BC Hydro is the utility that keeps the lights on in B.C. and generally it does a fine job of restoring wind-toppled power lines and firing up our smart phones and flat screens.
What isn’t going so well for the Crown corporation are its finances, which Energy Minister Michelle Mungall calls a “mess” and project finance expert Eoin Finn says are in the worst shape of any other public or private utility in North America.
Yet the NDP government has retained most of BC Hydro’s board of directors appointed by the previous BC Liberal administration — board members who were responsible for fiduciary oversight while the mess was gathering momentum — which raises troubling questions about the government’s readiness to fix problems at the deeply indebted utility.
And instead of implementing far stricter rules to avoid the perceived conflicts of interest that dogged the BC Hydro board during the BC Liberal era, most of the NDP’s recent appointees to the board have a strong connection to Site C dam project and other BC Hydro contracts, or to large mining and energy projects proposed for the province — a trend that government accountability experts call disturbing.
“If you are a publicly traded company and somebody credible comes along and says your finances are a mess, and the public accepted that your finances were a mess, the board would be dismissed,” said Dermod Travis, executive director of Integrity BC, a non-partisan political watchdog group. “And likely the entire executive team would be dismissed as well.”
Travis said while there is no doubt that BC Hydro board members have many professional qualifications, the NDP government “has left itself deeply exposed for a set-up by leaving this board in the hands of the BC Liberal party, which is effectively what they’ve done.”
“I think it’s going to be a recipe for stalemate or disaster.”
The NDP did fire BC Hydro board chair Brad Bennett, an advisor to former Premier Christy Clark who spent two election campaigns travelling on Clark’s bus and who, while he was BC Hydro chair, nominated Clark to run for re-election for the Liberals in the riding of West Kelowna.
And they gave the boot to board member Jack Weisgerber, a former Liberal MLA who was former B.C. premier Gordon Campbell’s energy minister and who worked as a BC Hydro consultant on the Site C dam from 2007 to 2014.
But six BC Hydro board members appointed by the BC Liberals remain, and five are donors to the BC Liberals, according to a search of B.C.’s political donations database.*
“There is no-one on that board today that would make me feel comfortable [about] a new direction,” Travis told DeSmog Canada.
“It’s a full steam ahead board. When you have a minister saying that BC Hydro’s a mess, the last person you should leave in charge, to make an analogy, is to leave the arsonist to put out the fire.”
Who are BC Hydro’s new board members?
Professional engineer John Nunn is one of the new board members appointed by the NDP in January. Nunn’s board bio on BC Hydro’s website describes him as an “engineer with over 40 years of Canadian and international experience in hydroelectric and water storage projects.”
What the bio doesn’t say is that Nunn was the chief project engineer for the Site C dam on B.C.’s Peace River, working for the engineering and consulting firm Klohn Crippen Berger, a Vancouver-based company that currently holds a contract, along with SNC Lavalin, for “design services” on the Site C dam project, according to BC Hydro.
Klohn Crippen donated almost $30,000 to the BC Liberal party between 2005 and 2016 (compared to zero dollars to the B.C. NDP).
According to Klohn Crippen Berger’s website, the company has provided “comprehensive engineering and support service since the earliest days of the Site C project.”
These include a 2005 assessment of design issues that “could affect the project cost” — then pegged at about $2 billion — and comprehensive engineering and consulting work services from 2009 to 2014, such as an acid rock drainage and metal leachate management plan.
Jim Brander, a professor at the UBC Sauder School of Business who focuses on Crown corporations, said there is a clear conflict of interest if companies that employ BC Hydro board members — or companies that used to employ board members — are awarded new BC Hydro contracts.
“It would look very suspicious if these new board members were there and new contracts were awarded to their old companies,” Brander said in an interview. “That’s an obvious conflict.”
Brander also said it is not unusual for new governments to leave crown corporation board members in place and that generally there is not a lot of turnover on these boards following the installation of a new government.
But he expressed concern that companies that donated to the BC Liberals — Klohn Crippen Berger, for example — received Site C dam and other BC Hydro contracts, saying “I don’t like the scenario of making donations and getting contracts.”
Vancouver attorney Christopher Sanderson was also appointed to the BC Hydro board in January.
Sanderson is a utility regulatory lawyer who has worked for BC Hydro on a “number of regulatory and judicial proceedings involving the extent of the Crown’s obligation to consult First Nations.”
That’s according to the website of Sanderson’s law firm Lawson Lundell, a company that donated $31,500 to the BC Liberals between 2005 and 2017 (there is no record of any donations to the NDP.)
Lawson Lundell currently represents BC Hydro in B.C. Utilities Commission hearings into BC Hydro’s $1.2 billion purchase of the Waneta Dam and generating station in Trail from coal giant Teck Resources Ltd. The Waneta Dam produces slightly less than one-half of the power that Site C would generate.
Sanderson has also represented the corporation Woodfibre LNG, which plans to build a liquefied natural gas processing and export facility near Squamish.
Notably, Woodfibre announced that it would proceed with the project on the same day that the former BC Liberal government made public its new eDrive electricity rate, offering a significantly lower power price to LNG projects that use hydro instead of natural gas.
BC Hydro’s website notes that it has been asked to supply power to Woodfibre LNG.
Woodfibre donated a total of $63,750 to the NDP between 2014 and 2017 and a total of $98,000 to the BC Liberal party between 2015 and 2017.
“If you have even the appearance of conflict of interest you should be disqualified [from the board of a Crown corporation],” said Duff Connacher, a founder of the civic organization Democracy Watch.
