British Columbia’s Participation in U.S. Electricity Policy
BC plays an active role in the development of energy policy in the US
– How did we get here
– What did we learn and
– What do we still need to do
Let’s start at the end:
Focus on electricity, but we cannot ignore the important role Canada and BC play in providing natural gas to meet US needs
What do we need to do?
¨ Finally resolve the major outstanding issues from California’s 2000 energy problems
o Settle the lawsuits from California
o Clean up the bankruptcies in California—BC is still owed large sums of money
o These activities are left over from the past keep us from moving forward with other important activities in the US
¨ Build the transmission infrastructure to enhance the trade capabilities between our counties
¨ Find a fair way for Canadian interests to participate in the policy in the US that we ultimately need to live with
¨ Create and breath life into new regional institutions such RTOS and WECC that transcend international boundaries
o 3 Canadians are on the WECC Board and our membership in RTO West are both good starts
Advice to Mexican members – actively participate in these forums because in our opinion they have demonstrated to us that we can get results
Message to Governors - It is important to bring Mexico into the discussion, but while you are doing it - don’t forget about Canada
Historically, why did we get involved?
The history with BC/US energy relationship starts with the river system.
- It is a unifying feature in that the Columbia River spans two countries
– The relationship started in the 1944 – post war era where both countries were looking to develop their economies and saw power as the key engine.
– 1961 we signed the CRT.
o The unique aspect of the treaty is that we agreed to build 3 storage dams and build them higher than they otherwise would have been – flooding more land in order to increase power production in the US
o In exchange we received half this output, which we originally took as cash and now take as power that we sell in the market.
o In order for this to work we had to build the transmission to interconnect the two countries. Subsequently Oregon and California built transmission between themselves.
o This is a unique relationship that combines the water and energy to the good of both countries.
o Historically we have the water in our reservoirs in the summer that we use to generate electricity to export to the SW US when it is the hottest and the power is most needed
o In the winter when we need the power the most we import power for the US when they don’t need it and our system is at its peak.
– BC and Canada’s economies are oriented around export
o 87% of Canadian trade in all sectors is to the US.
o 66% of all BC our energy production is exported with a majority goes to and is consumed by the US.
– More importantly BC’s hydro system because of its storage and inherent flexibility is the one system in the western US that can meet peak load when it occurs
o Often we are providing the most valuable power to the US when it needs it the most
o But at the same time we are importers of electricity on an annual basis and in the last two years have been net importers due to low water experienced throughout the PNW
o Many accuse of benefiting from high prices but we also pay those high prices ourselves.
– Three important messages
o The electrical system is blind to international political boundaries.
o In fact electrically we in western CDN and western US have more in common with each other than the eastern US has with the western US
o The relationship is not continental but regional; whether there is ever a continental market is an open question but there is no doubt that our regional market will become more strongly interdependent.
How does BC involve itself?
– We voluntarily agree to play the U.S. rules
o Powerex, BC’s export crown corporation, voluntarily agreed to be licensed by the federal government of the US.
o Powerex holds a FERC marketers certificate and BC Hydro agrees to operate as a functionally separate - as any other US utility.
o BCUC has adopted FERC standards for wholesale transactions - as their own and takes on the FERC role in BC.
– This raises a major issues from BC’s perspective
o Being a foreign country/province we generally don’t have a voice in the decisions made by US federal government - that affect us.
– However, that does not keep us from being active participants in the US federal processes.
o We intervene and participate in FERC dockets
o We participate in the FERC rule makings, and
o We have worked on federal legislation back in Washington DC – a two pronged approach that involved a federal-provincial process through Ottawa and the Canadian Ambassador in Washington DC; and through our membership and association with WIEB and CREPC (14 years!)
– We participate in government to government dialogues and discussions
o Western Governors Association
o CREPC
o WIEB
– We participate in industry to industry standard setting
o This relationship was established over 30 years ago – BC Hydro has been a member of the WSCC and NERC –chairing technical working groups and generally participating in standards development
o WECC now has 3 BC board seats that will set reliability standards
– We are willing to go so far as putting our transmission system under the control of an independent operator as part of RTO West and are working in BC to figure out how to make this work while maintaining our political sovereignty.
What have we learned?
– If you participate you can influence
o We can and have created innovative organizations that allow for fair participation on an international basis
– This takes along time and a lot of resources, and if often frustrating, but can be very productive and rewarding
– Getting in the door is only the beginning to solving problems
o Once you start you realize just how much work there is to do
o You need to set priorities because there is always more work to do than you have resources
– An example of a very successful regional international partnership with western governors is our very strong relationship in the West to support federal reliability legislation that provides for a strong state and provincial role in reliability
o Challenge is to get the rest of the US and Congress to agree
o This legislation would provide opportunities for Mexico
What do we still need to do?
– Resolving the continual litigation over our participation in the CA energy markets in 2000
o In fact as little as three weeks ago we were sued by the CA attorney general over whether or not we complied with his version of Federal energy rules that we followed
o BC thought it was helping CA by providing peak resources at their request
- We took extra water out of reservoirs
- Bought at high prices
- Supplied as needed, and played by the rules
- What we get is sued again and we are still owed large sums of money from California
o Ending the lawsuits and settling the bankruptcies affects credit terms and conditions
o Don’t want to get the impression that we are complaining
o However, this litigation is consuming our resources and keeps us from getting on with more important issues
o We should try to avoid this in the future and find other ways of dealing with disagreements.
– Getting the necessary transmission infrastructure investments in the US that enhance energy trading and transfers between our countries
– Form the RTOs and get them up and running in the West
– Pass federal reliability legislation in the form that the WGA and Canada both agree with
Conclusion
There is a tremendous amount of productive energy work between the US and
Canada that still needs to be done
- We must and will continue to participate in regional industry and government working groups
- In closing, I offer three different messages in closing--one for Mexico and 2 for the Governors
To Mexico
- We welcome you and encourage you to participate
- Your participation matters
o You can shape and influence outcomes and can get treated as an equal partner in the process– this is very important
o The West and the WGA are very good partners
To the Governors
- We encourage you in your efforts to work in bringing Mexico into these important discussions to realize our common visions.
- BUT you should keep in mind that we also have significant unfinished and important work to do on the Canadian/US border issues
- I recognize that that Mexico is the focus of the WGA dialogue on cross border energy issues.
o However, when you develop the Governors agenda and discuss what we should advise the governors tomorrow on this agenda, please make sure that some of the Governors time is spent on the US-Canadian relationship
- The Governors should offer strong high-profile support for the formation of RTOs in the West
o Until the RTOs are formed, the institutions that are responsible for transmission remain uncertain, which makes transmission infrastructure all but impossible.
o Transmission infrastructure investment is needed in the US to enhance the trade capabilities between our countries and forming the RTOs is a critical first and necessary step of getting this infrastructure built.