City Hall pledges commitment to neighbourhood energy systems after utilities commission firmly rejects Creative Energy monopoly plans to heat Vancouver

creative-energy-vision-from-website

Creative Energy’s future plans, from website

Yesterday, the B.C. Utilities Commission (BCUC) definitively rejected an application by Creative Energy that would have created a monopoly on heat energy in large parts of the City. This is a significant decision, for many reasons.

“It created a monopoly for Creative Energy and we don’t think that’s in the public interest,” said David Morton, the commission’s CEO. “We won’t approve an agreement that includes that obligation.”
From “B.C. rejects plan for low-carbon Vancouver power plant,” by Frances Bula, The Globe and Mail (Sep. 26, 2016)

Below is a media release from BCUC, an information bulletin issued by City Hall today in response to the rejection, plus references and media links.

Creative Energy is owned by Ian Gillespie of Westbank Projects Corp. — mega developer and major financier of Vision Vancouver, the ruling regime in the city.  City Council has already required many new buildings to have hookups to a future district heating system and eventually intends to force every building in large areas of the city to connect in the future. But monopoly control of a city’s energy supply — enabled by the very politicians who funded their elections with funds from the same privately-held company (read that “no public accountability”) that generously funded their election — could prove to be a significant risk and future burden on City finances, businesses, taxpayers, and citizens. Imagine Gotham City in the Batman series.

There are many bits and pieces to the whole story. Gillespie tried hard to get the approval, and kept the application well under the radar. The City issued a non-big contract to Creative Energy, but that received barely any media attention. CityHallWatch tried for over a year to get information from City Hall and Creative Energy about what “bio-fuels” it intended to use to convert its central steam plant on Beatty Street to low-carbon sources. The former CEO (Stacey Bernier) did not reply to a single e-mail from CityHallWatch seeking even the slightest amount of information about its proposed “bio-fuels.” And in the past several months it appears Gillespie installed a new CEO who has regulatory connections and experience: Robert Hobbs, the former chair of the BCUC. But even all those efforts did not get past the regulator. This appears to be the close of a chapter on this application, but we believe a high level of public and media scrutiny of this initiative is needed going forward. Its implications on the public interest are worth billions of dollars, and last decades into the future. Westbank is still pursuing major bonuses in height and density to build two tall towers over its steam plant on Beatty Street, in return for going “low carbon,” even though those details are still not known publicly.

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Media Release
British Columbia Utilities Commission
September 26, 2016 14:00 ET

BCUC Releases Decision on Creative Energy Application in Vancouver
http://www.marketwired.com/press-release/bcuc-releases-decision-on-creative-energy-application-in-vancouver-2161451.htm

VANCOUVER, BC–(Marketwired – September 26, 2016) – The BC Utilities Commission has released its decision on Creative Energy’s amended Neighbourhood Energy Agreement (NEA) with the City of Vancouver, a reconsideration of decisions from December 2015 and March 2016.

DECISION:
In this decision, the BCUC Panel has again not approved Creative Energy’s NEA with the City of Vancouver because approval would grant a monopoly over the supply of heat and hot water in Northeast False Creek and Chinatown, which is not in the public interest.

KEY DETAILS:
This decision relates to an NEA between the City of Vancouver and Creative Energy. Specifically, the NEA submitted for approval by Creative Energy concerns its Northeast False Creek Neighborhood Energy System (NEFC NES), an extension of its gas fired district energy system that currently provides heat and hot water in the downtown core and into the False Creek flats.

Neighborhood Energy Agreements are a type of franchise agreement between a utility and a municipality that, among other things, set out the terms and conditions under which the utility can access and service its infrastructure — such as underground pipes or overhead wires — providing the utility with some level of certainty. NEAs do not typically cover connection or end-use agreements between the municipality and the utility.

EXPLANATION:
This decision supports both the original decision from December 2015 and the second decision on the amended application from March 2016 not to approve Creative Energy’s application on the grounds that approval would grant a monopoly over the supply of heat and hot water in Northeast False Creek and Chinatown, which is not in the public interest.
During the BCUC Panel’s open hearing processes, other potential suppliers demonstrated to the BCUC that they could provide competitive options in the same area. As such the BCUC Panel has decided it would not be in the public interest to approve a Neighbourhood Energy Agreement that references, directly or indirectly, mandatory connection and/or end-use provisions.

