Victoria proceeding with plans for an $8 billion dam despite suspect electricity-demand forecasts, a restrictive clean-energy policy and the destruction of a valuable river valley.

The business plan for the province’s next mega project – the $7.9 billion Site C hydroelectric dam – is rife with problems.

A Business in Vancouver investigation has revealed that the electricity forecasts the province is using to justify the project contradict historic increases in demand and the cost to produce electricity from the dam is more than what taxpayers pay for energy today. On top of that, the dam would flood an area of prime agricultural land roughly 13 times the size of Stanley Park, forcing farmers to abandon their livelihood, killing fish, destroying aboriginal burial grounds and animal habitat and increasing the risk of landslides. The Liberal government has also removed the taxpayer-funded project from the oversight of the British Columbia Utilities Commission (BCUC), a policy that even Site C’s supporters don’t agree with. And even though the provincial and federal environmental assessment offices have yet to complete independent assessments of the project, Energy Minister Rich Coleman has said the province is committed to building the dam. “Site C will be a project that’s going ahead,” Coleman told reporters in August. “It’s a project that we’ve already committed to.”

Site C project spells the end for third-generation farming family

It’s smaller than previous hydroelectric dams, but B.C.’s next mega-project would still flood 5,340 hectares of prime agricultural land

Ken and Arlene Boon are the third generation in their family to farm the nutrient-rich land next to the Peace River known as Bear Flat. Arlene was born two kilometres from where her home sits today, in one of the province’s most productive agricultural regions near Fort St. John. In the late 1970s, BC Hydro approached her grandfather about a third hydroelectric dam the utility wanted to build a little ways downstream. The project would flood the farmer’s land, which he and his family had called home since shortly after the Second World War. “Grandpa was not co-operative with Hydro whatsoever,” said Arlene. “He had basically told them he wasn’t moving until the water was up to his knees.”

Fortunately, in 1983, the B.C. Utilities Commission (BCUC) rejected the government’s plan to build the dam, citing the need for a more accurate electricity demand forecast and alternatives to the project. But in 2004, then-premier Gordon Campbell dusted off the plan, envisioning a project that would cost $3.2 billion. In 2006, the cost estimate for the project climbed to more than $6 billion. Last year, Campbell flew into Hudson’s Hope and used the massive W.A.C. Bennett Dam as a backdrop to announce that his government was again proceeding with Site C.

At the time, Campbell said the project would produce some 4,600 gigawatt hours (GWh) of electricity per year, enough to power roughly 410,000 homes. He added that it would produce clean energy, create up to 35,000 jobs and help the province reach its goal to become electricity selfsufficient, a standard his government set in motion with the Clean Energy Act. What he didn’t advertise was that the project would wipe out 5,340 hectares of prime agricultural land and push some families, like the Boons, out of house and home. “We’ll lose our place, most of our land, probably our home, our house,” said Ken Boon.

Demand forecasts

At the time, the government claimed the province’s electricity demand would grow 20% to 40% over the next 20 years. A year later, the province upped the scale of the project again, envisioning a $7.9 billion hydroelectric dam that would produce 5,100 GWh of electricity per year, or enough to power 450,000 homes. And in spite of lagging electricity sales, the province also increased its demand forecast.

In a letter to Business in Vancouver in August, Energy Minister Rich Coleman said the province’s energy requirements over the next 20 years were expected to soar 40% based on population growth in excess of one million people. But historic population growth statistics call into question the province’s claim that future electricity needs are based on more people moving to B.C. Between 1991 and 2011, B.C.’s population climbed 36% to approximately 4.5 million people. During the same period, domestic electricity demand in B.C. climbed 25% to 50,607 GWh. That means electricity demand growth actually lagged population growth, the opposite of what the government claims in its justification for Site C. In fact, over the last five years, BC Hydro’s electricity requirements have declined 11%.

