The Forgotten Electricity that Could Eliminate Need for Site C Dam

On January 17, 1961, Canadian Prime Minister John Diefenbaker and United States President Dwight Eisenhower signed the Columbia River Treaty.

It was a landmark agreement that required Canada to build three dams to aid in U.S. flood protection and power generation. In exchange for taking on the impacts of these water storage projects, Canada was paid $64 million for 60 years of flood control benefits.

Canada also received an entitlement to one-half of the estimated additional hydroelectric generation capability at power plants on the Columbia River in the United States made possible by the operation of the dams in Canada.

This power is referred to as the “Canadian Entitlement” and since 2003 it has amounted to at least 1,176 megawatts of capacity and 4,073 gigawatt hours of energy a year.

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That just so happens to be nearly identical to the amount of electricity B.C. could create via the controversial $8.8 billion Site C dam — the most expensive public project in B.C. history.

The B.C. government gave Site C the go-ahead in December 2014, but the third dam on the Peace River is facing several court challenges from landowners and First Nations who oppose flooding 83 kilometres of the Peace Valley.

This week, a U.S. energy economist said the power from the dam is dramatically more costly than previously thought. The B.C. government has argued the dam is the most cost-effective way to meet the province’s electricity needs and has rejected repeated calls for an independent review of costs by the B.C. Utilities Commission.

Failure to Consider Columbia River Power ‘Inexplicable’: Panel Chair

Harry Swain, the chair of the joint federal-provincial panel that reviewed the Site C dam, panned the B.C. government’s actions on the dam in March, in comments called “unprecedented” by environmental law experts.

 “To say we will not consider our entitlement under the Columbia River Treaty is inexplicable,” Swain told DeSmog Canada.

In recent years, B.C. has been selling off the Canadian Entitlement to the tune of $100 to $300 million annually. From 2010 to 2012, the province received about $30 per megawatt-hour for that power. Meantime, the cost of power from the Site C dam is estimated at $83 per megawatt-hour.

“On the face of it, it doesn’t make a lot of sense to be building new sources at $83 (per megawatt hour) and continuing to export at $25 or $30 or $40 per megawatt hour,” said Philip Raphals, an energy analyst hired by the Treaty 8 Tribal Association to provide expert testimony during the Site C hearings. “Why not just use our own inexpensive resources instead of selling them off for so little?”

Using Columbia River Power Would Save B.C. $2 Billion: Treaty 8

In a 20-page letter to the B.C. government, the Treaty 8 Tribal Association made the case that taking into account just 50 per cent of the Canadian Entitlement would defer the need for new electricity capacity in the province to 2034.

“We have estimated the potential benefits to ratepayers of enacting such a regulation to repatriate the Canadian Entitlement to be at least $2 billion compared to the Site C portfolio preferred by BC Hydro,” said the letter sent in Dec. 2014 to Minister of Energy and Mines Bill Bennett and Minister of Finance Mike De Jong.

Days after the letter was sent, the B.C. government announced it intended to move ahead with the Site C project.

Canadian Entitlement ‘Fell Between Cracks’: Energy Expert

The panel that reviewed the Site C dam was not allowed to consider the possibility of repatriating the Canadian Entitlement, nor did BC Hydro bring it forward as an option.

Why not? B.C.’s Clean Energy Act.

The act includes a self-sufficiency requirement, which requires that BC Hydro be able to produce enough electricity to satisfy provincial electricity demand. It was designed so BC Hydro can’t rely on market purchases, particularly imports of high-polluting power, for planning purposes.

 “The Canadian Entitlement, however, consists of hydropower, the environmental costs of which are already borne by British Columbians,” reads the Treaty 8 letter. “Adopting a regulation allowing the import of the Canadian Entitlement (for planning purposes) could not be seen as compromising B.C.’s climate polices or its goal of energy self-sufficiency.”

Because of this requirement, BC Hydro never examined the possibilities of using the Canadian Entitlement to meet B.C.’s needs, Raphals says.

“How, then, would the provincial government ever become aware that it could avoid the environmental and treaty infringement consequences of the Site C project, avoid borrowing billions of dollars and avoid major rate impacts by repatriating BC Hydro power, if BC Hydro believes it is barred from even mentioning this possibility unless explicitly asked to do so by the government?” the Treaty 8 letter to government said.

The panel’s mandate was to work within existing laws, regulations and policy, which meant the Columbia River power only came up as an aside during the environmental review.

“The downstream benefits are off of everyone’s radar … It seemed to us that it’s a solution that has fallen between the cracks,” Raphals said.

The joint review panel did comment on the self-sufficiency requirement briefly, saying:

“Taken literally, this means a B.C. disconnected to the outside world, a vision of autarchy truly strange for a province that relies on trade, and a long way from its recent history …. Minor relaxations could mean being connected for reliability or for diversity exchange …”

The consequences of the self-sufficiency requirement were also evaluated in a 2011 BC Hydro review.  That panel wrote:

“The panel recognizes that the economic and energy situations have changed, and that the existing self sufficiency definition may be overly conservative and place an undue burden on ratepayers. The panel recommends that BC Hydro and the province evaluate alternative definitions and timelines for self-sufficiency that meet the needs of the province and ratepayers in a way that is sustainable for the long term.”

Re-Negotiation of Treaty Creates Too Much Uncertainty: B.C. Government

Given these well-documented concerns and the low market rate of electricity, why hasn’t the B.C. government considered using the Columbia River power to defer the need to build more expensive sources of power, such as the Site C dam?

In low water years, B.C. currently may import up to 10 per cent of annual demand, according to the Ministry of Energy and Mines.

“Meeting new B.C. demand by relying on the Canadian Entitlement instead of building new sources of power in B.C. would increase this exposure,” a ministry spokesperson said in a written response to DeSmog Canada. “While BC Hydro is comfortable with a 10 per cent level of exposure, a higher level of exposure would introduce risks regarding the ability of the market to reliably meet B.C.’s electricity needs under certain conditions.”

In addition to that, the treaty is up for re-negotiation.

“It is also not a long-term resource as either country may unilaterally terminate the treaty with 10 years notice,” the spokesperson said.

Raphals argues that, given the importance of the treaty for U.S. system operations, it is “implausible” that the U.S. would simply abrogate it. 

“It is, however, entirely possible that the amount of the Canadian Entitlement will eventually be reduced,” he said.

And that’s why, when modeling the impact of the Canadian Entitlement, Raphals limited the downstream benefits to half of what is currently available.

Raphals argues that taking the Canadian Entitlement into account allows B.C. to delay the need to build new projects and ultimately make smarter planning decisions.

“There is no need for BC Hydro to make firm decisions in 2014 on how to serve its loads 20 years from now,” Raphals said. “The world today is very different than it was 20 years ago, and there is every reason to believe it will be very different as well, in very unpredictable ways, in 2034.”

Photo: Canadian Prime Minister John Diefenbaker and U.S. President Dwight Eisenhower sign the Columbia River Treaty in 1961.