Economist Marvin Shaffer recently wrote a piece on his blog generally in support of Site C.  PVEA’s Randy Hadland, who has been involved in fighting for the Valley since the 1970’s had a detailed response.  Here are the two pieces:

There is no ‘right’ answer as to what government should do with respect to Site C. There will be unavoidable adverse impacts if the project is completed — impacts that some First Nations and residents argue are unacceptable and unnecessary. At the same time it should be clear that there will likely be significant costs to ratepayers if the project is terminated at this time.

BC Hydro, the agency that by far has the most expertise capable of analyzing the cost consequences, calculated that terminating Site C would be some $7.5 billion (in 2018 present value terms) more expensive for ratepayers than completing the project. BCUC, based on its own set of assumptions and calculations, concluded the difference in cost would be small, within the error of the estimates, but its actual numbers also suggest that ratepayers would likely be significantly worse off if the project is terminated at this time.

After correcting for errors in its surplus sales calculations, BCUC reported that the present value cost of termination would be $295 million greater than completion. And in response to questions from the Deputy Ministers, the BCUC reported that that difference would increase to $900 million if one were to take into account the recovery of sunk and termination costs over a 20 year period in the case of termination and over the expected 70 year life of the asset if Site C were completed.

BC Hydro identified other errors in the BCUC calculations that would would increase the difference in present value cost another $500 million. And then there were the costs that the BCUC failed to take into account — the costs customers would incur for the demand side management measures it assumed would be undertaken in its alternative portfolio and the cost of advancing the Revelstoke 6 project to deal with shortfalls of peak generating capacity without Site C.

Taking those additional errors and costs into account, but otherwise maintaining all of the Commission’s assumptions about costs, surplus sales values, and load growth, assumptions that I and others believe are tilted against Site C, the corrected BCUC estimate of the cost of terminating the project would be some $2 billion greater than completing Site C.

There are of course other issues and risks to take account.

There is the risk that Site C construction costs escalate above the $10 billion BCUC assumed for its analysis. But there is also the risk that load will grow more rapidly than BCUC assumed.

There is the impact on taxpayers as distinct from ratepayers. There is a cost to taxpayers associated with the BC Hydro debt government guarantees. A question government should ask for this and indeed all crown corporation and Ministry investments is what is the magnitude of this cost — what would government have to charge in a debt guarantee fee to offset the cost taxpayers are effectively assuming. In the case of Site C the issue is how would this fee compare to the very significant water rental payments BC Hydro would pay if the project goes ahead.

There are GHG implications.  Surplus sales from Site C will reduce thermal power production and GHG emissions in neighbouring jurisdictions. Government should ask itself here what value it places on the reduction in GHG emissions that can be expected if Site C is completed. It is arguably a significant benefit of proceeding with the project.

There is the loss of agricultural land due to the flooding and related works at Site C. The Joint Review panel concluded that those impacts, while very important locally, would be relatively insignificant from a provincial and national perspective. The government should consider if and why it concludes differently.

I’ve been involved with Site C for a very long time. I was a consultant advisor to the first BCUC hearing into Site C in the early 1980’s. I testified before the recent Joint Review panel on behalf of the Peace Valley Environmental Association. I provided expert testimony for a First Nation in a Court Injunction hearing into the costs of suspending the project after one year of construction. For some time I have been an independent analyst of the consequences of terminating the project now. And this past month I wrote a critique for the Allied Hydro Council of the BCUC’s Final report on Site C.

Though people with differing views seldom accept this, in all of this work I have tried to analyze the issues and options as best and objectively as I can. All I hope is that government, however it resolves the politically challenging trade-off it faces with Site C,  does the same.

Response from Randy Hadland:

This is my reply to Shaffer on the blog he put out that is below here.  If anyone has a minute, I seem unable to publish my comments on his blog site.  Part of it is that it is too long, and I can cut it into about thirds to get it on, but it still isn’t showing up.  Any ideas?  Randy

The difference between choosing the ‘right’ answer, being to stop the construction/destruction, and the alternative, is that while it is possible to stop the dam and avoid the unacceptable and unnecessary, if the government were to choose to continue it, we would be left with the costs of the dam and the unacceptable and the unnecessary impacts. I don’t believe that you have examined the conservation/efficiency options that the Panel was presented with. There are conservation options for example that negate the need for spending any amount of money at this time and for some time in the future, either by Hydro or by its customers.
BC Hydro may, as you say, have the most expertise capable of analyzing the costs involved in Site C. However I think that saying this does a disservice to the BCUC which if you recall was set up to do this very thing the first time that Site C went to the BCUC in ’82. If it is your opinion that the BCUC is not presently qualified to examine the complexities and implications of the proposed dam then I would ask you to join with me in calling on the present government to halt the project, retool the BC Utilities Commission and have a hearing that examines the issues from an independent, qualified, and non-biased point of view. That is the crux of the matter. BC Hydro may be the most qualified, but the BCUC was set up to examine the issue, simply because BC Hydro has too many interests involved to be able to deliver an unprejudicial analysis. And we the people of BC deserve an honest and fair determination.
It would make sense that, if you have to pay off a mistake like having started Site C, and stopping construction, faster than if you pay it off over a far longer time frame just because you finished the mistake, that it would be less expensive for ratepayers. After all you can discount the 35 Billion dollars that would have to be paid in interest on the 10 Billion dollar loan. But there is no reason why you have to pay for the mistake, one way faster or slower than the other. Choosing to make the dam less expensive by arbitrarily setting a timeframe biases the decision. Not exactly an objective methodology.
Please see my earlier remarks about the relative bias of anything coming out of BC Hydro, that criticism applies also to their identification of errors in the BCUC report. It seems more objective to report on the various opinions about the correctness of Hydros opinions.

