The government-owned utility, which produces electricity for the provincial market and also sells power to the United States, should be split into separate generation, transmission and distribution companies, according to a task force reviewing the province's energy policy.

"British Columbia's access to expanding North American electricity markets depends up the opening of the system to more competition, thereby increasing private sector investment," according to the report.

The task force said British Columbia consumers currently pay rates that are below market levels, but restructuring the system is needed to increase energy supply and increase the province's "energy security."

The energy task force was created in August by Premier Gordon Campbell, whose Liberal Party government was elected in May with a pledge to make Canada's third-largest province more business friendly.

Campbell denied accusations during the campaign that he planned to privatize BC Hydro, and the new companies recommended by the task force would remain public corporations although they could face private competition.

BC Hydro was created in 1961 when the province took over BC Electric Corp. The utility provides about 94 percent of the province's power supply and is projecting a C$164 million profit in the current fiscal year.

The report said British Columbia must attract more private capital to increase its energy supply, which will eventually lead to lower prices.

"In particular, the electricity transmission system must be able to accommodate new energy producers and enable them to deliver their product to market on an equitable basis," the task force said.

British Columbia currently relies on hydroelectric dams for the bulk of its power generation capacity, but the task force also recommended the province encourage the development of coal-burning power plants.

"Final guidelines and standards related to emissions should be developed as soon as possible, based on an appropriate balance between economic and environmental considerations," the report said.

The report recommends creating more natural gas storage capacity in the Vancouver area, saying consumers are subject to "excessive" price changes because it was one of the only major markets in North America without storage capacity.