Further, there was no evidence provided in any of these proceedings that the BCUC has ever approved an NEA or franchise agreement that contained terms that either explicitly conferred a legal monopoly or suggested or assumed that a legal monopoly was conferred.
This decision also reaffirms a fundamental principle for the BCUC — to regulate only where required and not to impede competitive markets, unless there is an inability of competitive suppliers to operate with greater efficiency and effectiveness than a sole service provider.

CONTEXT:
While the BCUC Panel considered the City of Vancouver’s stated objective to establish a district energy system in Northeast False Creek and Chinatown area, in not approving this agreement, the Panel’s intent is not to prevent the City from achieving its policy objectives.

In this decision, the Panel notes two paths the City could take to achieve its goal:
Own or operate the district energy system and exempt it from regulation by the BCUC under the Utilities Commission Act.
Enact a Bylaw entirely independent from the NEA, requiring developers to connect to the City’s preferred energy system.

BACKGROUND TIMELINE:

The BCUC released its first decision on Creative Energy’s application for approval of its NEA with the City of Vancouver in December 2015. In that decision, the BCUC granted Creative Energy approval to build and operate the Northeast False Creek Neighborhood Energy System (NEFC NES), an extension of Creative Energy’s gas fired district energy system that currently provides heat in the downtown core and into the False Creek flats. However, the BCUC did not approve the NEA between Creative Energy and the City of Vancouver at that time.

In March 2016, after the Commission required Creative Energy to re-apply with specific changes to its Neighborhood Energy Agreement, the BCUC released a second decision, again denying the revised application on the grounds that it did not substantively deal with the concerns of the Panel from the original decision, specifically, considerations in the NEA that referenced exclusive end-use provisions in a City of Vancouver bylaw on the Northeast False Creek Neighborhood Energy System.

In July 2016, Creative Energy asked for the BCUC to reconsider their decisions from December 2015 and March 2016, and today’s decision is being released as a result of that request.

BCUC ROLE AND PROCESS:

The first proceedings between April 2015 and December 2015 provided opportunity for public input and comment. In total, 13 groups participated in the three-day oral hearing that was open to the public and broadcast online, including a number of groups representing ratepayers and utility customers.

During the two subsequent decisions from March 2016 and today’s, the BCUC requested written input from all parties involved in the first decision. All input received from customers, intervenor groups, the City of Vancouver and the participating utilities was considered in making this decision.

The BCUC’s mandate is to ensure:

  • customers receive safe, reliable and non-discriminatory energy services at fair rates from utilities
  • that utility shareholders are afforded a reasonable opportunity to earn a fair return on their investments

To read the decision, please visit the following link: http://www.ordersdecisions.bcuc.com/

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Information Bulletin, City of Vancouver
City committed to neighbourhood energy systems
(27-Sept-2016)

Following the September 26, 2016 decision by the BC Utilities Commission (BCUC) to not approve Creative Energy’s Neighbourhood Energy Agreement with the City of Vancouver, the City remains committed to establishing cost-effective neighbourhood energy systems for the residents and businesses in Northeast False Creek (NEFC) and Chinatown.

The City is disappointed with BCUC’s ruling. This system is a critical part of the City’s neighbourhood energy strategy and for ensuring that heat for this neighbourhood is generated from renewable energy sources. The creation of neighbourhood energy systems in high density neighbourhoods are key to meeting Vancouver’s greenhouse gas emission reduction targets outlined in the Greenest City Action Plan and Renewable City Strategy.

Renewable neighbourhood energy systems can achieve up to 60% GHG reduction compared to conventional heating systems. They also eliminate the space and maintenance requirements associated with boilers in individual buildings, and provide cost-effective and stable rates to area residents and businesses.

The BCUC has stated that its intent is not to prevent the City from achieving its policy objectives, and has recommended other options for the City to achieve its low-carbon goals. The City will work with Creative Energy to review the BCUC decision and determine alternative courses of action to ensure that the City’s renewable energy objectives are achieved.

The City remains interested in finding a solution that enables private sector investment in renewable energy systems. Benefits of private sector ownership of neighbourhood energy systems include:
· Lower cost to the City of Vancouver and taxpayers;

· Facilitation of innovation and expertise in the private sector;

· Cost efficiencies;

· BCUC regulation of public utility operation, service, and rates.

The City established an agreement with Creative Energy in March 2015 for them to build, operate, and finance a neighbourhood energy system in NEFC and Chinatown.

Learn more about the Renewable City Strategy.
Learn more about the City’s Neighbourhood Energy Strategy.

