There is misinformation circulating about the cost of cancelling the Site C dam. Some people have erroneously stated that Hydro must bear the whole amount of sunk cost plus remediation immediately upon cancellation, leading to rate shock and and a downgrading of Hydro’s credit rating. FALSE. The full cost to date plus remediation is about $3 billion, which can be amortized over many years. The following has been prepared by utility finance expert Eoin Finn.

The accounting rulebook states:

“When a capital project is CANCELLED such that work on asset will not be completed, costs accumulated in AuC (Asset Under Construction) accounts must be transferred to expense by journal voucher in the period it was cancelled. Supporting documentation for authorization of cancellation or correction is requested for audit purposes.”

However, as utility finance expert Eoin Finn tells us: “There are at least a couple of ways of smoothing the impact to ratepayers, which are fairly normal, GAAP-approved practice in utilities with lumpy expenditure patterns.

1. This sort of one-time “hit” IS why Hydro’s deferral accounts were created in the first place. With BCUC’s permission, the rate smoothing deferral account could be used, and the sum amortized/recovered over whatever period can be agreed upon with BCUC, which has the hammer on this. $3B over 10 years would be a $300M-a-year rate hit—which a 1-time rate increase of 6% in year 1, or successive rate increases of 2% over each of the first 3 years, would take care of. Relatively small potatoes—rates have increased 70% over the past 10 years.

2. The BC Government could eliminate or reduce either its ($300) dividend or portion of its almost $1B water charges to BC Hydro. That would be transferring the costs from ratepayers to taxpayers, but those are much the same people anyway (major exceptions are FortisBC customers in the Okanagan).”

Further note on sunk costs to date and remediation costs:
Sunk costs are $2 Billion, including $500m for rental of Atco trailer camp, and $500m for planning at Hydro’s headquarters.
Remediation of the site is considerably less than Hydro has estimated and is between $500-800M at the most.

Vancouver’s Eoin Finn is a director of the Pacific Electricity Ratepayers Association and a retired partner of a major accounting and consulting firm.