Sunday, December 31, 2006

Alcan and Hydro get a big NO

It won't be much of a New Year's party for Alcan and BC Hydro, as the BC Utilities Commission turned down their application for a long term power contract between the hydro company and the aluminum producer.

In what some describe as a bit of a shocking decision, the Utilities Commission went against the two giants of industry, saying that the deal was not in the best interests of the public. A group that seems to get over looked from time to time when it comes to the ways of industry in the

The District of Kitimat has recently been concerned about Alcan's desires in the electricity market at the expense of job creation in the aluminum market, this ruling tends to suggest that they may have been on to something all along.

It will be quite interesting to see if the BCUC decision has any impact on the recently announced modernization plans for the Aluminum smelter at Kitimat.

B.C. Hydro, Alcan pact rejected by utilities board

Globe and Mail
December 30, 2006

VANCOUVER -- The British Columbia Utilities Commission has rejected a proposed long-term power contract between B.C. Hydro and Alcan Inc., saying the deal is not in the public interest and raises price concerns.

A commission panel concluded that B.C. Hydro should not have agreed to pricing provisions in the deal and that the commission "does not accept B.C. Hydro's evidence regarding the value of the benefits to ratepayers" of the agreement, BCUC secretary Robert Pellatt said yesterday in a letter to B.C. Hydro.

Critics had argued that the deal was struck without a competitive bidding process and would see Alcan reap the same rates for its electricity as new projects, even though costs at its Kemano power plant are significantly lower.

Alcan and B.C. Hydro maintained that the agreement, which would have replaced an existing deal between the Crown corporation and the aluminum producer, was a good deal for ratepayers and would help ensure reliable electricity for the province.

The deal would have run to 2025. Prices in the agreement were based on prices set in an open call for power projects in 2006.

"We are very disappointed," Alcan spokeswoman Anik Michaud said yesterday of the order. "We will need time to study it, and it's far too early to plot our course of action."

B.C. Hydro filed the proposed agreement in November. The utilities commission studied the deal at a hearing in December. In its order yesterday, the commission said it does not accept the contracts and that it would release reasons for its decision at a later date.

B.C. Hydro spokeswoman Elisha Moreno said the Crown corporation was "disappointed" in the ruling but would wait for the final decision before deciding on any further action.

The prices laid out in the contract were "consistent and competitive" with open calls for electricity, Ms. Moreno said, adding that "we certainly were not offering them [Alcan] any preferential pricing."

But intervenors in the hearing argued that B.C. Hydro "relaxed or eliminated" many of the key conditions faced by independent power producers in the 2006 call, meaning Alcan would receive an artificially high price through the deal.

"Had these conditions been similarly relaxed or eliminated in the [2006] call, the bid prices would have been different," the Independent Power Producers of British Columbia argued in a submission to the hearing.

The 2006 call prices should not be used as a benchmark for the agreement, the group added, "because of the significant differences in the contract terms and conditions and because there was no competitive bidding."

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