By Rob Shaw, The Vancouver Sun

B.C.’s Energy Minister is throwing a lifeline to the province’s pulp mills, with up to $100 million for energy conservation projects to help offset rising industrial electricity rates.

Bill Bennett made the announcement in Surrey, flanked by four mill companies that had publicly warned they could be driven to economic hardship by his ministry’s 10-year plan to raise BC Hydro rates.

The companies— Canfor, Catalyst Paper, Paper Excellence and West Fraser—operate thermo-mechanical pulp mills and are among B.C.’s biggest industrial power users. Under the new program, they will be eligible for government money using a formula that involves the horsepower of refiners at their mills. The companies can use the funding toward new machinery or mill upgrades that will reduce power consumption, as long as they also contribute 25 per cent of the capital costs.

“We’re estimating that the thermo-mechanical pulp industry in B.C. should be able to save roughly $17.5 million annually in electricity costs,” Bennett said in an interview with The Vancouver Sun. “Here’s the kicker: By incentivizing this conservation by these big users, BC Hydro is going to avoid spending $265 million to acquire new sources of power generation.”

Bennett announced last November, a 10-year plan for rate increases at BC Hydro to help pay to upgrade and modernize the province’s aging power transmission systems. That plan included a 28 percent rate increase over the next five years, staring with nine percent this year. At the time, Bennett acknowledged the move would raise monthly power bills for industrial users by an average of $139,000, and promised to work with the sector to offset costs. Some industrial users and businesses complained that rising Hydro rates were hurting their competitiveness.

B.C.’s industrial sector accounts for approximately 32 percent of BC Hydro power usage, mostly from sawmills, pulp and paper mills, mines and chemical plants.

Catalyst, which was recovering from bankruptcy protection, warned it had already absorbed a 27 percent rate hike over the last three years and the new increases would raise its $124 million annual Hydro bill to $150 million within the first two years. The company has 1,550 workers. The new government program would see Catalyst eligible for up to $19 million in funding at its Powell River plant, $10 million at Port Alberni and $16 million at Crofton, near Duncan on Vancouver Island. The companies must submit project applications to BC Hydro by the fall of 2015 for approval, said Bennett.

The conservation fund is a better idea than just lowering the Hydro rate for industrial users, said Bennett. “These companies recognize the principle that if it’s a straight subsidy you have no incentive to invest in conservation-creating equipment,” he said.

The $100 million, to be spent over three years, will come out of $1.6 billion 10-year fund the government has earmarked for Power Smart conservation programs, said Bennett. If successful, the conservation program would help BC Hydro reduce the 40 per cent project growth in demand for electricity over the next 20 years, and save $265 million in power it would have had to otherwise generate, said Bennett.

“This is not just a subsidy to big business, it’s a way to help keep these companies operating … to preserve these thousands of jobs that exist within these companies,” he said. “But it’s also a way for BC Hydro to not have to spend $265 million to generate electricity that otherwise would be necessary.”