I have something of a confession to make: I am hopelessly addicted to the computer game Sim City. There’s a special gratification that comes from realizing a grand vision, from managing the affairs of an entire society, from building bridges, providing homes, growing industry, and developing commerce for a bustling metropolis. Oh, and the awesome power! It’s intoxicating, having the total authority to build what you want, when you want it, and wherever it pleases you. Sometimes, in the course of bulldozing a small inner-city airport or razing an entire tract of housing to lay down a new power line, I’ll amuse myself with a silly notion: what if my virtual society was not merely some digital fantasy, but a real city with real citizens? How would they react to the destruction of their homes and businesses simply because they stood in the way of progress? Would they stoically surfer the burden of advancing the common good, or would they rise up and revolt? Then, I chuckle to myself.
I know, this must sound ridiculous, but there’s a certain degree of sinister pleasure that is derived from the act of governing without accountability. It certainly makes things easier when you can build and bulldoze without having to suffer the protestations of community action groups and special interest lobbies, when the worst you have to fear from a bad policy decision is what my municipal politics professor liked to call “people voting with their feet”. The sad reality is that public governance becomes infinitely more complicated when you are dealing with real individuals that have divergent opinions and the right to be heard. In real life there is debate and there is controversy.
A few weeks ago, while reading the Edmonton Journal, I came across the first signs of this public kind of controversy over Bill 50, the Electric Statutes Amendment Act, and some power transmission upgrades. Earlier this month, the Alberta Electric System Operator (AESO), the body that oversees Alberta’s power grid, released their 10-year plan along with cost projections for proposed power projects in the province. Perhaps the most shocking revelation was that roughly $14.5B is required for necessary upgrades to our provincial transmission system’s capacity. These upgrades involve additional high-capacity lines between Calgary and Edmonton as well as additional high-capacity lines connecting the Industrial Heartland northeast of Edmonton, Fort McMurray, and southern Alberta’s wind farms to the grid. The construction and operation of transmission lines is financed entirely by private Transmission Facility Operators, and their costs are recouped through transmission rates charged to electricity consumers. According to one article in the Journal, the proposed upgrades could translate into a $14.50 increase in the average Albertan’s monthly power bill, effectively doubling the rate paid for electricity transmission.
It is evident from letters written to the Journal that ratepayers harbour deep suspicions regarding these proposed upgrades. Parrish Tung, from Elk Point, compares them to a private restaurant that receives public money to increase its ability to turn a private profit. He writes:
Here are two different scenarios:
-Suppose I own a restaurant. My business is so good that I need to add a new stove to increase my production. As such, I ask my town to charge all residents $10 per month so that I can improve my service. What do you think of that?
-We now will have to pay more money on our power bill so that the power company can increase its capacity to sell power and make money. What do you think of that?
What is the difference? Not much.
These suspicions seem to deepen with regards to a proposed intertie with Montana mentioned in the AESO’s 10-year plan. Ray Lutz, in his letter, writes “Alberta taxpayers should not have to pay for transmission lines to enable privately owned electrical generating companies to sell their power to the U.S.”
The AESO’s 10-year plan is only half of the transmission upgrade controversy, however. Two day before this plan was released, Bill 50 was introduced in the legislature. Bill 50 threatens to change the way transmission infrastructure projects are approved. Currently, the AESO must approve all proposed transmission infrastructure projects, after which the Alberta Utilities Commission holds a public ‘needs’ hearing to determine whether or not, well, the project is needed. Basically, these hearings gather input from the public at large along with the province’s electrical system operators and owners to weigh the proposed project’s benefits against its social, financial, and environmental costs. Bill 50 proposes to allow the Minister of Energy to designate any project a Critical Transmission Infrastructure project, which would result in this project bypassing the ‘needs’ hearing and heading directly to the ‘siting’ hearing where the exact placement of the transmission lines is determined.
