A report released by B.C.'s provincial government says the previous government pressured BC Hydro into signing long-term contracts with independent power producers (IPPs) that will cost customers more than $16 billion over 20 years.

The report concludes that BC Hydro "bought too much energy and energy with the wrong profile ... paid too much for the energy it bought, and ... undertook these actions at the direction of Government."

Prepared by former B.C. Treasury Board director Ken Davidson and commissioned by the Minister of Energy, Mines and Petroleum Resources Michelle Mungall, the report says the contracts will cost the average residential BC Hydro customer about $4,000 over the next 20 years, or about $200 per year.

In a statement, Mungall said the contracts have already cost customers $3.2 billion.

"A small number of well-placed independent power producers benefited, and customers were stuck with a 40-year payment plan," she wrote.

Forced to buy from independent producers

Davidson wrote that BC Hydro began purchasing small amounts of power from IPPs in the mid-1980s, and that the B.C. Liberal's policy that the utility be self-sufficient led the utility to buy power that it did not need.

The report said the power BC Hydro was forced to purchase from IPPs was, for the most part, the wrong type of power.

For example, it says that of 105 contracts with IPPs since 2002, 71 were from run-of-river projects, most of which can only be relied on during the spring.

It said BC Hydro does not need more power during that time of the year, when the demand is low, and there is an abundance of water available in BC Hydro's reservoirs.

The report makes a number of recommendations, including ensuring prices reflect real market value, restoring the oversight of the BC Utilities Commission, and improving transparency on the cost of energy procurement.

It also recommends eliminating BC Hydro's self-sufficiency mandate.