I am writing in response to the Abbotsford school district’s interest in a 20-year “regulated” tariff agreement with Fortis BC. This agreement would see the school district purchase thermal energy from heating plants in schools that will become owned and operated by the utility. In turn, Fortis will replace the schools’ aging inefficient plants with higher efficient equipment. Their strategic partner would then facilitate this retrofitting and subsequent operation. Fortis would leverage their position as a utility to regulate the project to recover its cost of capital, equipment installation, operating and energy costs.
This sort of regulation will restrict other companies from competing against them while their shareholders earn a guaranteed rate of return. Fortis BC acknowledged at the recent hearings held by the Utilities commission (BCUC) “that this type of regulation does not exist in any other jurisdiction in North America.” The BCUC came down on the side of competition over-regulation and noting numerous concerns about costs, transfer of risk to taxpayers, and needless regulation. The commission also noted that it is not their role to provide oversight for sophisticated counterparties entering into such agreements.
Fortis aims to regulate these projects based on their legal interpretation of thermal energy plants per the Utilities Commission Act. The commission indicated if such an application is made to regulate they would request an exemption to deny it, but that will require ministerial approval.
Given all this, the district continues to entertain a $4-million regulated project for six schools. A project status report was presented at the June meeting with all trustees voting for continuation; or as Trustee Corky Neufeld said, “We will Fortis on.”
How sophisticated can they really be when upgrading to high efficient boiler or heat pump plant is 25 per cent the cost of the proposed geothermal system while still reducing energy consumption and carbon emissions by 40 per cent.
In addition, at the end of the 20-year term there will be sizable residual at a time when most of the equipment will need replacing again. Fortis BC will offer the district another 20-year term rolling in the residual and replacement costs (which locks the district to the utility in perpetuity).
I support the district’s efforts to reduce carbon emissions and enhance efficiencies but at what cost, why regulate, and what real value does the utility offer?
Darryl McCulley, Abbotsford