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.*

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Fast-tracking Site C dam construction before May’s provincial election is an unusual decision driven more by politics than need, according to a Canadian expert in Crown corporations who suggests the relationship between BC Hydro and the Premier’s office may be “too close for comfort.”

Luc Bernier, the former head of the Institute of Public Administration of Canada, said Premier Christy Clark’s vow to push Site C past the “point of no return,” when B.C. has a surplus of electricity and Clark is still searching for a buyer for Site C’s power, leads him to believe that that “there’s too much politics around BC Hydro.”

“What seems unusual to me is the idea of locking up this project before the provincial election,” said Bernier, who holds the Jarislowsky Chair in Public Sector Management at the University of Ottawa.

“If B.C. doesn’t need the electricity for the next decade or so there’s no emergency to build it…The only emergency in this project is the coming election.”

BC Hydro’s Site C spokesperson Dave Conway has said Site C’s power may not be needed for up to 40 years.

Flat Demand Could Make Site C ‘Nightmarish Project’

Demand for electricity has been falling in B.C. since 2008, and the B.C. government now says it wants to sell Site C’s power to Alberta to electrify the oilsands, a move that Harry Swain, chair of the Joint Review Panel that examined Site C for the federal and provincial governments, called an “act of desperation.”

Swain pointed out that BC Hydro never mentioned Alberta as a potential market for Site C’s power in its application for an environmental assessment certificate for the project.

Earlier, high electricity demand from anticipated Liquefied Natural Gas (LNG) production was one of the reasons the B.C. government gave for building Site C. That demand has never materialized.

Given that B.C. has so much power that BC Hydro is paying independent power producers millions of dollars a year not to produce electricity, Clark is now counting on federal taxpayers to share the cost of a proposed $1 billion transmission line to send Site C’s power to Alberta, although Alberta has not yet committed to buying the electricity.

“If you don’t need the electricity you’re going to have a bill for nine billion dollars for a dam you don’t need,” Bernier said in an interview, pointing out that another large hydroelectricity project, the Muskrat Falls dam in Labrador, has become a financial boondoggle, in part because its power is not required.

“It’s not going to be a profitable project, it’s going to be a nightmarish project,” Bernier said of Muskrat Falls, which will add an average of $1,800 to the annual hydro bill of every customer in Newfoundland and Labrador.

Economist Jim Brander, a professor at UBC’s Sauders School of Business, said BC Hydro’s technical staff, not politicians, should make the decision about the need to push Site C past the point of no return, based on questions such as electricity demand and the dam’s projected rate of return.

A Crown corporation’s senior management should be arms-length from political issues, so that decisions can be made on a technical basis and not for political reasons, Brander said in an interview.

“We think that it leads to better management when the managers are able to be managers and not politicians.”

Like Bernier, Brander has concerns about the connections between BC Hydro and the Premier’s office, saying it is too close for the appearance of good governance and integrity.

Premier’s Office Involvement in BC Hydro Media Relations ‘Very Rare’

While both experts said any government would want oversight of a project as large as Site C, the Premier’s office’s direct involvement in BC Hydro’s media relations is “very rare” and the close connection between BC Hydro and the Premier’s office “makes me uncomfortable,” said Brander, who personally believes Site C’s power will eventually be needed.

“Even if there is nothing wrong, it doesn’t look good if the managers of the Crown corporation are too close to members of the government, just for the sake of appearances. And appearances are important, because it’s very important that people believe that these governance purposes are honest and legitimate.”

Besties? @BCHydro and Premier’s Office Too Close for Comfort, Experts Suggest https://t.co/EE3uNaJwC1 #bcpoli #bcelxn17 #SiteC

— DeSmog Canada (@DeSmogCanada) January 31, 2017

BC Hydro Directors Closely Linked to BC Liberals

Brad Bennett, the Kelowna businessman Clark appointed in September 2015 to chair BC Hydro’s board of directors, was a chief advisor to Clark during her 2013 election campaign and toured the province with the premier.

In September, the BC Hydro board chair nominated Clark to run for the B.C. Liberals in the premier’s riding of West Kelowna. He spoke in Clark’s support as she was acclaimed and posed with the premier behind a “Re-elect Christy Clark” banner.

“We’re going to be heading into a [election] campaign in April,” Bennett told members of the B.C. Liberal Party and the community. “Our biggest enemy when things are feeling good isn’t the NDP necessarily, it’s apathy within our own ranks.”

Bennett is the president of McIntosh Properties Ltd., a real estate investment and private equity investment company that donated more than $30,000 to the B.C. Liberal Party from 2005 to August 2015, according to Elections BC.

