Skip to main content

British Columbia's former Liberal government made a political decision in moving ahead with the $10-billion (and counting) Site C hydroelectric project on the Peace River without first seeking an independent cost-benefit analysis from the province's utilities regulator.

Now that the British Columbia Utilities Commission (BCUC) has finally delivered that analysis – albeit more than two years and $2-billion in sunk costs later – politics will again reign supreme as Premier John Horgan's newish New Democratic government weighs cancelling the megaproject.

That's because the 187-page report the BCUC delivered to the government on Wednesday makes it clear the economic case for cancelling Site C is no longer a slam dunk. It would cost British Columbians at least another $1.8-billion to end the project on top of the cost of procuring the future electricity supply that would have partially been provided by the 1,100 megawatts Site C would generate.

BC Hydro ratepayers would have been spared this no-win situation had the previous government made the right call in the first place. But the short-term political allure of a hydro megaproject took precedence over the interests of future generations of British Columbians.

This is a recurring pattern among Canada's Big Hydro monopolies, which live to build. Site C does not threaten to cripple British Columbia's finances the way the $12.7-billion (at last count) Muskrat Falls project will mortgage Newfoundlanders' future for generations to come. But BC Hydro's fast-growing debt load does threaten to cost B.C. its stellar credit rating. And if the B.C. government has to subsidize electricity rates because of Site C, to take the bite of rising hydro bills, then the burden will fall on all B.C. taxpayers.

The BCUC report makes it clear BC Hydro relied on overoptimistic assumptions to make the economic case for Site C. One by one, the utilities commission rejected BC Hydro's projections for future electricity demand, interest rates, export prices, final costs and the construction schedule. The commission figures completion costs are currently in excess of $10-billion, instead of the $8.9-billion recently estimated by BC Hydro after announcing $610-million in cost overruns.

Furthermore, the BCUC panel said it was "persuaded" by a Deloitte consultants' report that warned the project could run as much as 50 per cent over budget – with a final price tag of about $12.5-billion – and was "not persuaded" BC Hydro could finish the project by 2024 as planned.

"In the longer term, a disruptive technology, such as affordable utility – or home – scale storage technology could reduce the benefits of Site C," the BCUC added. "Combined with a continued glut in North American energy markets, this could make it increasingly difficult to sell Site C surplus energy."

Of course, most of this was known well before the Liberals gave the green light to Site C. It's too late to recoup the billions that have already been spent or committed to the project. More than 2,000 construction workers are currently employed on Site C, leaving the pro-union NDP with no good options as it promises a decision on the project's fate by the end of the year.

The decision might be an easier one for the NDP if the First Nations affected by Site C were unanimous in their opposition to the project, since the new government has promised to follow the United Nations Declaration on the Rights of Indigenous Peoples. But BC Hydro has reached benefit-sharing and compensation agreements with six First Nations, while the courts so far have agreed the utility fulfilled its duty to consult dissenting First Nations.

In its submission to the BCUC, the McLeod Lake Indian Band said its agreement with BC Hydro "advanced reconciliation" and that cancellation of Site C "would give rise to significant financial hardships" for the band, while "its members and its businesses would lose opportunities that could not be replaced."

The BCUC did take one option off the table for the government. It concluded that temporarily suspending the project and restarting it in 2024 if conditions improve would be "by far the most expensive" scenario, adding at least $3.6-billion to the Site C price tag. This is also "the most risky scenario because, among other things, environmental permits will expire and that will require new applications and approvals," not to mention renegotiating construction contracts.

The BCUC does propose an alternative to Site C that involves procuring non-hydro renewable power and embracing demand curtailment policies. The use of wind and other intermittent power sources would be facilitated by BC Hydro's ability to "store" hydro power in reservoirs until needed by availing itself of its rights under the Columbia River Treaty entitlement.

This is the scenario the Liberals should have favoured in the first place. Opting for it now means swallowing the sunk costs on Site C, leaving the NDP with its own political choice to make.