An Electrification Plan Part 4: Specific Policy Actions: Building an Organizational Framework

INTRODUCTION

An Electrification Plan for Northwest British Columbia (“the Plan”) lays out four related policy actions designed to confront a pressing problem: BC has aggressive greenhouse gas (“GHG”) reduction targets, but policy as it currently exists in the province will almost certainly fail to achieve them. The four related policy actions, if implemented swiftly, will serve to counter this problem by developing an adequate policy menu that takes into consideration the practical economic necessities of an electrification mandate, while also working to achieve Government’s goals of economic development, environmental sustainability, and First Nations reconciliation. The specific policy actions that comprise the Plan are as follows:

POLICY ACTION #1: SPECIAL ELECTRIFICATION ZONE

The Northwest offers an important opportunity owing to the region’s current electrical isolation, its natural endowment of clean energy options, and its impending industrial development. Government will capitalize on this opportunity by designating the Northwest as a Special Electrification Zone (“SEZ”).

The following policy approaches, under this specific policy action, will foster economic development and facilitate permitting in the SEZ, while controlling emissions growth through the initial use of carbon offsets and planned electrification over time.

To guide development within the SEZ, BC should, directly or through the British Columbia Utilities Commissions, undertake to develop a Northwest Electrification Plan (“NWEP”). This NWEP should be developed collaboratively between First Nations, industry (load and generation), and government. The NWEP will be assigned a range of tasks, including determining:

• A viable investment schedule for new, clean, generation and associated transmission infrastructure, based on an economically rational framework, but using a sufficiently prospective outlook to be practical for industry design and construction timelines;

• Viable technology constraints that may be imposed on industry developing within the region, and a mechanism for ensuring that such standards remain at the forefront over time;

• The possible extent, and the manner, in which the Heritage Assets shall be employed to support the electrification initiatives, and the opportunity cost of redirecting from trade some portion of the Heritage Assets’ capability over time;

• The appropriate manner and timing of cost sharing between industry and Government over time, recognizing the unique challenges raised by “pre-building” infrastructure and re-allocation of some capabilities of the Heritage Assets from ratepayers to provincial interests – namely economic development, environmental protection, and First Nations reconciliation. To inform this aspect of the NWEP, BC shall work with Canada to assess the social and economic benefits of electrification including (but not necessarily limited to):

1. The value of mitigated carbon (priced at the real cost of the next-best steps that would otherwise have to be taken to meet BC’s and Canada’s carbon reduction goals); and

2. Savings in the areas of the Provincial and Federal budgets that will benefit from increased tax revenues, decreased social expenditure, and improved economic opportunities arising from the NWEP including savings arising from possible grid connections to communities currently running on diesel generation, and with specific reference to a grid connection to Haida Gwaii;

• The role of existing industry in the NWEP, including but not limited to:

1. The schedule of technologically and economically-viable retrofitting of plants and equipment for electrification, immediately or on a schedule consistent with planned replacement over time;

2. The possible role of Rio Tinto Alcan’s (“RTA”) Kemano project, including possible upgrades to that plant, in providing energy, capacity, or system support for a program of electrification, including reasonable compensation to RTA for system benefits provided; and

3. The possible role of load-side capacity resources, again in furtherance of electricity load support or system support.

The creation of a SEZ, operating under the guidance of a thoroughly developed NWEP as described above, would work to provide supply-side clarity to industry in order to promote an agenda of electrification. These approaches would foster economic development and facilities permitting which would guide industry planning to locate or grow in the region and help them overcome the uncertainty and frustration that is currently characterizing industry’s efforts to seek electric service in BC. Collaboration on the SEZ with First Nations also serves to directly involve previously excluded First Nations groups in new economic development opportunities in Northwest BC.

POLICY ACTION #2: THE NORTHWEST POWER AUTHORITY

Under the second specific policy action of the Plan, BC should create a new Northwest Power Authority (“NWPA”).

Specifically:

• The NWPA will be a collective, owned and managed by First Nations. It will act as a mechanism for individual First Nations to efficiently receive all or part of their accommodation (having exercised their rights and title individually);

• The NWPA will also serve as a vehicle for assets to be fully or partially owned by First Nations, in cases where this is the preference of First Nations, as part of efficient structuring, or is attractive (or necessary) as a means to receive support from BC or Canada, in the form of grants, tax concessions, or financing benefits, for example;

• The NWPA will own an unfunded equity position in the new concession-holding utility, in return for the consents related to the transfer of control of certain assets from BC Hydro to the concession holder;

• The NWPA will also act as a regional collection utility for new generation developed under the NWEP and will manage the integration of these assets with the concession holder (which will have the obligation to supply at retail and will have the inter-utility agreement with BC Hydro).

The result of this model will be that generation developed under the NWEP will be sold to the NWPA and it will, in turn, sell a diversified supply to the concession holder. At the end of the initial contracts between private generation developers (where these are sufficient to return capital to initial investors) and the NWPA, title to the generation assets will transfer to the NWPA as a means of ensuring long-term public ownership.

Further, in recognition of its regional and local importance, and its role in any future NWEP, BC should begin immediately to work with the Haida Nation and Canada to build an electrical interconnection between Haida Gwaii and the mainland.

A comprehensive plan for electrification in Northwest BC provides tremendous opportunity for First Nations groups to become increasingly involved in the economy through participation in clean development projects. As part of this transformation, creation of the NWPA would offer First Nations an avenue to participate in the planning, ownership, operation and governance of the new clean-energy infrastructure. This would include both transmission lines and generation resources.

The NWPA would also serve as an important vehicle for fulfilling Government’s commitments to local First Nations, achieving public ownership of new electric infrastructure, and securing funding support from senior levels of government.