Site C running over budget: BCUC
Regulator’s 299-page report questions dam timeline, Hydro’s forecasts
Premier John Horgan’s NDP government faces a tough political decision over the future of B.C.’s largest construction project, despite a report Wednesday that said the Site C dam is over budget, behind schedule and poses a growing financial risk to taxpayers.
The B.C. Utilities Commission released its final study into Site C, which outlines a series of problems, cost overruns and missed opportunities to pursue alternative clean power, in what proved to be a 299-page rebuke of former Liberal premier Christy Clark’s signature hydroelectric project.
“The BCUC is not persuaded that the Site C project will remain on schedule for a November 2024 inservice date,” says the report, released Wednesday morning. “The panel also finds that the project is not within the proposed budget of $8.335 billion.
“Currently, completion costs may be in excess of $10 billion.”
The report provided ample ammunition to the NDP government, which campaigned on putting Site C to an independent review to see whether it was truly necessary or an expensive boondoggle.
But Energy Minister Michelle Mungall urged caution on Wednesday when asked if the government was preparing to cancel the project and lay off more than 2,000 workers just before Christmas.
“We appreciate this is tough on everyone. This is not an easy decision, this is a very serious decision and we are taking it very seriously,” she said. “That’s why we want to have a decision by the end of this year.”
The Liberals called on the NDP to not throw away billions in work already done for a project that would provide energy for 100 years. But Horgan and his cabinet are under significant pressure from the environmental wing of the NDP and the government’s B.C. Green partners, whose votes keep the NDP in power and who want Site C killed immediately.
“This should be viewed as the final nail in the coffin of Site C,” said Green Leader Andrew Weaver, who has previously warned the NDP it would face fierce blowback if it allows the dam to proceed.
“Ultimately, it is a political decision. We criticized the B.C. NDP for simply wanting to delay. They have a very difficult decision to make. The decision in my view is clear. This provides the evidence needed to say the Liberals were fiscally reckless to put this project forward.”
In August, the new NDP government asked the utilities commission to examine the cost of continuing, pausing or cancelling Site C. Wednesday’s report concluded it would be more expensive to pause the project ($3.6 billion in additional costs) than cancel it ($1.8 billion in additional costs). Since construction started in 2015, B.C. Hydro has spent $2.1 billion.
“The suspension-and-restart scenario adds at least an estimated $3.6 billion to final costs and is by far the most expensive of the three scenarios,” the report says. “In addition, the panel considers it the most risky scenario.”
In response, Mungall said the government would no longer consider pausing the project, and the cabinet would confine itself to deciding whether to cancel or continue construction.
However, simply pushing through to complete the dam presents risks.
“The total cost at completion may be in excess of $10 billion as there are significant risks remaining, which could lead to further budget overruns,” the report says. An analysis by consulting firm Deloitte warned cost overruns could lead to a final bill of $12.5 billion.
The independent regulator also accused B.C. Hydro of having “excessively optimistic” energy demand forecasts, and not giving enough weight to viable alternatives to the dam.
“The panel believes increasingly viable alternative energy sources such as wind, geothermal and industrial curtailment could provide similar benefits to ratepayers as the Site C project with an equal or lower unit energy cost,” the report says.
However, even those alternatives come with risk. “Estimates of the amount of load curtailment available could be overly optimistic,” the report says. “The cost of wind may be higher than estimated. There may actually be no geothermal potential. In any of these cases, Site C would have a lower cost to ratepayers, provided it avoided the risks it faces.”
Commission chairman David Morton said the panel’s alternative energy comparison includes optional time-of-use pricing, in which customers would pay more for electricity during peak periods. “We’re far more aggressive in our demand-side management assumptions and I think that’s justifiable because many jurisdictions in North America are much more aggressive than B.C. Hydro,” Morton said.
Neither the NDP nor Liberals have committed to time-of-use pricing, perhaps fearing a backlash from ratepayers who could face a surcharge for using their electric oven or heating sources during peak dinner and evening periods.
The previous Liberal government started construction on the dam, southwest of Fort St. John, in 2015. The Liberals had exempted Site C from any review by the BCUC.
The NDP has long argued the project’s power is unnecessary and too expensive when compared to alternative sources like wind, solar and geothermal.
Reaction to the report Wednesday was mixed.
The B.C. Chamber of Commerce said the economic impact of Site C is important, and the project still has merit.
The Sierra Club of B.C. said the case for Site C was blown apart by the BCUC report.
Robert McCullough, an energy analyst hired by the Peace Valley Landowner Association, called the BCUC report “courageous” for its repudiation of Hydro’s figures and assumptions.
“Virtually every point that they made has been wildly thrown out,” he said. “There’s a pretty strong mandate for following the economic logic, and the economic logic is, through no one’s fault, this old project has been overtaken by events.”
After years of insisting the project was on time and on budget, B.C. Hydro in October admitted the project had missed a key 2019 river diversion deadline, was an estimated $610 million over budget, and was behind schedule. Hydro blamed engineering and geotechnical problems, including two tension cracks on river banks. One of the partners in the main civil works contract also filed for bankruptcy.
A report by Deloitte LLP said Hydro was over-budget on its main civil works contract from the moment work began and had eaten into 77 per cent of its contingency budget on that contract two years into its eight-year schedule.
This should be viewed as the final nail in the coffin of Site C. … This provides the evidence needed to say the Liberals were fiscally reckless to put this project forward.