Canadian Manufacturing

Decision makers, critics set sights on Site C project price tag

BC Hydro estimates it will cost $7.9 billion to build dam on Peace River; critics say price tag sure to grow

October 20, 2014  by Dene Moore, The Canadian Press

VANCOUVER—With provincial and federal environmental certificates now in hand, BC Hydro faces a much tougher hurdle for its massive Site C hydroelectric project: The bottom line.

The Crown agency estimates it will cost $7.9 billion to build the dam on the Peace River in northeastern British Columbia, making it the largest provincial public expenditure in the next two decades and the second-largest in the country right now.

It would take a decade to build and would be expected to power the province for a century.

“Site C is not an ordinary project,” a joint environmental assessment panel said in its report.


The Canadian Environmental Assessment Agency (CEAA) report said there is little doubt about BC Hydro’s competence to build and operate the project efficiently, but it fell short of endorsing the Crown agency’s estimates.

“The panel cannot conclude on the likely accuracy of project cost estimates because it does not have the information, time, or resources,” the report said.

The panel recommended that if the project proceeds, it should be referred to the B.C. Utilities Commission (BCUC) for a detailed examination.

But Energy Minister Bill Bennett has been steadfast.

“You have to ask yourself what the BCUC would do if this suddenly landed in their lap? I think probably they would go out and do exactly what BC Hydro has already done and duplicate the already considerable cost that’s been involved in looking at the costs of Site C and make sure they’re accurate,” Bennett said last week.

An independent engineering group, an independent construction management group and KPMG have all reviewed the estimates at BC Hydro’s behest, he said.

And there is an 18 per cent contingency built into $3.8 billion for construction costs, which would cover any overruns, Bennett added.

“I believe that BC Hydro has brought a sufficient number and quality of experts into this business of assessing the costs that we have, I think, a reliable number at this time,” he said.

Utilities commission or not, someone needs to check the math, said Jordan Bateman, B.C. director of the Canadian Taxpayers Federation (CTF).

“This is such a massive investment, you better make sure that these numbers are solid and that the long-term interests are protected,” he said, adding that members are split right down the middle on the project.

BC Hydro estimates the province’s electricity needs will grow 20 to 40 per cent in the next 20 years, and that need cannot be met through conservation alone.

Additional capacity is necessary.

But the Crown utility’s most recent record is cold comfort for project critics.

When a transmission line into the northwest corner of the province was announced in 2009, the original cost estimate was $404 million.

The final price tag for the Northwest Transmission Line (NTL) was $736 million.

Based on average cost overruns for recent energy projects throughout North America, the dam could cost as much as $10 billion, said Adrian Dix, energy critic for the Opposition New Democrats.

The provincial government’s utility bookkeeping should add to concerns, he suggested.

Three years ago the provincial auditor general rapped the Liberals for funnelling billions of dollars of BC Hydro expenses into deferral accounts.

By 2015, those deferrals were expected to total $5 billion.

BC Hydro has a total debt of almost $17 billion.

“The mismanagement of the last 10 years has put (BC) Hydro in a poor position to undertake a big initiative such as this,” Dix said.

Green Party MLA Andrew Weaver said that while the cost to the environment, agriculture and First Nations are huge concerns, the economics of the project are the major issue.

“It does not make sense in today’s economy to spend $10 billion on a legacy dam that we might need one day—maybe a decade, maybe 20 years from now. If we need energy, we can get it so much cheaper, without incurring debt,” said the Nobel-winning climate scientist.

Let industry take the risk, he said.

Current provincial debt is $62 billion.

“This is a huge decision that will have implications for the people of B.C., who own BC Hydro, and rate-payers for generations to come,” Dix said.

Bennett said a final investment decision will be made by cabinet by the end of the year.