Even in California, the U.S.A.’s most populous state, electricity demand increases lagged population growth between 1990 and 2010.
The California Energy Commission also projects only a 13% increase in electricity demand between 2010 and 2020. Despite repeated requests from BIV, Coleman declined to be interviewed for this story.

Powering oil and gas

Peace Valley Environment Association biologist Diane Culling believes that, despite the government’s claims that Site C would generate enough energy to keep the lights on for 450,000 homes, the project is meant to power resource companies. “We always talk in terms of450,000 homes,” said Culling, “[but] no one is talking about sending this power to the Horn River Basin and the oil and gas industry.” Around the same time the Campbell government pulled Site C out of storage, it also began to cash in on massive natural gas reserves in northeast B.C. The industry has since become a $6 billion per year cash cow and is expected to grow. When asked about the electricity demand projections, BC Hydro’s Mike Savidant said industrial activity would become a significant driver of the growth in electricity demand in the coming years. “We do see that load growth increasing much more significantly,” Savidant said.

A closer look at BC Hydro’s latest demand forecast report revealed that while residential electricity sales are expected to rise 38% over the next 20 years, commercial sales are expected to climb 47% and industrial sales are expected to increase 51%. The electricity demand from metal mines is projected to jump 91% in the next 20 years, while coal mine demand is expected to increase 50%. But the real industrial growth comes from the oil and gas sector, where electricity demand is expected to soar a whopping 461%.

Despite that growth, BC Hydro’s corporate customers pay less for power than the average citizen. Large industrial customers paid approximately $45 per megawatt hour (MWh) of electricity in 2011 compared with $77 per MWh for residential customers, according to BC Hydro’s annual report.

Simon Fraser University (SFU) professor Marvin Shaffer is in favour of Site C, but said the low rates industrial customers pay compared with the cost to produce the energy is the equivalent of “market failure,” creating an artificially inflated rate of electricity demand growth. “I think there’s no question the rate of growth in demand in British Columbia is artificially high,” said Shaffer.

The average revenue among all customer classes, excluding foreign sales, is approximately $52 per MWh, which raises another question about Site C’s business plan. If electricity from Site C is expected to cost between $87 and $95 per MWh, how can the project be revenue-positive if customers pay far less than that amount? Savidant said that’s not how BC Hydro calculates its revenue; instead it uses a “blended cost” of all the assets in its system. Still, Site C would increase the average cost of that “blend.” BC Hydro said the business case for the project is also based on alternative power sources that aren’t as cost-effective as the dam. Savidant said Site C is markedly cheaper than Independent Power Projects (IPPs). 

When Site C is compared against the cost of IPPs, SFU political science professor Marjorie Griffin Cohen believes it makes sense. “It seems to me that it would be a whole lot better and makes a lot more sense to build Site C than to continue plundering rivers as we’re doing now through the IPP calls,” said Griffin Cohen, a former BC Hydro director.

However, Site C remains far more expensive than the spot market price for energy, which ranges between $4.34 and $52.43 per megawatt hour. But thanks to the Clean Energy Act, which requires B.C. to be electricity self-sufficient by 2016, BC Hydro can’t buy power on the market because it would have to be imported.

Clean Energy Act forces Hydro’s hand
In August, senior provincial bureaucrats published a report that condemned BC Hydro’s soaring costs and ballooning employee count, but endorsed Site C based on the “need to comply with the Clean Energy Act.” Critics argue that Site C’s existence is based on a self-sufficiency policy that will end up costing ratepayers in the end. In fact, Victoria’s own bureaucrats pointed out in their BC Hydro review “changing the definition of self-sufficiency could have the effect of mitigating rate increases.” The report also found that if the self-sufficiency definition was modified, “BC Hydro is close to being self-sufficient now.”

