Reject Site C as a Fiscal Nightmare for Taxpayers, Says Former BC Hydro Head

The B.C. government has only one responsible course of action to take on the controversial Site C dam, and that is to cancel the project, remediate the site and pursue cheaper and more flexible energy sources to meet long-term demand, according the former head of BC Hydro.

In a highly critical report submitted to the British Columbia Utilities Commission’s inquiry into BC Hydro’s Site C project, Marc Eliesen, former president and CEO of the Crown corporation, lambasted the former BC Liberal government for weakening regulatory oversight and failing to provide full financial disclosure on the economics of mega-dams.

Eliesen, who also chaired Manitoba Hydro and served as CEO of Ontario Hydro, does not mince words in the report.

“The final investment decision made in late 2014 to proceed with Site C was a reckless and irresponsible decision made by the former Government of British Columbia and the Board of Directors of BC Hydro. Both the former government and BC Hydro’s Board abdicated their fiduciary responsibility to the ratepayers and taxpayers of this province.

“BC Hydro ratepayers do not need and cannot afford the electricity capacity associated with Site C even if the project is completed on time and on budget,” added Eliesen in his report.

The new NDP government recently asked the utilities commission to determine how BC Hydro customers would be affected three options: completing the troubled $9-billion mega-project; suspending it until 2024; or terminate construction.

The utilities commission is under pressure to gather key financial data and complete a final report with recommendations by November.

Ever since the Clark government approved the dam without a proper economic review by the commission, the project has been mired in controversy.

Indigenous and agricultural groups have battled the government in the courts, while initial construction has encountered unexpected geotechnical problems such as a 400-metre tension crack on the north bank of the proposed dam. It suddenly appeared during construction of the contractors’ haul road.

Eliesen, who has direct experience with cost over-runs on energy projects in B.C., Manitoba and Ontario, notes that the cost of Site C has kept rising.

Since the project was first approved in 2014, its budget has increased from $7.9 billion to $8.8 billion. Eliesen suspects that the project’s costs could now increase from $9 billion to $12 billion — or more than 30 per cent — due to poor planning and lack of management experience with large hydro projects.

Government advocates of another troubled energy project, the Muskrat Falls generating station in Newfoundland and Labrador, originally estimated that the project would cost $7.4 billion.

Today, the current cost estimate exceeds $12.7 billion — an increase of 72 per cent. It will also likely increase methylmercury contamination tenfold in waterways that sustain aboriginal communities.

In his report, Eliesen cites a 2014 study on mega-dams by Oxford University researchers that shows that “large hydro projects built in 65 countries were, on average, 90 per cent higher (in real — inflation adjusted — dollars) than forecast at the time the project was approved.”

Eliesen also reminds the commission that the BC Hydro board concluded in 1989 “that Site C should not be advanced for reasons related to First Nations’ rights, economic, social and environmental factors.”

To justify the project the B.C. government subsidized the methane extraction industry with three power transmission lines and then invented non-existent markets such the liquefied natural gas industry or Alberta as potential purchasers of surplus electricity, writes Eliesen.

“Subsidization to drive demand increases the burden on other Hydro ratepayers, particularly residential users,” added the report. Meanwhile electricity demand remains flat in the province and even if demand increased there are much more affordable options than Site C, such as conservation measures and recommissioning the Burrard Thermal Station, a generating plant mothballed by the Clark government.

Eliesen also chastised the previous government for mismanaging the finances of BC Hydro, which “is deemed to have the worst financial record among all provincial utilities in Canada.”

“The financial security of BC Hydro is at risk and as a consequence so are the finances of the province at risk,” added Eliesen in an interview.

BC Hydro’s debt level has catapulted from $8.1 billion in 2008 to $20.6 billion for the 2017-2018 fiscal year.

Mismanagement of the utility has been so pervasive that electrical rates will have to go up in the future, said Eliesen. “But if we build Site C those increases will be catastrophic.”

When rates go up, not only families suffer but businesses become less competitive and that affects jobs across the province, he said.