B.C. Energy Projects Sit In Limbo

The province's British Columbia Hydro and Power Authority wants to see plans for a gas-fired plant in Nanaimo get the regulatory go-ahead. That plant hinges on whether an underwater pipeline will be built to transport natural gas from Sumas, Wash., to Vancouver Island.

Elisha Odowichuk, B.C. Hydro's media relations manager, said the Crown corporation is willing to build the Nanaimo plant with the goal of selling it to the private sector or, if possible, to find an outside firm soon to take on the construction phase.

The plant's targeted completion date of November, 2004, "is still what we're banking for," she said.

But environmentalists, unions and New Democratic Party supporters are suspicious about the $370-million Nanaimo proposal and accompanying $340-million pipeline.

B.C. Hydro wholly owns the Nanaimo project and is an equal partner in the pipeline project with a unit of Tulsa, Okla.-based energy marketer Williams Cos. Inc., whose share price on the New York Stock Exchange has plummeted 90 per cent over the past year.

In British Columbia's polarized political climate, the projects totalling $710-million have become a lightning rod for those who are angry with Premier Gordon Campbell's Liberal government. Already, $62-million has been spent in the early stages of the power plant and $46-million on the Georgia Strait pipeline.

"It just seems to me to be fairly questionable whether this thing can ever be completed," said Bill Tieleman, a strategist for the previous NDP government and now president of a consulting firm in Vancouver.

An array of groups such as the Society Promoting Environmental Conservation and the B.C. Federation of Labour say there are better ways to generate electricity, such as running small hydroelectric and wood-waste projects. These critics aren't impressed by B.C. Hydro's assertion that the Nanaimo plant must be built to meet the demands of Vancouver Island's growing population, which reached 705,000 last year, up 25 per cent over a dozen years.

There are ramifications not only in financial terms for the government, but politically.

While in opposition, the Liberals blasted the New Democrats for flushing away $463-million on three fast ferries that were neither fast nor seaworthy for the West Coast.

Since ousting the NDP in a landslide majority win in May, 2001, the Liberals have been carefully portraying themselves as prudent fiscal managers.

B.C. Hydro had expected to proceed as quickly as possible with the Nanaimo project even though a private-sector partner, Calpine Corp. of San Jose, withdrew in May.

However, the Liberal government recently took a second look and ordered a B.C. Utilities Commission review of the plant to answer calls for greater scrutiny. Separately, the pipeline still requires regulatory approval from the National Energy Board.

B.C. Energy Minister Richard Neufeld said he has confidence that B.C. Hydro has done its homework and believes that once the B.C. Utilities Commission hears the evidence, the Nanaimo project will be seen in a positive light and win approval.

"There's a process. I think, actually, in my own heart of hearts that it will go through. I can't imagine that it wouldn't," he said in an interview. "It doesn't take a rocket scientist to figure out that we're going to need more electricity. B.C. Hydro can't let the lights go out on Vancouver Island. That's why they're being aggressive. You just don't pull it out of a hat. There is going to be up-front money spent."

But some analysts say it's better for the government to cut its losses by mothballing the Nanaimo project, whose estimated construction costs have soared.

It makes more sense for B.C. Hydro to devote attention to replacing undersea transmission cables instead of getting caught up in the debate over the Nanaimo plant, said Mark Jaccard, an energy analyst and professor at Simon Fraser University.

Prof. Jaccard predicts that the Nanaimo project will be delayed. He figures that other energy options will emerge, namely co-generation, which is the simultaneous production of electricity and steam in a process that many industry observers say is energy efficient and cost effective.

Although the political left has seized upon the gas-fired project as a symbol of Liberal incompetence, it was former NDP premier Glen Clark who supported the concept when it was proposed in 1996 for Port Alberni, said David Austin, a Vancouver-based energy analyst and lawyer who represents independent power producers.

Environmentalists, unions and New Democrats "are wailing away but have conveniently forgotten the past," he said.

"The Nanaimo project no longer makes any economic sense because of the increase in capital costs and delays in the pipeline. If you proceed, the cost of producing electricity is going to be incredibly high," Mr. Austin said. "This thing has such a long history. It's a financial mutt with bad fleas."

With power shortfalls envisaged within two years, Vancouver Island residents are being urged by B.C. Hydro to do their part to conserve energy and avoid having the island's lights go off because of electricity shortages at peak times.