Joe Foy, the Wilderness Committee’s national campaign director, said the government’s self-sufficiency policy isn’t feasible and forces BC Hydro to buy more power at higher prices than the province needs. He also pointed out that if the province were truly energy starved it could source between 4,000 and 5,000 GWh of energy annually from the Columbia River Treaty Entitlement. That energy is currently sold to the U.S. “If we really needed energy, why are we still taking that as money?” said Foy. But BC Hydro said that entitlement ends in 2024, when the treaty with the U.S. expires. “It’s not something we can rely on over the long term,” said Savidant. Also, that entitlement would technically be considered imported power, which would contravene the Clean Energy Act.
When asked if there are any other alternatives to Site C, Savidant said the province’s energy policies require the Crown corporation to generate electricity from clean sources, meaning that large natural gas power production is out of the question. On top of that, the Clean Energy Act also ruled out large hydroelectric dams elsewhere in B.C. It identifies Site C as “the last large hydro project BC Hydro is permitted to build,” Savidant said. That means the province’s own clean-energy policies have effectively forced BC Hydro to choose between Site C and pricey IPP contracts.

Another point of contention surrounding Site C is the fact that the Clean Energy Act has removed the project from BCUC oversight.
Senator Richard Neufeld was an MLA for Peace River North and the province’s energy and mines minister when plans for Site C were being unveiled to the public early last decade. Although he left provincial politics three years ago, Neufeld was more than happy to talk to BIV about the benefits of Site C. “If you’re going to build for the future, you have to build for the future,” said Neufeld, pointing out that ex-premier W.A.C. Bennett did the same thing with his hydroelectric projects decades ago.

Neufeld also wasn’t afraid to defend the reasoning behind the province’s decision to remove Site C from BCUC oversight. “I’ll go back to W.A.C. Bennett,” he said. “There was no BC Utilities Commission when he built the Peace and Columbia River system, not any. That was strictly a decision by government, and that’s exactly what has to happen here.”

But critics disagree with Neufeld. Foy said that without BCUC oversight the province is setting itself up for another costly mistake.
“The last guys they prevented the BCUC from having a look at were the private power producers, and that shit is just hitting the fan big time,” said Foy.

NDP energy critic John Horgan also believes the BCUC should have some say regarding the dam. “If this is the next best project it should be able to stand the rigour and scrutiny of a public hearing,” said Horgan. Griffen Cohen agreed, as did Shaffer and his colleague (and former BCUC chairman) Mark Jaccard. All three are in favour of Site C. They point out that, eventually, the province will need the electricity. Jaccard added that, unlike intermittent energy sources such as wind or run-of-river, Site C would generate firm, reliable power.

Peace Valley impacts
But back in the Peace Valley, the talk is less about demand forecasts and government policy and more about direct impacts. In BC Hydro’s Site C project description report, the utility conceded the project would flood an area 13 times the size of Stanley Park. It also conceded that Site C’s reservoir would affect “fish … mortality … increase the risk of erosion, landslides … and may result in the loss of wildlife habitat,” affect greenhouse gas emissions, air quality and flood prime farm land. Site C proponents say the project’s impacts are a fraction of what locals dealt with when the region’s other two dams were built. “For the amount of the energy we get out of the project, the footprint is relatively  small,” said Savidant. But First Nations in the area disagree. At least four native communities in the region have vowed to stop the dam from being built.

Treaty 8 Tribal Association
Tribal Chief Liz Logan said the dam would destroy ancestral graves as well as pioneer homes and ranches. BC Hydro has factored “mitigation and compensation” costs into the $7.9 billion price tag for the dam, but Savidant wouldn’t say how much has been set aside.

For Ken and Arlene Boon it’s not about the money. In addition to farming and building log homes on their land, the Boons have restored one of the area’s original schoolhouses and a post office, and even transformed one building into a small museum. “You can’t put a price on memories… you can’t relocate and still have the same value of what you have here,” said Arlene. “It’s priceless.” But although the Boons fear that the dam will force them to leave Bear Flat, they don’t believe it will ever be built. “I think it’s political suicide,” said Ken Boon. “When it comes down to the crunch I don’t see how the government … would win with Site C. I think it’s a loser, and I really don’t think its ever going to happen.” •