In an exclusive interview with DeSmog Canada, former BC Hydro CEO Marc Eliesen says ratepayers will face a “devastating” increase in their electricity bills if the Site C dam is built and emphasizes there is no rush to build new sources of power generation in B.C.

“With Site C, BC Hydro ratepayers will be facing a devastating increase of anywhere between 30 and 40 per cent over the next three years,” Eliesen told DeSmog Canada in his first interview on the subject.

“There’s no rush. There’s no immediate need for Site C or any other alternative energy,” he said.

Eliesen’s comment about the lack of immediate need for the power echoes statements made by Harry Swain, the chair of the panel that reviewed the Site C hydro dam for the provincial and federal governments. In March, Swain told DeSmog Canada the B.C. government should have held off on making a decision on the dam.

With a price tag of $8.8 billion, the 1,100-megawatt Site C dam is the most expensive public project in B.C. history. The hydro dam, which would impact 13,000 hectares of agricultural land, has been proposed for the Peace River for three decades.

In late 2014, the provincial and federal governments approved the project and this July construction permits were issued despite pending court challenges by First Nations.

Eliesen, an economist by training, has also served as chairman and CEO of Ontario Hydro, chairman of Manitoba Hydro and has held senior roles with the federal government and the governments of Ontario and Manitoba. In November, Eliesen called the National Energy Board’s review process for the Kinder Morgan Trans Mountain pipeline “fraudulent” and a “public deception” as he dropped out of the process.

Failure to Consider Columbia River Power ‘Non-Sensical’

Eliesen said there is no rush to build new generating capacity in B.C., leaving “more than sufficient time to evaluate alternatives” that are more cost effective and minimize environmental impacts.

The alternatives include everything from geothermal to BC Hydro’s Burrard Thermal plant — due to be decommissioned in 2016 — to the 1,100 megawatts of electricity B.C. has access to through the Columbia River Treaty, Eliesen said.

Not considering using the Columbia River power to meet B.C.’s needs is “non-sensical,” Eliesen said.  (See: The Forgotten Electricity that Could Eliminate Need for Site C Dam)

“If there is a demand for the power, well you clearly have an available supply, which you can depend on,” he said.

“If there was some massive escalation in demand that you needed immediately, well my goodness, you’ve got two instant sources: there’s 1,100 megawatts from the Columbia River and almost another 1,000 from the Burrard Thermal Plant, which was converted from coal to natural gas some time ago.”

Mining, LNG Companies Not Paying ‘Fair Share’

Eliesen also critiqued BC Hydro for adopting a price structure that results in everyday British Columbians subsidizing heavy power users.

“Whether it’s mining or proposed LNG plants or anything of that nature …  They’re all subsidized by other hydro ratepayers. Those heavy power users do not pay the true cost,” Eliesen said. “They are not paying their fair share.”

The B.C. Utilities Commission used to review the cost of service, but that doesn’t take place any more, Eliesen said.

“The provincial government basically declared we don’t want the commission — we don’t want anyone — looking at BC Hydro plans. I think the result has been quite devastating.”

The B.C. government exempted the Site C dam from a review by the B.C. Utilities Commission, despite calls from its own expert panel to refer the project for an independent review of costs and need. The province’s failure to consider the panel’s recommendations has since become the basis for the Peace Valley Landowners Association court challenge against the Site C dam.

Eliesen noted other jurisdictions are conducting much more thorough analyses of hydro projects, noting two projects in Manitoba he recently advised on. 

“They went through the most detailed evaluation by the Manitoba Public Utilities Board that ever could have taken place,” Eliesen said. “The kind of analysis and investigation and due diligence that was taken has never taken place recently in British Columbia.”

Site C Dam Price Tag Likely to Escalate

In 1993, when Eliesen was the president and CEO of BC Hydro, he issued a public statement on behalf of the board stating that Site C would never be built because of its significant negative environmental, economic and social impacts.

That position quietly went by the wayside when the Gordon Campbell government was elected, Eliesen said, noting that electricity costs have increased at a far quicker rates than other jurisdictions since then.

Over the years, Eliesen has seen the cost of the Site C dam nearly double. 

“I’ve seen the costs of Site C escalate enormously,” he says. “It used to be $5, $6 billion, then it was $7.9, now it’s $8.8 billion. It’ll easily reach, if it’s ever built, in the $11 to $12 billion dollar range.”

