B.C. Hydro admits to Site C problems

Problems at construction site, failure to stay on schedule fuel $610M overrun

After stubbornly defending the Site C budget and construction schedule for much of the year, B.C. Hydro threw in the towel this week via a confessional letter to the B.C. Utilities Commission.

“It has been very important to us in this process to be forthcoming with timely and accurate information,” wrote B.C. Hydro CEO Chris O’Riley in a letter made public Thursday.

“Today’s filing provides an opportunity for us to share new information with the commission and the public.”

There followed a discouraging update on the progress of the main construction contract for the hydroelectric dam at Site C on the Peace River.

“We have now determined that we will not be able to meet the current timeline for river diversion in 2019,” O’Riley disclosed. “We estimate that this development in the project is expected to increase its cost by 7.3 per cent or $610 million, for a total forecast project cost of $8.945 billion.”

So much for on time and on budget? Not quite, according to O’Riley.

He insisted there was enough slack in the schedule for the 2024 completion target to be met — at least hypothetically. But no way could the forecast $610-million overrun be covered, even if B.C. Hydro were allowed to tap the $440-million reserve set aside by the previous B.C. Liberal government. The full significance of those admissions was underscored by the signature at the bottom of the letter. In B.C. Hydro’s other submissions to the commission’s cabinet-ordered review, the sign-off was handled by chief regulatory officer Fred James.

This time the CEO himself put his name to the letter and appropriately so. O’Riley was appointed to the top spot in midsummer, following the NDP-engineered ouster of previous CEO Jessica McDonald. Before that, he was deputy CEO with responsibility for B.C. Hydro’s infrastructure program.

He knows as much about Site C as anyone, including why things have gone sideways on the main civil engineering works contract.

The contract, over budget and behind schedule from the outset, has been eating through its share of the project contingency fund at an alarming rate.

But just as those details were being made public last week via an uncensored copy of a report by Deloitte LLP consultants, senior B.C. Hydro executives were meeting with the main civil works contractor.

The Sept. 27 showdown focused on a series of problems, mainly arising from two tension cracks on the left bank of the river.

The first crack opened up in February, forcing a 10-week delay in construction. Barely was that contained when a second crack opened up on the same bank in early May.

“Work continued in the area until July, 2017, when it was stopped by wet weather,” according to B.C. Hydro’s followup to the O’Riley letter.

“B.C. Hydro and the contractor worked collaboratively to develop a solution to remediate the second tension crack and the contractor commenced these remediation efforts, but production through August and September was below plan.”

B.C. Hydro and the contractor then tried to recover lost time via a joint review of the construction schedule. But the effort failed to reach a consensus.

“The review identified options to maintain river diversion by 2019, but the parties were unable to reach agreement on the schedule, options and allocation of cost.”

They also engaged in a round of finger-pointing. “The parties are in dispute over the causes of the delays,” according to B.C. Hydro. The statement is followed by a blacked-out section that presumably sets out the details.

Thanks to the earlier unredacted report, we know that as of late August, the contractor was pressing B.C. Hydro for a $327-million top-up and a 435-day delay in the construction schedule. B.C. Hydro rejected both demands. Apparently the standoff continues.

Still the parties did agree on one thing by the end of the Sept 27 meeting: “That river diversion is not achievable in 2019 and would be postponed until 2020.”

The missed target gave rise to another confessional from O’Riley: “Due to the project’s complexity, we expect to continue to face risks in other areas, including our second-largest procurement — the generating station and spillway.”

The yet-to-be awarded GSS contract is budgeted at $1.225 billion. O’Riley’s hint at a possible overrun may draw on a reading of the bids, which were submitted earlier this year.

Another risk cited by the B.C. Hydro CEO involves the pending contract to relocate provincial Highway 29 from its current routing, which will be submerged behind the flood waters of the completed dam.

The New Democrats have put off awarding the contract for the relocation out of concern for a few folks whose homes are in the path of the bulldozers. B.C. Hydro now says the rerouting may need to be redesigned because of “geotechnical conditions.”

The B.C. Liberals seized on the delay to the highway contract to blame the New Democrats Thursday for the $610-million overrun and one-year delay in diverting the river.

The highways contract is indeed at risk, cost-wise. But it is much smaller and unconnected to the troubles on the main civil works contract, according to B.C. Hydro’s CEO.

The delay and overrun disclosed this week were caused by tension cracks and other problems on the construction site, plus a contractor who keeps falling behind schedule for whatever reasons.

All problems that date back to the B.C. Liberal time in office, much as they try to shift the blame anywhere else.

Due to the project’s complexity, we expect to continue to face risks in other areas, including ... the generating station and spillway.