California's new carbon cap-and-trade regulations, which came into effect Jan. 1, will require BC Hydro's power exporting arm to buy costly carbon credits on its energy exports beginning in January, 2013, likely wiping out Hydro's primary export market and increasing the cost of electricity to B.C. consumers in the process, a B.C. energy economist said Tuesday. Aldyen Donnelly, principal of WDA Consulting Inc., said in an interview that the California regulations require Hydro to pay the full carbon charge on its exports to that state, forcing it to buy carbon credits on the open market. Hydro is being tagged as a dirty energy producer because it has not disclosed its greenhouse gas emissions to California's Air Resources Board. The board's concerns are over Hydro's policy of importing coal-fired energy at night. Through its trading arm Powerex, Hydro buys low-cost but greenhouse gas-loaded energy from coal-fired plants in the U.S. at night. It then restricts the flow of water from its reservoirs, and saves that water for day-time production of higher-priced clean energy. Hydro uses its energy export revenues to lower B.C. consumer rates. The utility's own forecasts show it expects to generate $113 million in income from energy exports in 2013. Although Hydro has not disclosed the value of its export sales to California, every $33 million change in Hydro's net income results in one per cent change in domestic hydro rates. Donnelly said the lack of transparency makes it difficult to forecast the impact of the California carbon tax on rates but her best estimate shows it could be high enough to wipe out all export income.
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