Eliesen says the costs of Site C haven’t been adequately reviewed and there are “too many conflicting interests in BC Hydro for it to undertake its own due diligence on this matter.”

Calls for a moratorium on construction on Site C have gained strength recently with the Greater Vancouver Regional District and Peace River Regional District both calling on Premier Christy Clark to pause the project while active court cases are completed

On July 23, the B.C. Government and Service Employees’ Union announced its opposition to the Site C dam due to its violation of indigenous rights and the massive loss of habitat and agricultural lands.

Site C Dam ‘Doesn’t Make Any Sense’

Despite the growing calls for a moratorium, the B.C. government appears hell-bent on pushing ahead with building the dam.

Asked why the government continues to push ahead, Eliesen said it doesn’t make any sense.

“Well I can’t talk for the government, so I don’t know, other than they want some major project undertaken during their current election term,” he said.

“It doesn’t make sense in the context of environment, it doesn’t make sense in the context of wanting to work with First Nations and it doesn’t make sense, more specifically, on the economic impact because the B.C. ratepayer will pay enormously over the next three years.”

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One of the thorniest issues raised in the joint review panel’s report on BC Hydro’s Site C dam proposal is that of the B.C. government’s hypocritical policy on the burning of natural gas for electricity.

“The LNG developers have been promised a free hand to burn their gas here for their own purposes, but BC Hydro has been denied the same privilege,” the panel wrote in its report on the $7.9 billion proposed dam.

The controversy revolves around the 2010 Clean Energy Act — and who it applies to and, perhaps more importantly, who it does not.

The act limits BC Hydro’s options for generating electricity by demanding that 93 per cent of the province’s energy needs be met by “clean or renewable resources” — eliminating the use of gas turbines and sending the gas-fired Burrard Thermal generating station into early retirement.

It’s a reasonable policy from a climate change perspective — but there’s a catch.

In June 2012, the province exempted the liquefied natural gas (LNG) industry from the Clean Energy Act, enabling plants to burn as much natural gas as they’d like to power their giant compressors — despite originally promising they’d be powered by clean electricity — and, as of now, that’s exactly what they intend to do.

“If it is acceptable to burn natural gas to provide power to compress, cool, and transport B.C. natural gas for Asian markets, where its fate is combustion anyway, why not save transport and environmental costs and take care of domestic needs?” the Site C panel wrote.

To turn natural gas into a liquid for export, it must be cooled to 163 degrees below zero. Doing so essentially requires running a gigantic refrigerator 24/7. Each of the large LNG plants proposed for B.C.’s coast (there are 10) would need the equivalent of an entire Site C dam to power it by electricity.

Oilsands-sized pollution problem

The Pembina Institute reports that for the province to meet its annual revenue hopes of more than $4 billion (five to seven LNG facilities) by 2020, the resulting carbon emissions from that industry would rival that of Alberta’s oilsands.

In case you missed it, this is the industry that Premier Christy Clark has repeatedly touted as producing the “cleanest LNG in the world.”

For B.C.’s LNG industry to come anywhere near to being “clean,” plants would need to be fuelled by renewable electricity, not natural gas.

With that in mind, Clean Energy Canada recently commissioned a feasibility study that looks at meeting the energy demands of LNG plants with regional renewables, such as wind on the north coast, which wouldn’t require transmission upgrades or power from the Site C dam.

“Any LNG facility on the North Coast could primarily power its production facilities with renewable energy and do so reliably, affordably and on schedule—using established commercial technologies,” Navius Research concluded. “Further, doing so reduces that plant’s carbon pollution by 45 per cent, and increases local permanent jobs by 40 per cent.”

Seems like a no-brainer, doesn’t it?

If the province is going to forge ahead with an LNG industry, 91 per cent of British Columbians say it’s “very important” or “somewhat important” for LNG plants to maximize their use of renewable energy, according to a poll conducted by NRG Research Group in October 2013.

I haven’t seen any poll results on the matter, but methinks British Columbians wouldn’t respond to kindly to the natural gas industry playing by a different set of rules than the rest of us. After all, a Strategic Communications poll from April 2014 found 78 per cent of British Columbians supported the province moving off of fossil fuels completely in favour of clean sources of energy to prevent climate change from worsening.

B.C.’s natural gas contradiction

Due to the Clean Energy Act, BC Hydro couldn’t include gas-fired electricity in any of its scenarios presented to the Site C panel — even though the LNG industry can now burn gas willy-nilly.