“If you don’t have strong conflict of interest and appointment laws you don’t have democracy,” said Connacher, a lawyer, academic and internationally recognized leader in the areas of democratic reform and government accountability.
A third BC Hydro board member appointed by the NDP in January, Robert Gallagher, is the retired CEO for New Gold, a company that donated $28,500 to the BC Liberal party between 2006 and 2011. New Gold donated $3,050 to the NDP from 2012 to 2013.
A New Gold project in B.C., the proposed Blackwater Gold mine in the Nechako Plateau southwest of Prince George, is currently under consideration by the B.C. Environmental Assessment Office.
“There’s something about a publicly traded company that seems to be entirely lost on the boards of public agencies and crown corporations in British Columbia,” Travis said.
“And that is the independent director, the person who has no attachment to anyone or anything who sits on that board of directors. The problem that you have with this particular board, even with the new appointees, is that you have cheerleaders. You don’t have devil’s advocates.”
“I think it’s going to be a recipe for stalemate or disaster.” https://t.co/fiA0waXpK1
— DeSmog Canada (@DeSmogCanada) March 19, 2018
Still no BC Hydro CEO
The NDP also maintained the status quo at BC Hydro when it promoted Chris O’Riley, the utility’s vice-president and a long-time hydro employee who helped shepherd the Site C dam project, to the role of Chief Operating Officer (COO) last summer.
Last August 30, O’Riley told the watchdog B.C. Utilities Commission that Site C was “on time and on budget.”
Yet, only three months later, it was revealed that the project had fallen behind schedule and had climbed $2 billion over budget, prompting former BC Hydro CEO Marc Eliesen to assert in an affidavit that BC Hydro executives had mismanaged the Site C dam’s budget and cost control process and that they are “not capable” of accurate estimates or controlling costs.
The NDP has not filled BC Hydro’s CEO position since it dismissed Jessica McDonald, former Liberal premier Gordon Campbell’s deputy premier and head of the B.C. public service (McDonald’s ex-husband Mark McDonald ran former Liberal premier Christy Clark’s election campaigns.)**
Brander said it is “a bit strange” and “a little surprising” that BC Hydro does not have a CEO. The successful business model, he said, is that a COO reports to a CEO.
Premier John Horgan, asked by DeSmog Canada about the lack of a BC Hydro CEO, said at a media briefing last week that he has “confidence” in O’Riley and that it is up to BC Hydro’s board to make a decision about the CEO position.
For now at least, the NDP has created a new BC Hydro board position called an Executive Chair, appointing Ken Peterson, a electricity industry veteran, to the role. Peterson is the former CEO of Powerex, the marketing and trading subsidiary of BC Hydro.
Powerex was one of dozens of electricity trading companies accused of selling power to California at inflated prices in 2000 and 2001 during summers of electricity shortages. The subsidiary settled a lawsuit in 2013, paying US $273 million in cash to California and offering state electric utilities $477 million in credit.
(A Ken Peterson is listed on the B.C. political contributions registry as having donated a total of $3,500 to Premier John Horgan’s nomination and leadership campaigns in 2004 and 2011, although, in the absence of full disclosure, it may not be the same Ken Peterson.)
NDP recently re-appointed BC Liberal board member
Horgan told DeSmog Canada at the same media briefing that Peterson is “taking stock of the [BC Hydro] executive, he’s taking stock of the board members. And we’re going to be replacing board members as their terms expire.”
Yet only three months ago, the NDP re-appointed John Ritchie to the BC Hydro board when his term was up.
Ritchie, a civil engineer who was installed on the Hydro board by the BC Liberals, is a former senior consultant for Hatch, an engineering and consulting firm that BC Hydro hired to work on Site C.
Together with Klohn Crippen Berger, Hatch holds a long-term contract with BC Hydro to work on dam safety projects that “may include dams and spillways,” according to an announcement of the agreement on Klohn Crippen Berger’s website. The agreement is valid until 2024, the year that Site C will become operational.
Like the five other board members retained from the Liberal era, Ritchie sat on BC Hydro’s board while the price of Site C climbed from $8.8 billion in 2016 to $10.7 billion in 2017.
Hatch donated $10,000 to the BC Liberals in 2009, the year before Campbell announced that his government would proceed with the Site C dam. There is no record of any donations to the NDP.
And when Hatch was part of a larger firm called Hatch, Mott MacDonald, it also donated just over $4,000 to the BC Liberals between 2007 and 2011, along with $1,600 to NDP candidate Gabriel Yiu in 2013.
Connacher said B.C. is in urgent need of a fully independent appointments commission comprised of people outside government that are chosen by all political parties with seats in the legislature.
“They should be required to do a public, merit-based search for nominees for appointments,” he told DeSmog Canada.
Travis agreed that board appointments should be reviewed by all political parties, noting that it can save money for taxpayers because after a change in government “you won’t have to be firing as many people as we do now.”
Boards need people who aren’t afraid to hit the pause button to avoid boondoggles, he said.
“We need people who can look at government and say, ‘that might make for good politics, but it’s lousy business and I’m not supporting it.’ ”
*Updated at 9:40 p.m. on March 19, 2018: The story originally stated that three of the remaining six BC Hydro board members appointed by the BC Liberals are donors to the BC Liberals, but further research has indicated that five of six are actually donors to the BC Liberals.*
** Updated at 10:42 a.m. on March 20, 2018: This story has been updated to reflect that Mike McDonald, not Mike Marrisen as previously stated, is Jessica McDonald’s ex-husband and worked on Christy Clark’s election campaigns.*