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Utilities commission nixes Creative Energy plan, again
Regulator says it would have created a heating monopoly
By Bob Mackin | Sept. 27, 2016, 5:08 p.m
https://www.biv.com/article/2016/9/utilities-commission-nixes-creative-energy-plan-ag/

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B.C. Utilities Commission rejects low-carbon power plant for Vancouver
Marcie Good | SEP 27, 2016
http://www.bcbusiness.ca/natural-resources/bc-utilities-commission-rejects-low-carbon-power-plant-for-vancouver

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B.C. rejects plan for low-carbon Vancouver power plant
FRANCES BULA
VANCOUVER — Special to The Globe and Mail
Published Monday, Sep. 26, 2016 9:50PM EDT
http://www.theglobeandmail.com/news/british-columbia/bc-rejects-plan-for-low-carbon-vancouver-power-plant/article32070457/

Excerpts:

 

That [Creative Energy] plan relied on new projects being mandated to hook up to the Creative Energy system to ensure there would be enough volume to support the high cost of building the infrastructure for a large new utility. The commission said Creative Energy is free to operate as a power company. But it would not approve its agreement with the City of Vancouver to be the sole option as a power source for new buildings.

“It created a monopoly for Creative Energy and we don’t think that’s in the public interest,” said David Morton, the commission’s CEO. “We won’t approve an agreement that includes that obligation.”

… Mr. Morton said the commission also didn’t accept the argument from Creative and from the city, which was one of several intervenors in the case, that it needed to require new buildings to hook into the Creative system to support a new kind of energy utility that would significantly reduce greenhouse-gas emissions.

… He said the city now has two options if it really wants a low-carbon energy system for downtownIt can pass a bylaw requiring new developments to hook into CreativeThe commission has no authority to stop a city’s bylaws. Or it can run the system itself, as it does in the Olympic Village development, instead of having a private operator do it.

The decision came as a major disappointment to Creative Energy chair Trent Berry. He said Creative remains committed to helping the city move to low-carbon powerBut, he said, without any guarantee that new projects will be required to hook into Creative, it’s unclear whether it can expand as planned.

… He said it was unfortunate that the commission did not recognize the environmental benefits the new power utility would provide. Mr. Gillespie’s company is the new incarnation of a much older company called Central Heat, which has provided steam heat and power to about 200 buildings downtown for decades. Creative’s plan was to switch from natural gas as a source for that steam to some other low-carbon source, as it maintained and then expanded the system to new developments. It has been considering biofuel, otherwise known as wood waste.

Vancouver’s development community had expressed concern about the idea of being required to hook into a new privately run power utility.

Mr. Dobrovolny [city’s general manager of engineering] said the city is going to keep working with Creative to create a low-carbon power utility, although he doesn’t think just changing a bylaw is a good solution. “It doesn’t provide the same kind of long-term security for Creative,” he said, because a future council could come in and rescind it.

CityHallWatch notes on this: Some thoughts come to mind about all this…. The cornerstone of Creative Energy’s entire proposition is a switch to “some other low-carbon source.” But they have not publicly provided any long-term plan, spanning decades, of  where that source will come from. Even City officials have told CityHallWatch they have no idea, and to ask Creative Energy. Thus, the “environmental integrity” of the entire business model is questionable. Second, it is disappointing to see our public servants serving as advocates for one specific and secretive privately-owned company, which also happens to be a major financier of the politicians who control the city. The risk of conflict of interest and possible corruption is high.

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Earlier story.

Steam heat – Felicity Stone, Business in Vancouver, 10-Dec-2015
Vancouver developer Ian Gillespie’s power company Creative Energy, has received permission from the B.C. Utilities Commission to build a new power facility in Northeast False Creek—but not to extend into Chinatown or rely on funds from a city carbon tax, nor a mandatory connection to the Downtown Eastside. Gillespie, founder of Westbank Projects, purchased Creative Energy in 2014. The utility sells energy in the form of steam to more than 210 customers in the downtown core of the City of Vancouver.
A 30-year agreement between Creative Energy and the City of Vancouver was enacted in May 2014, subject to approval from the provincial commission. It would give Creative Energy a monopoly in Chinatown and along the north side of False Creek. The Urban Development Institute, one of a dozen intervenors, argued that Creative Energy’s shareholder is also a developer, and thus there might be a potential conflict of interest. Gillespie, they said, may influence discrimination against other developers for competitive advantage given the connection agreement is a prerequisite for applying to the city for a building permit. (via the Province)
http://www.bcbusiness.ca/manufacturing-transport/vancouvers-green-power-plan-hits-a-snag

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