Cancelled Site C project could require 10% rate hike to cover costs

Nelson Bennett - BIV

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A new bridge under construction near the Site C project in northern B.C. Photograph By Business in Vancouver

The B.C. NDP government confirmed last week that the cost of cancelling and remediating the Site C dam could require a 10-per-cent rate hike, if costs are amortized over 10 years.

And it still might need to find or save additional sources of power to meet peak demand.

Although he doesn’t think B.C. will need any new power for years to come, if it ever does, it could simply exercise its rights to use power generated in the U.S. under the Columbia River Treaty, said Harry Swain, who chaired the joint review panel that originally reviewed the Site C dam project.

But Kelvin Ketchum, who was the Canadian chairman of the Columbia River Treaty operating committee, disagrees. Exercising its treaty entitlement to power may seem like a simple solution, but it is fraught with problems.
“The Columbia River Treaty benefits are not a substitute for Site C,” Ketchum said.

Ketchum, now retired, worked for BC Hydro for 35 years as an engineer, and served on the Canadian Columbia River Treaty operating committee starting in the mid-1990s. He became chairman in 2002 and retired in 2015.

The Columbia River Treaty was signed in the early 1960s. Under that agreement, B.C. built three dams on the Canadian side of the Columbia River and agreed to manage water flows to benefit a hydroelectric dam on the U.S. side in Montana.

In exchange, B.C. is eligible for a portion of the generating capacity from the American dam. B.C. already receives power from the Libby dam in Montana, and sometimes uses it domestically, Ketchum said. But for the most part, it sells that power into the North American market.

B.C. could exercise its option to stop selling the power and use it for domestic purposes. But that could trigger a renegotiation that B.C. might lose.

Over the years, American dam operators have managed water flows to benefit salmon. This has resulted in U.S. dams producing less power than they could be producing, Ketchum said.

And because they are now producing less power, they think B.C. is getting too much power. So at the very least, the Americans might want to renegotiate B.C.’s allotment.

“They think they’re giving us too much energy, because they’re not able to produce that energy because of their restrictions for fish,” Ketchum said.

The worst-case scenario would be if the U.S. served notice it was cancelling the agreement, although there are provisions in the treaty that would give B.C. 10 years’ notice.

“I don’t know that that’s likely,” Ketchum said. “But I think it’s very likely that the U.S., in any renegotiation, will want to reduce those benefits. They think they’re paying too much.”

In its final report, the B.C. Utilities Commission warned that the Site C dam could come in nearly $2 billion over budget. Those who want to see it scrapped say the power the dam will produce will be far in excess of B.C.’s needs.

Ketchum believes that even if Site C comes in over budget, it will still have value – for 100 years – whereas cancelling it will leave B.C. taxpayers with a $4 billion bill and not one watt of new power generation.

Last week, Environment Minister Michelle Mungall confirmed that covering the $4 billion in sunk costs and remediation from cancelling Site C could require a 10% increase to BC Hydro rates.

“I’ve seen this before,” Ketchum said. “I was around when Revelstoke [dam] was built. People argued Revelstoke came in, and we didn’t have the market for it. Well, we did. We were able to sell that power to Alberta or the U.S. and it displaced thermal resources in those places. And the same with Site C: it’s going to be useful somewhere.”

Site C opponents argue that if B.C. does need additional power, it can be met with wind power, which can be built out incrementally. But wind power is unreliable, whereas hydro power can be managed to match demand.

“I like wind,” Ketchum said. “But the problem with wind, you get megawatts when the wind blows and not when it doesn’t. The beauty of Site C is it’s dispatchable.

“I don’t think people understand the electrical system very well. When somebody turns on a light, something somewhere in the system has to generate more [power] and you can’t tell a wind turbine or solar thing or a run-of-river hydro … to generate more. That has to come from a project with storage, like Site C. A gas-fired turbine can do that, but that’s kind of fallen out of favour now.

“This thing is good for 100 years. If they go over the budget by 10 per cent, 20 per cent – a lot of projects do. If the power isn’t needed in B.C., it’s going to be needed in Alberta, Saskatchewan or the western U.S. in order to reduce greenhouse gases. It will always displace greenhouse gases somewhere.”

Swain argues that B.C.’s demand for power will remain flat for the next two decades, so the province might never need to resort to alternatives like the Columbia River Treaty entitlement. Others have argued that Swain’s predictions are based on the assumption that no government actually plans to hit its climate change targets.

If governments get serious about those emissions targets, it will require a transition away from fossil fuels, which will mean a greater demand for clean, dispatchable power.

While Swain agrees with that argument, he said he has seen nothing from governments to suggest they have concrete plans to phase out fossil fuels.

“If we had a plan to get from here to there – the Paris accord – that would add some credibility to it, but we don’t,” he said. “We are a long way from it.”

Even if governments do get serious about switching from fossil fuels to clean power, and even if the Columbia River Treaty were not an option, Swain said B.C. produces enough surplus power already – power that it sells to other jurisdictions – that it could stop selling.

“We’re exporting about 3,700 megawatts to the United States now,” Swain said. “So that’s two-thirds of Site C right there.”

Ketchum points out that while B.C. does generally generate a surplus of power, that’s not always the case. When demand is high and the snowpack low, B.C. has had to buy power from other jurisdictions.

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