OVERRUNS LOOM LARGE OVER SITE C
BC Hydro: Cost overruns blamed on design changes, sub-standard steel, First Nations and let’s not forget about those blasted mountains
BC Hydro has exceeded the budgets on four major transmission line projects in recent years, with the combined overruns totalling a halfbillion dollars.
The biggest overrun was the Northwest Transmission Line, constructed to supply electricity to mines and other developments in the northwest corner of the province.
Budgeted at $395 million when Premier Christy Clark took office four years ago, the project had multiple upward revisions, the largest approved by the BC Hydro board just days after the last provincial election.
“Disappointing,” Finance Minister Mike de Jong called it.
Which didn’t begin to capture the now-they-tell-us outrage from the New Democrats, rightly suspecting Hydro of holding back on the bad news until the votes were counted.
The Northwest line is now complete, with the finance ministry reporting the finished price at $716 million (“trailing costs remain”), down a bit from the high-water-mark budget of $746 million reported just after the election.
Only in the realm of government finance would the lower finished cost be characterized as coming in “under budget.” More accurate to say final cost was 80 per cent higher than the first budget.
“This is not the first surprise that I’ve had from BC Hydro,” then newlyminted Energy Minister Bill Bennett said when the Northwest overrun was first reported, “and I am pretty sure it is not going to be the last one.” Which proved to be prophetic. Hydro’s move into the northwest included a spur line, the Iskut extension. Budgeted at $180 million as recently as last year, it is now reported complete (except for more of those pesky trailing costs) at $209 million. Then there’s the project the New Democrats have highlighted in the legislature this week, the Interior-Lower Mainland transmission line, stretching from Merritt to Coquitlam.
Four years ago, it was listed as a $600-million undertaking. Lately the “anticipated total cost” is said to be $725 million, though that comes with a mighty big asterisk, judging from the back and forth this week between Energy Minister Bennett and Opposition critic Adrian Dix.
Owing to myriad holdups in construction, Hydro took back a key section of the project from the chosen contractor and is now embroiled in arbitration. Challenged by Dix for the final budget figure, Bennett went hypothetical: “At the current time there would be no reason for me to say that the project is anything but on budget. That’s what I know today.”
As of 4 p.m. Monday, which is when he said it.
Rounding out the big four transmission project overruns is the Dawson Creek/Chetwynd area line in the Northeast. Two years ago, Liberals reported the “total capital cost” as $255 million. Today, it is $296 million.
So from a combined $1.43 billion, the budgets for all four projects have grown to $1.946 billion. Collective overrun, $516 million or 36 per cent.
In accounting for these budget-busting exercises, Bennett has offered various justifications. Construction delays. Design changes. Consultations with First Nations. The cost of recruiting skilled workers.
My favourite, relayed to Bennett by Hydro when the news first broke of the overrun on the Northwest Transmission Line: “They’ve done 10 times more blasting than they expected to do and the costs have been higher.”
Blasting in B.C. — who knew? Where did all these damn mountains come from?
Dix contributed a laugh line this week when noting how the troubles on the Interior-Lower Mainland line included sub-standard steel that contributed to twisting and buckling on the transmission towers.
“The minister is less managing the project than participating in an episode of Fawlty Towers,” he quipped, riffing on the British comedy series of the same name.
Still, Bennett assured the house that the overall record was favourable.
“Hydro has 661 transmission and distribution projects that they have delivered over a five-year period. The total budget was $3.3 billion. On those, they have been about four per cent, almost five per cent, under budget.”
Asked about the troubles on the Interior-Lower Mainland line Wednesday, Premier Christy Clark said “they need to get the project back on track. The minister is very concerned about it and I know that’s what he’s doing right now.
“Overall BC Hydro has a better record than the NDP would lead you to believe when it comes to coming in on-time and on-budget,” she insisted, while granting “this project isn’t one of them.”
Still, the overruns on the four transmission projects loom large in considering whether Hydro can stay within the budget on the biggest-ticket project of all — the $8.8-billion hydroelectric dam the Liberals expect to begin building this summer at Site C on the Peace River.
Not to worry, Clark maintained, touting new hydro chief executive officer Jessica McDonald and her management team.
“I think that they are absolutely up to the task at the really big projects they’ve got ahead of them. Site C is the biggest project they’ve ever had — the most expensive project — and I would not have approved that to go ahead if I wasn’t absolutely confident that this CEO and this management board is up to the task of keeping these costs down.”
For now I would just note that in the few months after McDonald assumed the helm at Hydro last August, the Site C budget went up, not down, and by almost $1 billion.