He is the son of former B.C. Premier Bill Bennett, whose plans to build Site C in the early 80s were turned down by the quasi-judicial B.C. Utilities Commission, saying that B.C. did not need the power at the time.

It was at the former premier’s funeral last January that Clark made her vow to finish what Bill Bennett had started and hustle Site C past the “point of no return.”

Brad Bennett is also the grandson of W.A.C. Bennett, who built the first dam on the Peace River and named it after himself. W.A.C. Bennett planned the Peace Canyon Dam that, along with his namesake’s larger dam, supplies about one-third of BC Hydro electricity, and he also proposed to build Site C, the third dam on the Peace River, a designated B.C. heritage river.

The connections between BC Hydro and the Premier’s office extend further than the Bennett family.

Six of 10 members of BC Hydro’s board or directors appear as donors to the BC Liberal party in the province’s online political donations database — although it is possible the donations were made by other people with the exact same names.

The name of a seventh Hydro board member is listed as the principal officer for a company that donated to the Liberals. An eighth Hydro board member, Jack Weisgerber, is a former Liberal MLA who was the Minister of Energy and Mines in the Campbell administration and also worked as a BC Hydro consultant on Site C from 2007 to 2014.

BC Hydro’s CEO is Jessica McDonald, who served as deputy minister to former B.C. Premier Gordon Campbell — the person responsible for resurrecting Site C after BC Hydro’s board of directors announced in 1993 that the project would be shelved permanently because it was too expensive, too environmentally destructive and too damaging for First Nations.

Campbell’s government changed the law to exempt Site C from review by the watchdog B.C. Utilities Commission, which traditionally has examined power projects to ensure they are in the public interest.

While McDonald had no experience in the energy sector, she previously headed B.C.’s public service, managing 36,000 employees and overseeing an annual budget of $40 billion.

McDonald’s ex-husband Mike McDonald is Clark’s former chief of staff. He is heading the B.C. Liberal’s re-election campaign this spring, after leading their 2013 election campaign and Clark’s bid for leadership of the B.C. Liberal Party.

Mike McDonald is a senior associate at Kirk & Co., one of B.C.’s top communications firms, which received a six-year Site C contract for communications, consultation and community relations. (The contract ended in 2013, the same year that Mike McDonald joined the firm after working closely with them for the previous decade, according to the Kirk & Co. website, and prior to Jessica McDonald’s 2014 appointment as head of BC Hydro).

“I’m not sure if it’s not too close for comfort,” said Bernier, who directs the Centre for Research on Governance at Quebec’s National School of Public Administration.

“If we were talking about Prince Edward Island with 240,000 people living there, everyone is related to everyone. Is it necessary in 2017 in B.C. to be that close?”

In the absence of a demonstrated need for Site C’s power, Clark’s team talks mainly about the jobs that will be created by the $8.8 billion dam, which as the largest publicly funded project in B.C.’s history will be paid for with money out of British Columbians’ own pockets.

Clark’s Jobs Promises Coming Up Empty

Job creation has become an issue of paramount importance heading into the B.C. election campaign. Virtually none of the 100,000 jobs Clark promised in the Liquefied Natural Gas (LNG) industry have materialized and the premier’s much-touted jobs plan has failed to produce employment gains outside the Lower Mainland and Capital Regional District.

When Clark announced provincial Cabinet approval of Site C in December 2014, she promised, to little scrutiny, that the project would create 10,000 direct construction jobs.

By the end of November, according to BC Hydro, Site C employed close to 1,800 people, including in service jobs such as housing and kitchen work at the $470 million Site C workers accommodation facility in Fort St. John. About 650 of the workers were from the Peace River area.

Site C’s November employment tally includes more than 400 jobs in engineering and on Site C’s Project Team, including at BC Hydro’s head office in Vancouver, and more than 50 contract professional and office managers and supervisors.

BC Hydro said Site C will create “many more jobs” in the coming months and years, but how many of those will be construction jobs remains to be seen.

Clark has repeatedly said Site C will be delivered on budget, a statement questioned by former BC Hydro CEO Marc Eliesen, who called the project a “white elephant” and said it could have disastrous consequences for B.C. hydro rates, already in the middle of a scheduled 28 per cent increase over five years.

BC Hydro points out that B.C.’s electricity rates are still among the lowest in North America, saying that the planned rate increases are needed to replace aging infrastructure and invest in new projects to meet what the Crown corporation calls a “growing demand for power” in its communications materials.

The Joint Review Panel that examined Site C concluded that BC Hydro had not demonstrated the need for the dam’s power in the timeframe it presented, and recommended the project be referred to the B.C. Utilities Commission for an independent review of the need for Site C’s electricity and the project’s cost.

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