‘Stop the Losses’: Former BC Hydro CEO Calls for Cancellation of Site C Dam

Site C dam construction

The decision to proceed with the Site C dam was “reckless and irresponsible” and continuing the project will result in a “series of devastating high electricity rate increases” that will lead to job losses and business failures, the former President and CEO of BC Hydro has told the B.C. Utilities Commission in a formal submission.

Marc Eliesen, who was at the helm of BC Hydro from 1992 to 1994, outlined why he believes the only financially responsible course of action is to cancel the $8.8 billion project and remediate the Peace River site in order to minimize Site C’s negative impact on BC Hydro customers and taxpayers.

Both the former government and BC Hydro’s Board abdicated their fiduciary responsibility to the rate payers and tax payers of this province,” Eliesen said in his 22-page submission to the BCUC, which is conducting a fast-tracked review of Site C’s finances and construction schedule.

There never was a business case for the start-up of construction of Site C, and there is not a business case to support its continuation or postponement.”

To justify the Site C dam, Eliesen said BC Hydro and the former B.C. government engaged in questionable activities to drive demand, “inventing industries” like LNG, “inventing customers” in Alberta and “inventing international demand” from the United States.

In the current market environment, characterized by great uncertainty and volatility, building a costly hydro station that will take many years to complete is not what BC Hydro should be doing.”

Eliesen said BC Hydro customers “do not need and cannot afford” the electricity that would be produced by Site C, even if the project is completed on time and on budget.

But the notion that Site C will be completed on time and on budget is “illusionary,” stated Eliesen, who is also the former Chair and CEO of Ontario Hydro, the former Chair of Manitoba Hydro, and the former Chair and CEO of the Manitoba Energy Authority.

The likely scenario is that costs will escalate significantly, as has been the case with the other two large hydro dams under construction in Canada, the Muskrat Falls dam in Labrador and the Keeyask dam in Manitoba, he pointed out.

'Staggering Construction Overruns'

It is the author’s considered opinion, based on many years of experience at a number of Canadian utilities — including BC Hydro — that the cost of Site C has a high probability of increasing from $9 billion to $12 billion — by more than 30 percent.”

Site C’s price tag has already soared from $6.6 billion in 2010 to $7.9 billion in 2011 to $8.5 billion in 2014 and $8.8 billion in 2016 — an increase of 33 percent.

Major hydro infrastructure projects experience “staggering construction overruns and implementation delays” worldwide, warned Eliesen, whose list of credentials includes stints as Ontario’s Deputy Minister of Energy and Manitoba’s Deputy Minister of Energy and Mines.

Muskrat Falls’ cost is now pegged at $12.7 billion — it jumped by another $1 billion last month — and it is anticipated that this “boondoggle” project on Labrador’s Churchill River will tack an extra $1,800 on to the hydro bills of every household in that province.

While BC Hydro has not constructed a major generating station since the early 1980s, Eliesen detailed the cost overruns on four BC Hydro transmission line projects.

The Northwest Transmission Line, whose final price tag was $716 million instead of the budgeted $395 million, was 81 percent over budget.

The Interior to Lower Mainland Transmission Project — built to deliver new generating capacity from upgrades at the Revelstoke and Mica dams — was 24 percent over budget.

The Dawson Creek/Chetwynd Line in B.C.’s northeast was 16 percent over budget and the Iskut Extension Line — constructed mainly to bring electricity to Imperial Metal’s Red Chris mine — was 61 percent over budget.

B.C. ratepayers do not need a project that would impose an intolerable and unacceptable cost burden for many years to come,” stated Eliesen. “The B.C. economy does not need the negative macroeconomic consequences of higher electricity rates. It is time to stop the losses from this ill-conceived project.”

Petrowest Receivership 'Disturbing Development'

The announcement this week that Calgary-based Petrowest Corporation has gone into receivership is a “disturbing development” that will also have negative implications for Site C’s cost and construction schedule, Eliesen said.

Petrowest was one of three corporations that formed the Peace River Hydro Partnership, which is responsible for building river diversion tunnels and constructing the 60-metre high Site C dam as part of a $1.75 billion civil works contract. The consortium includes ACCIONA Infrastructure Canada Inc., a wholly owned subsidiary of a Spanish company, and Korean-owned Samsung C&T Canada Ltd.

The receivership notice followed close on the heels of an announcement by Petrowest saying that it had been terminated from the Peace River Partnership for alleged insolvency.

The media were reporting that Petrowest was on shaky financial ground only a month after Petrowest and the other consortium partners were awarded the Site C contract in 2015, Eliesen pointed out.

How was Petrowest ‘qualified’ by BC Hydro?” asked Eliesen, who called for the company’s financial status to be examined by the BCUC and factored into its deliberations about Site C.

Fulsome Review Would Take 12 to 18 Months

In his August 16 submission, one of a dozen that the BCUC received in the first few days of its Site C inquiry, Eliesen pointed out that under “normal due process” a fulsome review of Site C’s costs and construction schedule would take 12 to 18 months to complete. The BCUC has been given until September 20 to issue a preliminary report and until November 1 to reach its final conclusions.

The Commission does not have the historical record of due diligence that would normally accompany a public project of this magnitude to draw on and assist it in responding to the government’s request,” flagged the former BC Hydro CEO, saying that the BCUC should have been permitted to review Site C prior to the project’s approval in December 2014.

Eliesen pointed out that the BC Hydro board turned down the project in November 1993, when he was CEO, for reasons related to First Nations’ rights and also because of economic, social and environmental factors. That followed the project’s rejection one decade earlier by the BCUC on the grounds that BC Hydro had failed to demonstrate that Site C’s energy was needed or that it was the preferred project for B.C. 

'Systemic Bias' in BC Hydro Load Forecasts

Echoing statements made by the Commercial Energy Consumers Association of B.C. — which says it has compelling evidence that BC Hydro has over forecasted electricity demand for the past 50 years — Eliesen also said there is a “systemic bias” in BC Hydro’s load forecasts that exaggerates demand and does not take into account drops in demand related to higher hydro rates.

If additional electricity is required, “alternatives are available that are much more responsive to market conditions and much more cost effective than Site C,” he stated.

Eliesen pointed out that the vast majority of people with internal utility expertise in hydro project management have retired or no longer work for the Crown corporation.

Consequently there is a lack of professional and management expertise at BC Hydro with respect to large scale construction projects.”

The option to moth-ball Site C is not desirable for a variety of reasons, including the lack of future export markets for Site C’s power and the high cost of new transmission lines, explained Eliesen, who indicated his willingness to provide further information to the BCUC or to discuss the findings of his report.

It is not fair to Peace Valley residents and First Nations to impose on them a state of uncertainty for the next six years.”

Main Image: Before photo by Don Hoffmann, after photo by Vicky Husband.

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