B.C. Hydro's largest transmission system upgrade in three decades, a $725-million project to bring new power capacity to Metro Vancouver, is behind schedule and the cost of the "fixed price" contract is in dispute.
The setback comes at an inauspicious time for the Crown corporation: The B.C. cabinet is set to decide in the next few weeks whether to approve a $7.9-billion project, the Site C dam, despite concerns from a federal environmental review panel that the costs have not been thoroughly reviewed.
The Interior-Lower Mainland transmission line was due to be in service by January, which would allow B.C. Hydro to finally shut down the gas-fired Burrard thermal power plant. The plant is rarely fired up now, but costs $14-million a year to maintain. Now, the gas plant will have to be kept on line throughout 2015.
According to B.C. Hydro, the transmission project should be in service by the end of next year. The 247-kilometre, 500-kilovolt line runs through "some of the most challenging terrain in the country," an official said, which contributed to delays in construction.
Energy Minister Bill Bennett says those complications have in turn led to demands for more money from the contractor. "My advice is, the price is set in the contract and that's what it is going to be. But in the commercial world where these people exist, sometimes parties disagree with their interpretation of the contract," he said in an interview.
Just how much more money the contractor, Flatiron-Graham, wants is unclear. B.C. Hydro says the details of the contract are confidential, and represent just a portion of the total $725-million budget.
When the province announced the transmission-line project in 2011, Blair Brandon of Flatiron-Graham said in a news release, "we are confident working together with B.C. Hydro will maximize the ILM Project's success and ensure the project is on time and within budget."
Mr. Brandon did not return calls this week.
The contractors were responsible for designing and building the transmission line, but Hydro has had to deal with 60 First Nations along the route as well as numerous private landowners.
A Freedom of Information request for the quarterly financial reports on the project revealed no cost details – all references to risk management, financial performance and cost calculations were blanked out.
This is the second large transmission project undertaken by B.C. Hydro on a fixed-price contract in recent years. The budget for the northwest transmission line has climbed from $395-million to $746-million. The final figure is expected in the next few months when the last elements are completed, and B.C. Hydro says the final price tag will be less.
Mr. Bennett said he learned of the cost overrun of the northwest project shortly after taking over the energy portfolio, and it was "like a wet fish in the face." He said the cost estimate "was not done on the back of a napkin, but it didn't include the rigorous scrutiny that sort of project should have." However he is now convinced that Hydro did get good value for money, compared with similar projects in Alberta.
The Energy Minister maintains that the Crown corporation has done a better job with the Site C project budget, and he says he is now confident the dam can be built for $7.9-billion.
Energy critic Adrian Dix doesn't share the minister's level of confidence."What Mr. Bennett says about Site C is probably incorrect as well," Mr. Dix said.
Last May, the joint environmental review panel on Site C concluded it cannot measure the true cost of the project and recommended further independent review on B.C. Hydro's cost estimates, energy-demand forecasts and conservation plan. However, the project has been granted environmental approval and the B.C. government is expected to make a final investment decision in November without further review.
"There is a dramatic lack of transparency around this Crown corporation," Mr. Dix said. "The government isn't being truthful about the long-term costs of Site C and that is why it doesn't want its projects assessed by the regulator, the B.C. Utilities Commission."