IERN International Energy Regulation Network

British Columbia is a hydro-dominated region with interconnections to the U.S. Pacific Northwest (PNW) and Alberta.

The majority of British Columbia has been served by BC Hydro, a traditional vertically-integrated utility. BC Hydro operates approximately 11 000 MW of the existing generation while the remaining 3 200 MW is provided by FortisBC (formerly Aquila), independent power producers and self-generation.

British Columbia continues to meet the majority of its electrical energy commitments through hydroelectric resource. Recent additions to the supply mix include clean technologies, such as small hydro which added 700 MW of supply to the system from 2000 to 2003.

From the standpoint of interprovincial transfers, electricity normally flows from British Columbia to Alberta during peak hours and from Alberta to British Columbia during off-peak hours.

British Columbia benefits from interconnections with the PNW that also indirectly provide access to California. Historically, the benefits derived via the interties were primarily a result of exports and energy banking. A net import position for B.C. was reached in 2004.

Transmission needs are mostly met by BCTC while FortisBC is the next largest service provider.

British Columbia’s distribution needs are predominantly met by BC Hydro, with FortisBC providing distribution in part of the south central portion of the province. Smaller municipal utilities and industrial facilities with on-site generation meet most of the remaining load.

The British Columbia Transmission Corporation (BCTC), created under provincial legislation, operates BC Hydro’s core transmission assets as an independent transmission and ensure non-discriminatory access to the transmission system for all market participants. FortisBC operates part of the infrastructure in the south central part of the province.

Transmission and distribution tariffs are regulated by the British Columbia Utilities Commission (BCUC).

Distribution and transmission activities are vertically integrated.

The market is partially privatised.

Main suppliers is BC Hydro.

The plan also creates a framework where large electricity consumers will be able to choose their generation supplier, rather than be restricted to supply through their traditional local distributor, which in most cases is BC Hydro.

Residential and commercial customers continue to be served by their incumbent utility under a cost-based rate structure.

The northeast B.C. is the only producing area in the province. Marketable gas production in B.C. has increased by 62 percent in the past ten years, from about 42 106m3/d (1.5 Bcf/d) to 71 106m3/d (2.5 Bcf/d) in 2003.

Gas from northeast British Columbia can reach markets accessible through Alberta including Alberta, Eastern Canada and the continental U.S. as well as California.

The British Columbia domestic gas market and the PNW market, concentrated along the U.S. Interstate Highway 5 corridor (I-5 Corridor), are the major traditional markets for the province gas transported by Westcoast Energy Inc., which carries on business as Duke Energy Gas Transmission Canada (Westcoast).

Northeast British Columbia gas can now be transported to markets via the Westcoast system, the Alliance pipeline and through various producer pipelines which interconnect with the TCPL Alberta system. Approximately one third of marketable B.C. production is now moved into Alberta.

Gas exports through Huntingdon physically serve coastal markets along the I-5 Corridor and in particular the U.S.

Gas prices in British Columbia are integrated with North American prices and market-based.

Station 2 and Sumas/Huntingdon are the two main pricing points for B.C. gas (Figure 2.1). In December 2003, NGX, an electronic energy trading system with operations in Canada’s major gas Markets.

Market information for Station 2 (gas volumes traded, number of transactions, bid price range and daily weighted average price) is now available on-line for gas traded on NGX and is based on all trades conducted through NGX, in contrast with U.S.

A single major transmission pipeline connects northeast British Columbia, the only producing area in the province, with the Lower Mainland market around Vancouver . Owned by Westcoast, this long distance pipeline transports gas to the B.C. Interior and Lower Mainland markets and to Huntingdon, B.C.

Natural gas storage is extremely limited in British Columbia and consists of one underground storage production area facility, Aitken Creek Storage (Aitken Creek), in northeast B.C. and a small liquefied natural gas (LNG) facility on Tilbury Island in the Lower Mainland used by Terasengas Inc (Terasin) to meet the peaking needs of its own system. There is no large underground market area gas storage facility in the Lower Mainland.

Gas is delivered to British Columbia consumers, mainly by the two major local distribution companies (LDCs) that operate in B.C.: Terasen and Pacific Northern Gas Ltd. (PNG).

