. C. Hydro sends electricity to the United States via the transmission system of the Bonneville Power Administration (BPA), the U.S. federal agency that controls energy supplies in the four Northwest states.

Under the administration’s policy, however, B. C. Hydro can gain access to the grid only when the transmission lines are not being fully utilized by U.S. utilities.

Spot Sales

Despite this policy, B. C. Hydro has gained a lucrative taste of the U.S. market. During the last nine months, it has sold a record $145 million of its surplus in spot sales to U.S. utilities.

The export price of that power averaged below 20 mills (2 cents) per kilowatt hour. Long-term fixed contracts for Site C power would range between 35 and 50 mills.

But B. C. Hydro has experienced little trouble gaining access to the BPA grid during the past year only because of abnormally low water levels in the Pacific Northwest.

Most observers believe that BPA’s north-south transmission lines would have to undergo major expansion before guaranteeing Site C power long-term access to California.

Melissa Jones, a special adviser to California Energy Commission chairman Charles Imbrecht, said her state is willing to contribute more than $500 million to grid expansion and “is trying to light a fire under Bonneville to get them started.”

That view was emphasized by Imbrecht following a Jan. 7 meeting at BPA’s Portland offices, in which Johnson outlined the Site C project before 45 representatives of U.S. utilities.

“There was unanimity of interest expressed by all Californians to pursue the Site C development and we embrace it with great enthusiasm,” Imbrecht said. “But I think we could have had substantially greater movement from (Bonneville).”

The BPA is reviewing its access policy, and a draft report is expected to be completed by April with a final report out by September. That report will likely spell out the fate of Site C.

BPA power manager Ed Sienkiewiscz said the federal agency is taking a cautious approach.

“I can understand that they (B. C. Hydro) are anxious. They’ve decided they want to do something and they’re impatient to get it done,” he said. “At the same time, we ask some forbearance and understanding of the issues we face.”

One of those issues is the Pacific Northwest’s disastrous nuclear program.

Nuclear Reactors

In the late 1960s, when energy demand was expected to continue rising at booming rates, the Washington Public Power Supply System drew up plans for five nuclear reactors.

More than $6 billion was raised for the reactors. But investors in the project, now known as “Whoops,” became victims of the largest municipal bond failure in U.S. history.

Construction of two of the reactors was canceled, two others were indefinitely shelved after being 70% completed, and one plant is now operating at three-quarter capacity.

The BPA, dedicated to reaching energy self-sufficiency, still insists that the two unfinished reactors could be brought out of mothballs to meet the rising energy demand in the next decade.

But most California utilities have lost faith in the nuclear program.

“I don’t really think they can complete the plants,” said Jones, of the Energy Commission. “And if they do, (the power) will cost from 100 to 120 mills.”

The BPA is also looking at conservation as a future energy source.

“By far the biggest and cheapest energy resource we have is conservation,” said Mark Sullivan, president of the Seattle-based Northwest Conservation Act Coalition.

The Northwest Power Planning Council, made up of eight gubernatorial appointees, two from each state, estimates that the Northwest could save 4,000 megawatts during the next 20 years simply by increasing efficiency.

The BPA could also be forced under the National Environmental Policy Act to conduct an environmental study of Site C, despite the fact the dam will be hundreds of miles from the U.S. border.

“We will have to go through an environmental review process,” confirmed Sienkiewiscz. “How extensive that review will be is difficult to say.”

That is music to the ears of environmentalists in British Columbia, where the government has said it would proceed with Site C, once contracts are signed, without further public hearings.

The British Columbia Utilities Commission determined that the dam could be built at a relatively low environmental cost, chiefly because the Peace River is not a commercial fishing ground.

Most Canadian environmental groups say they can live with the project. It is the provincial government’s new export policy that worries them.

Impact on Salmon Industry

“Which river do they dam next?” asks John Carter, president of the British Columbia Wildlife Federation. “Every other river in British Columbia is a salmon river. The salmon industry is already in trouble. It’s a bit of a contradiction to create jobs by building dams on salmon rivers.”

Carter’s fears seem well founded. A B. C. Hydro official recently admitted that, if Site C is built for export, the utility may have to implement plans for a giant $5-billion, 2,900-megawatt project on the Stikine River in northwest British Columbia to help meet the province’s own needs after the turn of the century.