BC Hydro Annual Report 2001

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E N E R G Y C O S T S
Energy costs, domestic demand and electricity trade activities are managed using a portfolio approach. BC Hydro has sufficient committed
resources to meet its domestic demand, but may choose to purchase energy in the electricity trade market from time to time to meet this
demand if it is economic to do so. BC Hydro uses sophisticated models and techniques to determine when it is economic to purchase
energy in the electricity trade market, in place of using its hydro or thermal generating facilities to meet domestic demand, and when it is
economic to generate energy for sale in the electricity trade market. These techniques take into consideration variables such as the market
price of energy, water inflows, reservoir levels, energy demand and environmental and social impacts.
2001 2000 2001 2000 2001 2000
(MILLIONS OF DOLLARS) (GIGAWATT-HOURS) ($ PER MW . h)
Hydro $ 255 $ 276 44 834 49 985 $ 5.7 $ 5.5
IPP purchases 116 109 1 972 2 024 58.8 53.8
Other energy purchases 4,036 749 25 893 21 188 155.9 35.3
Natural gas 452 81 4 438 1 654 101.8 49.0
Non-integrated 13 11 94 94 138.3 117.0
Transmission charges and other expenses 290 108
Total $5,162 $1,334 77 231 74 945 $ 66.8 $ 17.8
Energy costs of $5,162 million increased by $3,828 million from the same period last year. This increase was primarily due to:
AN INCREASE IN THE PRICE OF ELECTRICITY AND GAS PURCHASES
The combined average price of electricity and gas purchases in fiscal 2001 increased by more than four times from the prior year. This increase
accounted for over 65 per cent of the total increase in energy costs. Energy purchases are largely used for future resale during higher-priced
periods in the electricity trade market. Energy purchases are also used to supplement hydro generation in meeting domestic load
requirements when economic.
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AN INCREASE IN THE VOLUME OF ELECTRICITY AND NATURAL GAS PURCHASES DUE TO A
DECREASE IN LOW- COST HYDRO GENERATION
The availability of low-cost hydro generation has a significant impact on energy costs. This is because the variable cost of hydro generation
is substantially less than the cost of electricity purchases or natural gas purchases, used primarily for the operation of the Burrard Thermal
Generating Station. Hydro generation declined by 9 per cent this year, mainly due to a 13 per cent reduction in the level of water inflows
into BC Hydro’s reservoirs. The decrease in hydro generation and the corresponding increase in energy purchases contributed approximately
20 per cent of the total increase in energy costs.
The lower level of water inflows during the year contributed to BC Hydro being in a net import position of approximately 1700 GW . h
for the year. This means more energy was purchased for use in the BC Hydro system than was sold in the electricity trade market, thereby
conserving reservoir levels. The additional water stored in the reservoirs will be used to generate electricity needed to meet increased
domestic demand in future years.
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