Opponents to the transmission upgrades – largely wary ratepayers and landowners along the proposed infrastructure corridors – as well as the opponents of the provincial government have taken these issues as an opportunity to deride the Progressive Conservative administration and Alberta’s power industry. A picture is being painted where greedy power suppliers and transmission facility operators are eyeing the lucrative energy markets south of the border, sticking Albertans with the bill for a multi-billion dollar extension chord, and using their government cronies to deflect popular opposition to their scheme. Feedback from Albertans, like the above letters, for instance, shows that this perception has traction, and some in the media have understandably predicted that transmission upgrades and Bill 50 promise to become the autumn’s high-voltage issue.
When asked why Bill 50 was introduced with only a week remaining in the Spring sitting, the government responded it was so Albertans could spend the summer familiarizing themselves with this complicated issue. I would like to contribute some insight and hopefully dispel the popular apprehension towards transmission upgrades outlined above. These upgrades are not part of any nefarious corporate plot, and while they would require rate increases and the assembly of private lands, they are absolutely necessary. Corporate greed versus the ratepayer is not the discussion Albertans should be having this summer. Rather, they should be discussing whether the powers granted to the provincial government in Bill 50 are the most responsible manner in which to proceed with essential investments in our transmission infrastructure.
First, it is extremely critical that every Albertan understands why these upgrades are absolutely necessary. Alberta’s recent boom in population growth and industrial development, especially considering the energy intensive lifestyles of the digital generation, have placed an enormous burden on a provincial power grid that has not seen any significant investment in the past twenty years. To put this in perspective, demands on the power grid have increased by the equivalent of a city twice the size of Red Deer every year since 2001. Our transmission lines are running dangerously close to over-capacity, increasing wastage through line loss and raising the specter of rolling blackouts throughout the province. When power lines are forced to carry excessive amounts of electricity, electrical energy is transformed into heat and power is lost. This so-called line loss is increasingly becoming a problem in Alberta. Last year, $220M worth of electricity was lost this way, the equivalent of power for 350,000 homes. Increased line losses are not nearly as frightening as the prospects of rolling blackouts, though. When total transmission capacity is used, but demand continuously increases, the power must be shut off somewhere to prevent a literal meltdown of the power grid. The AESO orders different sub-units of the grid to take turns shedding load with power cuts, resulting in homes, businesses, and essential services going without power. Line loss and the risk of rolling blackouts are the dangers that come with a power grid dangerously close to over-capacity. This is the reality facing Alberta, and this is the reason these upgrades are necessary. This is not a case of the power industry charging us for frivolous transmission projects to line their own pockets. These upgrades to Alberta’s transmission infrastructure are essential, and they cannot be put off any longer.
Second, all Albertans must understand that everyone benefits from paying into a dependable, effective, and safe power grid. Whether at home, at the office, or at the factory, the lights should come on when you flip the switch. Now, some Albertans seem to deny that they should have to pay for, or indeed have any responsibility towards the power grid. They seem to think that the grid, and any upgrades required to it, should be the responsibility of the power generators, since they are the ones making money from having it around, after all. This simplistic view of the power grid belies its true function, however. The power grid is not merely an extension of the power plant. It is its own entity that allows both consumers and producers to efficiently buy and sell from the electricity marketplace. It functions like our province’s highway system. I hate to break it to you, but our highways were not built for road trips to the mountains. They were built to move goods throughout the province, from producer to market, and from market to consumer. Now, let’s apply the logic from the above argument to highways. Would it make sense to view the highways as an extension of factory and farm, and required producers to pay for them exclusively? Of course not. These highways are a public good, just like our power grid, and whether they are paid for through taxes or through publicly regulated rates, they must be maintained collectively and equitably. In Alberta, transmission rates are charged on a per-use basis. Agricultural and residential land owners, who have come out most vocally against increases to the transmission rates, might be surprised to learn that in 2008, they paid only 4% and 16% of the total transmission costs respectively. The big payers were commercial and industrial power users who paid 19% and 61% respectively. All Albertans must accept that they are responsible for their fair share of the power grid, and that increased rates are simply the unpleasant side effects of growing a dependable, effective, and safe power grid.