Terasen provides gas distribution services to customers in the most highly populated regions of British Columbia, including the Lower Mainland, the B.C. Interior (Prince George, Kamloops and the Okanagan Valley) and eastern Vancouver Island, Campbell River to Victoria.

West central British Columbia, around Prince Rupert and Kitimat, is served by PNG.

Northeast British Columbia, which includes Fort St. John and Dawson Creek, is served by PNG’s subsidiary, Pacific Northern Gas (N.E.) Ltd.

Distribution and transmission charges are reviewed and approved by the British Columbia Utilities Commission (BCUC).

British Colombia is the third largest natural gas consuming province in Canada. Gas consumption in British Columbia is dominated by industrial demand.

By 2003, industry and power generation use had grown to 58 percent of total gas consumption and core customer use was at 42 percent.

The BCUC sets the local delivery rates for Terasen and PNG and reviews gas costs. Terasen uses financial risk management tools, including a portfolio of Local Delivery Cost Gas Cost.

National Energy Board fixed price contracts from various supply sources, contract hedges and spot purchases to manage gas price risk, but the cost of gas largely flows through to consumers based on market prices.

The B.C. Ministry of Energy and Mines developed a long-term energy strategy titled Energy for Our Future: A Plan for BC (BC Energy Plan) in November 2002. The cornerstones of the BC Energy Plan are:

• to maintain low electricity rates and maintain public ownership of BC Hydro’s core assets, to have secure energy supply to meet current and future requirements, to stimulate private investment, and to have environmentally responsible energy development excluding nuclear generation.
• that electricity distributors should pursue a voluntary goal of acquiring 50 percent of new supply from clean generation

Several project under development:

• Generation: (Duke Point Project), which committed to building a 252 MW gas-fired generator the facility is scheduled to be available for the winter of 2007-2008
• Transmission: By 2009, upgrades to the transmission system between Calgary and Edmonton will increase the potential for interprovincial power transfers. These upgrades would assist in increasing exports from Alberta to British Columbia to over 700 MW during the peak and off-peak periods.
• BC Hydro is currently in the process of ensuring generation for Vancouver Island through the VICFT process. BC Hydro has also requested that BCTC obtain approval to preserve an in-service date of 2008 for 230 kV alternating current (AC) submarine transmission cables to connect the Lower Mainland to Vancouver Island.
• To further promote wholesale access, BCTC is developing an OATT to replace the existing Wholesale Transmission Tariff.
• Sea Breeze Power Corporation, a merchant transmission developer, is undertaking feasibility studies for projects that would provide additional interconnections between B.C. and the PNW.
• British Columbia and the interconnected American regions are in the process of developing an RTO by the 2007. Due to the significant trade that occurs between British Columbia and the western U.S.,
• Creating an independent regional transmission operator by 2007.

The BC Energy Plan commits to developing new rate structures that will provide better price signals through stepped rates for large electricity consumers.

BC Hydro is presently developing rates to meet the BC Energy Plan commitment. In addition, utilities such as BC Hydro and FortisBC have developed demand-side management initiatives (PowerSmart and PowerSense, respectively) that are open to all classes of consumers.

The proposed Georgia Strait Crossing Pipeline Project (GSX) would carry gas from Sumas/Huntingdon across western Washington State and the Strait of Georgia to Vancouver Island. The pipeline would be capable of supplying 2.71 106m3/d (96 MMcf/d) to two power generation facilities on the island, one of which is already operating, and other users. The pipeline has received regulatory approval from the Federal Energy Regulatory Commission (FERC) in the U.S.

The Province has launched initiatives to improve the industry’s competitiveness in B.C. compared with Alberta and other producing regions:

• creation of the Oil and Gas Commission in 1998 to provide a single window for regulatory approvals for oil and gas activities.
• increased spending on road infrastructure and working with First Nations to develop consultation protocols for dealing with oil and gas exploration and development applications.
• established a planning framework to facilitate the development of natural resources, for example, in the Muskwa-Kechika Management Area (M-KMA).
• elimination of the provincial sales tax on production machinery and equipment, a reduction in the corporate income tax rate to match.