That means natural gas facilities like Burrard Thermal, which has similar capacity to Site C, couldn’t even be considered as an intermittent source of power for times when electricity demand peaks.

With a price tag of $7.9 billion, Site C is the most expensive infrastructure project on the books in Canada — and could be the largest public expenditure in B.C. for the next 20 years. Meantime, the lower impact, more affordable alternative of geothermal power hasn’t been placed on the table by BC Hydro due only to the province’s “failure to pursue research over the last 30 years,” according to the panel.

If the province approves Site C this fall and it actually gets built, the project is expected to chalk up $800 million in losses in the first four years due to a lack of market for its power — and it’s BC Hydro customers (pssst … that’s you and me) who will be on the hook for covering the loss.

While British Columbians are picking up the tab for that, the LNG industry will be enjoying a free pass to pollute.

It’s high time for Clark to force the LNG industry to play by the same rules as the rest of us — and, for her own sake, she’d better do that before British Columbians cotton on to the fact she’s trying to sneak an oilsands-sized pollution problem below the radar while sticking British Columbians with a pricy and impractical megadam.

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Major industrial power users in British Columbia fear that if the proposed Site C dam becomes a reality, rate hikes could put mills and mines out of business while saddling taxpayers with a costly white elephant and ballooning BC Hydro debt.

A decision on the $7.9 billion plan to build a third hydroelectric dam on the Peace River will be made by the federal and provincial governments this fall.

Economic questions about the mega-project were raised by last month’s joint review panel report, which noted the dam would likely be “the largest provincial public expenditure of the next 20 years.”

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The panel, which did not come out for or against the project, found that, based on cost comparisons provided by BC Hydro, Site C would be the most economical way to provide new power — but said it could not measure the true cost or need and recommended the B.C. Utilities Commission should look at it, an idea immediately dismissed by Energy Minister Bill Bennett. (The commission turned down the Site C project in the early ’80s.)

Strong opposition to Site C is now coming from the unlikely direction of the Association of Major Power Customers of B.C., an organization representing about 20 of the largest employers and industrial customers in the province.

“We have absolutely no confidence that this is the least cost plan,” association executive director Richard Stout told DeSmog Canada.

“It’s not the right project right now”

Major industrial power users in B.C. have seen a 50 per cent increase in rates over the last five years and are looking at another 50 per cent over the next five years, he said.

“It is unusual for us to criticize a government of this stripe, but BC Hydro has been out of control for a good 10 years,” Stout said, pointing to almost $5-billion in deferred accounts.

“Any other business would have been declared bankrupt by now,” he said.

Site C will take a decade to build and, with changing markets and a burgeoning natural gas industry causing a surplus of generating capacity in North America, it is almost impossible to accurately predict demand and prices, Stout said.

“All we know is the original load forecasts are going to be wrong,” he said. “It’s not the right project right now.”

Craig Thomson, energy and environment supervisor at Canfor Taylor pulp mill told DeSmog Canada that industry in B.C. was built with a foundation of low power rates, but in the last five years that has changed and Site C would be the final straw.

“I think the cost of hydro-electric dam construction is so astronomical that no one will ever do it again and we’re going to have this huge white elephant,” he said.

“Potentially it’s going to drive our industry out of business.”

B.C.’s natural gas hypocrisy

Doubts are growing about cost comparisons made by BC Hydro, which didn’t include the use of gas power because the 2010 Clean Energy Act demands that 93 per cent of the province’s energy needs be met by clean, renewable power.

The act effectively eliminated the use of gas turbines and sent the gas-fired Burrard Thermal generating station into early retirement.

But the province has now handed a Clean Energy Act exemption to the liquefied natural gas (LNG) industry, a move that allows gas plants to meet their massive power needs with natural gas. Meantime, BC Hydro is prevented from using natural gas even as a backup to renewables.

“It’s really hypocritical to allow them [LNG facilities] to burn gas,” Merran Smith at Clean Energy Canada told DeSmog Canada. “The carbon emissions, as well as the air pollution, are inconsistent with the province’s goals.”

“Gas is a fossil fuel. It may be cleaner than coal or oil, but it still has a heavy carbon footprint.”

Should gas turbines be allowed for backup power?

Like many others, Stout believes alternatives to Site C should be considered, including the use of gas turbines as an intermittent source of power — something that would first need the government to change the Clean Energy Act.