Third, apprehensive Albertans should reconsider their skepticism towards the proposed intertie with Montana. The simple fact is that interties are good for the grid and good for the economy, and Alberta remains one of the least connected jurisdictions in the North American power system. Our symbiotic relationship with British Columbia does a good job of illustrating the benefits of an intertie. The majority of Alberta’s power generation is provided by coal and natural gas power plants. Unfortunately, these forms of generation, unlike hydroelectric generators, for instance, cannot be shut down and restarted efficiently. The principle here is similar to the principle that makes idling your car engine at a red light more efficient than shutting off your engine and restarting it when the light turns green. Thus, every evening, when the demand for power tapers off, our coal and natural gas power plants are left running throughout the night. Rather than squander this power, however, we export it to British Columbia whose hydroelectric dams are easily powered down or brought back online with the simple closing or opening of a valve. The intertie allows the water level of the hydroelectric dams in British Columbia to rise overnight while using power from Alberta that would have otherwise been wasted, benefiting the power systems in both provinces. This arrangement further benefits Alberta since the export of this electricity brings money into our province. Again, an analogy with highway infrastructure helps render publicly funded interties more palatable. Border crossing infrastructure, even though it is intended to facilitate the export of goods to other provinces and other countries for private profit, remains publicly funded because it brings money into our province. Interties strengthen the power grid and strengthen the provincial economy, and the insular mindset that has greeted the proposed intertie with Montana should be abandoned.
Clearly, these proposed upgrades to our power grid’s internal and external connectivity rest on a sound case, even if they would require increases to transmission rates. At this point, the Montana intertie remains a mere proposal, but upgrades to the internal grid, especially along the Calgary-Edmonton corridor, have been on the table for a number of years. Unfortunately, these much needed projects have remained bogged down in regulatory quagmire as the load placed upon the grid increasingly reaches critical levels. Stubborn landowners along the proposed corridors have exploited the existing regulatory regime to slow down the approval of these projects. They do not want power lines crossing their property, and rather than waiting for the siting hearings, they have used the needs hearing to stall the process, thereby getting two swings at the same ball. While their concerns are understandable, there must be some point at which the needs of the many outweigh the preferences of the few. Imagine a busy avenue with constant congestion that is lined on one side with sprawling residential lots. The city decides to offer the property owners fair market value for a portion of each lot so that they can add another lane to the avenue. Is it reasonable to allow the owners of these residential properties to continuously reject offers from the city or, more to the point, delay the question? Evidently, Bill 50’s provisions allowing the government to bypass the needs hearing and head directly to the siting hearing would be instrumental to breaking up the existing deadlock between regulators and landowners. Perhaps, in the case of regulatory impasse, infrastructure improvements should be elevated to the domain of public policy. If so, we must consider the degree to which we are comfortable with our government holding this function.
Earlier in Spring session, the government passed Bill 19, the Land Assembly Project Area Act, which allows the government to designate an infrastructure corridor then freeze development and compel landowners to sell their property along this corridor. This could conceivably be used to bypass a siting hearing for transmission lines, which are specifically mentioned in Bill 19. Once Bill 50 passes this autumn (which it surely will), the government will find itself with an awesome arsenal of powers to use in the improvement of the province’s electrical infrastructure. Essentially, Bill 19 empowered the government with the authority to bypass the siting hearings while Bill 50 will empower them with the authority to bypass the needs hearing. Come autumn, they will have legislated back-doors to the public portions of the regulatory process. This is a tremendous amount of power to have at the disposal of government technocrats, and it was no accident that I began this post with references to the computer game Sim City. It provides an easy, if not amusing way to conceptualize the powers contained within Bills 19 and 50. There is one important difference, however. In reality, these planning decisions could be exposed to public scrutiny and, the government could be held accountable for them. Thus, any consideration of whether the government should be empowered to direct electrical infrastructure improvements must be made alongside considerations of this government’s transparency and accountability.
The issue here is not whether the power industry is trying to fleece ratepayers out of their money. Alberta’s power grid is overdue for an upgrade, and ratepayers – whether agricultural, residential, commercial, or industrial – should be prepared to pay their fair share. Thus far, regulatory impasse has stalled these critical upgrades, but the government stands ready to break the deadlock. It proposes to do this by empowering itself with the ability to circumvent either or both steps of the regulatory process completely. Albertans have until autumn to decide whether their government could exercise this tremendous power with transparency and accountability. It certainly gives us something to think about every time we flip a switch this summer.