MARCH 1, 2021 - VANCOUVER, BC – Today, PVLA released the report, “Reassessment of Site C Financial Viability” by Robert McCullough, a highly respected economist and expert on power projects. This report, following the recent release of Peter Milburn’s findings, updates McCullough’s October 2020 analysis of Site C cost estimates and financial viability. PVLA President Ken Boon: “The Peter Milburn Report confirmed what we have suspected since Premier Horgan green lighted this project in 2017 - Site C is a case study in failed project management and financial oversight.” “Robert McCullough’s new report outlines the flawed economic calculus and impending huge cost to BC ratepayers (you and me) of completing the Site C dam.” “We urge the BC government to direct the BC Utilities Commission to make an expedited, unfettered review, with full procedural safeguards, of
the estimated $10.2 billion cost to terminate Site C, and
repayment options, with a view to minimizing the impact on BC ratepayers.
Only then, can British Columbians be assured that there is no alternative but to saddle future generations with the most expensive power in North America.”
McCullough’s updated report highlights:
The most expensive single dam in Canadian history [Report Page 1]
At roughly twice its initial cost, Site C now has the distinction of not only being the most expensive hydro dam project in BC history, but at C $16 billion, with no assurance this will be the final cost, the most expensive single dam in Canadian history.
Unfortunately, this makes Site C the most expensive – both in terms of gross costs and costs per megawatt-hour - of the three troubled projects currently underway in Canada. Site C now outpaces the Keeyask project in Manitoba and the Muskrat Falls project in Newfoundland in both delay and cost.
Site C electricity will cost BC ratepayers roughly 3 times more than other sources [Report Page 2]
If Site C is completed for C$16 billion, BC ratepayers will pay roughly 3 times as much for Site C electricity as they would if BC Hydro bought the electricity from other suppliers.
BC Hydro will lose 72 cents on every dollar of Site C power it exports [Report Page 2]
If Site C is completed and there is no increased demand for the electricity, which is the view of many experts, BC Hydro will lose C$97.76 or 72.5% on each MWh it sells into the market.
The BC Government’s analysis of cancellation costs and repayment timetable is incomplete and flawed. [Report Page 3]
The BC government, apparently on the advice of BC Hydro, asserts that applicable regulatory law requires Site C cancellation costs of $10.2 billion to be written off within 10 years, putting the finances and Triple A credit rating of the province at risk, not to mention burdening current ratepayers.
The McCullough report finds that this is wrong. One alternative, for example, is for the BC government to take this debt off BC Hydro’s books and pay off the debt over a long period of time thus minimizing the impact on BC ratepayers and taxpayers.
Importantly, Site C is only 35% complete, and so the BC government still has an opportunity to avoid as much as it can of the remaining 65% or $10.5 billion in project costs.
The BC Government does not justify the $10.2 billion cancellation cost estimate and ignores the sunk cost fallacy. [Report Page 4]
The BC government has not presented a detailed breakdown and justification for the $10.2 billion cost estimate to cancel Site C. Nor is there any discussion of possible mitigation strategies to reduce this cost. Ignoring the sunk cost fallacy, the BC Government justifies proceeding on the basis that this $10.2 billion would otherwise be thrown away.
The BC government should direct the BC Utilities Commission to review Site cancellation costs and debt repayment options. [Page 4]
Most North American jurisdictions refer projects such as Site C to an independent body with the power to review and call experts to shine light on the project costs and implications and make orders to protect ratepayers. Site C cancellation costs and repayment options have not received nearly enough independent scrutiny.
Given the scale of the mismanagement to date, a financially prudent government would refer the issue of cost of cancellation and repayment of outstanding debt to the independent BC Utilities Commission for expedited review. After all, it will be the BC Utilities Commission that will set the rates to repay the debt, if Site C is completed. Please click below for:
McCullough Research, February 28 2021 - Reassessment of Site C Financial Viability – Updating Site C Cost Estimates for Seismic and Design Changes as of Feb 26, 2021
McCullough Research, October 2020 – Reassessment of Site C Financial Viability
---- For further information, please contact: Ken Boon, President, PVLA - 250.262.9014 | firstname.lastname@example.org Robert McCullough, Principal, McCullough Research - 503.777.4616 | Robert@mresearch.com