BC Hydro says pandemic hits Site C project, expect delays, cost increases

British Columbia's massive Site C hydroelectric dam project has been hit hard by the COVID-19 pandemic and now faces construction delays and rising costs. The Site C Dam location is seen along the Peace River in Fort St. John, B.C., Tuesday, April 18, 2017. THE CANADIAN PRESS/Jonathan Hayward

Whoever forms the next provincial government will have to deal with all the problems associated with the dam at Site C on the Peace River.

The long history of questionable management by both BC Hydro and the civil servants in the Ministry of Energy, Mines and Petroleum resources has culminated in a major political challenge.

Let’s take BC Hydro first.

For more than three decades, they have consistently over-estimated the future growth in demand for electricity. Moreover, they have used those estimates to justify investment in Site C. The existing capacity of electricity generation in BC is about 71 gigawatt hours — not counting the 5 gigawatt hours we are entitled to claim under the Columbia River treaty — and current demand is about 51 gigawatt hours. The surplus of about 20 gigawatt hours is sold on the spot market at below the cost of generation, mainly to the U.S; so, BC Hydro and its ratepayers are, in effect, subsidizing industry south of the border.

The extended period of determined over-estimation should have led to some firings, but these never came about.

Were that not enough, the same wizards at Hydro decided to hedge against future rises in interest rates, assuming that they would rise. To date, that strategy has cost more than $1 billion.

Guess who gets to cover this loss? You see that person every day in your mirror. Did anybody get canned for this blunder? Nope.

The board of BC Hydro is still packed mainly with faithful Liberals who firmly supported hydroelectric development even in the face of existing surplus production. While the NDP government changed the chairperson, the rest just carry on. Why?

Were the situation at BC Hydro itself not bad enough, the staff of the Ministry responsible for BC Hydro has also been filled with ardent believers in Site C. It is the biggest public works project in provincial history and is already several billion dollars over budget and likely to cost $10 billion more to finish.

This sad litany of human failings is still not the whole story; it appears that the geological underpinnings of the dam at Site C are now discovered to be less than ideal.

What the new government to be elected later this month needs to do is hire experts from outside the province – that is, not dependent for their livelihoods on contracts from BC Hydro – to undertake a through review of the entire project, including actions by BC Hydro and the Ministry of Energy Mines and Petroleum Resources. The experts should then advise whether the project should be closed down, at least until demand justifies its completion. They should also opine on what, if any, changes in personnel are required. Once their report is finished, the government must take the recommended actions, however unpalatable, in order to avoid a possible financial disaster to BC Hydro and BC ratepayers. Rating agencies consider BC Hydro’s debt as a liability of the Province.

How did we get here?

BC Hydro has for decades carefully avoided looking at alternative means of generating needed power. They argued, for example, that there is no data on thermal sites in B.C. (What about the 1,000 plus drilling sites in the northeast alone?)

Former BC Liberal Premiers Gordon Campbell and Christy Clark both loved Site C and the attention it brought, but they apparently never questioned the weak business case that underpinned the entire project. Given the significant cost of completing the project and the fact that, if completed now, it will likely lose money for at least 20 years, the ratepayers of B.C. might well ask why are we sending good money after bad.

Surely there are alternatives that could yield a greater return than needless increases in power generation.

David Bond is a retired bank economist living in Kelowna.