BC Hydro has always planned on completing the Revelstoke project anyway. You tried in this ‘report’, to imply that the total costs of the Revelstoke 6 should be considered in the costs of stopping Site C. I am glad to see that it is only the costs of advancing Revelstoke 6 that is of concern to you. And since we don’t know how long that we might have before that would occur there are no measurable cost increases to apply to the termination option.
If we are going to go on and on about those, possible, errors on the part of the BCUC, why would we maintain all of the Commissions other assumptions? I and others for example see many of the assumptions being tilted towards Site C. Take for example the Sunk costs which were estimated at some 2.1 Billion dollars. Money that was spent on roads that the community can use, bridges that have as much value as was put into them, a luxurious work camp that could be bought out for far less than the cost of rent and maintenance, and serve many different purposes in the Peace region, gravel pits and other work that can be left as is for British Columbia. Or let’s consider the costs of remediation that the Panel set as an example of possible expense. Another 1.8 Billion dollars that was based on altogether too little evidence or documentation or even remediation work direction. Obviously that kind of expense is up to a question of what we choose to do. There are estimates of anywhere from 5 Million to 2.3 Billion for this work and accepting the Commissions estimate seems ridiculous unless a complete lack of common sense is prevalent.

There are other risks to consider. For example the cost might balloon to more than 12 Billion, given the geophysical problems that seems quite likely. There is the risk that demand will not grow, as the commission said, even as fast as Hydros low load growth forecast. Anf I personally would only consider that a risk if the government approves the dam. You will remember the term used in the 82 hearings, the Utility Death Spiral, in which consumers decline to purchase the power from expensive new generation projects, choosing instead to cut back on their energy use. This in turn causes the Utility to raise rates further for the usage that is still there, causing people to cut back further, and the spiral continues. That is a serious risk, given the amount that consumers can cut back if push comes to shove.
When the former Liberal government cut back on the water rental fees that BC Hydro was supposed to be paying, in part as compensation for the significant irremediable impacts of their projects on the environment and society, they laid a groundwork in which those costs would have to be collected some other way. If what you are saying is that the BC Government would have to support a loan to cover the costs of terminating Site C and that the water rentals would have covered the cost of a completed Site C, then I would suggest that this would be an inappropriate use of those funds.
Arguably would be the operative word in a discussion of whether there would be benefits from a GHG emissions point of view. For example, If as the BCUC found we can generate our own electricity supply cheaper than building Site C and cheaper than terminating Site C and including the costs with the costs of the new supply, does it not stand to reason that our neighbouring jurisdictions also have that ability? In short, what indication is there that Site C power exported would not instead subtract from alternative non fossil fuel energy development.
The Joint Review Panel, in its examination of the value of the agricultural resource in the Peace River valley, did not have agricultural expertise in its staff, and when the JRP asked the Chairman of the Agricultural Land Commission to appear before it and discuss the implications for agriculture, the Chairman was called away to ‘very important meetings’ with the then Liberal government in Victoria the day before he was to appear at the BCUC. If the present government takes the time they say they are going to take to look at issues that go beyond the set terms of the current BCUC Inquiry hopefully they will ask the Agriculture Ministry staff to review evidence such as that submitted by Wendy Holm who found that the land in the valley will be very important to all of our futures. Ms Holm came to that conclusion based on material that BC Hydro themselves prepared.
I’ve been involved with Site C for a very long time. I have been questioning the need for and the costs of Site c since the early 70’s. I do not try to be objective, that is the job of the BCUC and I hope the Government now takes the time to examine everything that comes before it. The BCUC has served us well in the past, despite making reports that contained inaccuracies, and they have done a very good job of looking at the aspects of this dam that they were asked to examine. When the Government includes in their analysis the impact that a large surplus of power in the system will have on developing a growing alternative energy industry, when they include the incredible impact that this Site C dam would have on the first Nations who have, already, suffered immensely because of our Hydro dam system, when they consider that the land in the valley could provide vegetables for more than a million people, when they consider that the biodiversity of the entire Peace valley all the way to the MacKenzie relies to some extent on the first class climate and isolation provided by the valley bottom lands, and when they consider the political fallout from approving the Liberals and our Provinces biggest mistake, I am hopeful that they will shut Site C down for good and forever.