Kinder surprise?

A provincial government report prepared by the ministry of energy, mines and petroleum resources states Terasen Inc. owner Kinder Morgan Inc. wants to "discourage electricity" use in British Columbia and "replace (it) with natural gas." But a spokesperson for Terasen says "that would be an inaccuracy" - rejecting suggestions Kinder Morgan wants the government to introduce a pricing system that could see some British Columbians who use electricity to heat their homes pay a higher Hydro rate than those who use other sources, such as natural gas.

The report, which was obtained via a freedom of information request, summarizes a January 31 meeting between Energy, Mines and Petroleum Resources Minister Neufeld and Kinder Morgan chairman and chief executive officer Rich Kinder - as well as president Park Shaper and chief operating officer Steven Kean. The meeting occured while Minister Neufeld was attending a convention in Houston, Texas. According to the report, after the executives expressed a desire to replace electricity use with natural gas, "BC noted that electricity is cheap and competes with gas."

Kinder Morgan then suggested introducing "incremental prices" for residential electricity consumers. Under such a system - which has been in place for BC Hydro's industrial customers since 2005 - the more power you use, the higher your kilowatt hour rate will be.

That encourages energy conservation. And, in an interview with Public Eye, Terasen corporate communications manager Joyce Wagenaar said her company is just working to make sure British Columbians "use the right fuel, at the right place, at the right time" - work that's taking place in cooperation with BC Hydro.

But incremental pricing also means those who don't heat their homes with electricity could receive a lower kilowatt hour rate than those who do, depending on how much power they use. Kinder Morgan is set to transfer ownership of Terasen to Canadian utility company Fortis Inc. sometime this year - having announced those plans on February 26. The ministry of energy, mines and petroleum resources declined to comment on Minister Neufeld's meeting with Kinder Morgan executives. The following is the relevant section of the aforementioned report.

***

Kinder Morgan: Attended by Rich Kinder (CEO), Steven Kean, Park Shaper

Summary of Discussion:
* KM provided an update on their projects. The Transmountain Pipeline (TMX) was continuing, seeing need for more transport to Vancouver and Seattle. Marketers demand is increasing from the South and Asia. TMX capacity is 225k bod (barrels of oil per day)
* In total $4b of projects upcoming mostly in BC.
* Park boundaries to be addressed.
* MEMPR has a Major Oil and Gas Projects Team in place.. Park boundaries are set by legislature, when it is a park created by legislation (vs. OIC).

(s. 13, 16)

Vancouver Terminals:

(s. 21)

Pipeline Construction:
Steve Kean noted that all is on time for BC Hydro to connect pump stations. MEMPR available to assist in resolving any issues that might arise.

Energy Plan:
* Energy Plan will be released in the 1st quarter of 2007

Energy Policies/BC Hydro:
* Rich Kinder inquired about electrical use and projects.
* BC Hydro will have a call for 55 giagwatts to be provided by IPPs. Last call for 2500 netted 7000 gwh - challenge is in firm rather than intermittent power.
* KM would like to see natural gas be part of the demand side management - discourage electricity and replace with natural gas. BC noted that electricity is cheap and competes with gas. In the last open call there were no bidders for natural gas facilities. KM discussed the economics of energy pricing and suggested incremental prices for residents (as it is currently for industry).

3 Comments

* Park boundaries to be addressed.
* MEMPR has a Major Oil and Gas Projects Team in place.. Park boundaries are set by legislature, when it is a park created by legislation (vs. OIC).

Good work digging out this Email/memo, Sean. Even more than the pricing suggestions, I think the two park boundary bullets could be the beginning of serious controversy.

there's a host of good policy reasons why the per-unit charge on everybody's hydro bill should go up after a certain monthly consumption threshold (determined on whether you, i.e. heat your home with electricity and how cold a part of the province you live in)

given mr. kinder's concern for demand management, and the fact that gas is supplied by a private not public company, he probably wouldn't have objected to the province levying a small excess consumption tax on every unit after an appropriate threshold, so we can encourage conservation and fund R&D on energy sources we'll need post his transtional fuel ...

So nice to know that BC Ministers are continuing the honoured tradition of meeting with corporate officials from big American companies interested in BC Assets other than BC Rail.

Well done Sean.

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