Thomson is looking at new technologies coming on stream and, in the meantime, Burrard Thermal, with a similar capacity to Site C, could provide sufficient intermittent power, he suggested.

“Electricity is 32 per cent of our operating cost and, if it goes up and up, someone is going to say the business is not viable and the doors will close,” he warned.

Energy economics expert Marvin Shaffer, adjunct professor at Simon Fraser University, believes Burrard Thermal should never have been eliminated as a source of backup energy.

“I’m not suggesting that an old, relatively inefficient plant like Burrard should be used as a base load facility. What Burrard can do is provide a very cost-effective backup to the hydro system as well as back-up peak capacity exactly where it might be required,” Shaffer said.

Burrard Thermal generating station was sent into early retirement with the introduction of the 2010 Clean Energy Act. Credit: Niall Williams via Flickr.

With Burrard in place, B.C. would have no shortfall of energy until 2033 and, even without Burrard, strategically placed gas thermal plants could supply low cost energy as needed, he said.

Faced with Site C as the alternative to intermittently using gas turbines, even Joe Foy of the Wilderness Committee comes down on the side of occasional gas use.

“It seems a better solution than drowning 100 kilometres of farmland when you don’t even need that power for 300 days of the year,” he said.

Oxford study: Dams routinely come in 90% over budget

Many also have concerns that, when costs such as transmission lines are factored in, Site C’s cost will soar above $7.9 billion.

Fears that costs will run amuck are backed by an Oxford University study of power dams that found construction costs of large dams are, on average, more than 90 per cent higher than their budgets.

Mark Winfield, associate professor in the environmental studies faculty at York University, sees parallels between Site C and costly nuclear power plant plans in Ontario.

“Large hydro projects like Site C and nuclear power plant construction or refurbishment reflect a focus on large, centralized, high-cost, high-risk, high-environmental impact, long-lived generating infrastructure,” he said.

That limits opportunities for the system to adapt to market changes and sets the focus on only one path, Winfield said.

“In both cases there are significant uncertainties about future demand and, therefore, substantial risk of making major investments in projects which may turn out not to be needed or which are overtaken by newer, better technologies,” he said.

Site C’s legacy: cheap power or wealth destruction?

Dan Potts, former executive director of the Association of Major Power Customers of B.C., believes the lasting legacy of Site C would be wealth destruction.

“The huge cost will rob the province of valuable resources that could be used to deliver other needed government services as well as burden the B.C. economy with debt and high electric power rates that will sap our competitiveness,” he said.

Times have changed from when previous dams were built on the Peace and Columbia Rivers, said Potts, who has calculated that gas prices would have to almost quadruple before power from Site C would be economically viable for export.

“B.C. Hydro has filed information that the cost of electric power from Site C will be in the range of $100 per megawatt hour. Current market prices are in the range of $30 per megawatt hour. If Site C were now operational, the market value of the power produced would be $350 million per year less than the cost,” Potts said.

Site C will lose $800 million in first four years: report

The possibility of exporting excess power to help fund the dam was discounted by the joint review panel, which predicted that, unless prices changed radically, B.C. Hydro operations would lose $800-million in the first four years of operations:

These losses would come home to B.C. ratepayers in one way or another. B.C. Hydro’s expectation is that it might sell Site C surpluses for only about one-third of costs, leaving B.C. ratepayers to pay for the rest.

But the panel also says that Site C, after an initial burst of expenditure, would lock in low rates for decades and produce fewer greenhouse gas emissions than other sources.

Ignoring the Clean Energy Act is not an option for BC Hydro and there is no doubt Site C compares favourably to other clean energy costs, said Hydro spokesman Dave Conway. In comparison to Site C power at $100 per megawatt hour, new generation from wind or micro-hydro comes in at $128 per megawatt hour, he said.

However, the panel noted that geothermal energy would cost about the same as Site C power — and as a firm source of power could present a viable alternative to the dam. Geothermal could be built incrementally to meet demand, eliminating the early-year losses of Site C, the panel noted.

Even without Site C, customers are looking at a 28 per cent increase in rates over the next five years, but British Columbians should bear in mind that they are paying one of the four lowest energy rates in North America, Conway said.

However, Foy would like all British Columbians to consider what else could be done with almost $8-billion.

“Maybe better education for kids or health care?” he asked.

“If we spend $8-billion on Site C, what community doesn’t get a health care facility?”

Image Credit: An area of the Peace River Valley threatened by Site C. Photo by tuchodi via Flickr.

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