Infrastructure spending needs to be a top priority in any provincial government review of BC Hydro.
The Crown power corporation has rightly pointed out that upgrading an electricity system that was built, in large part, during the 1960s, 1970s and 1980s requires significant investment, and, for the most part, Hydro has executed capital projects on budget.
Its most recent financial report notes that 493 have been delivered over the past five years at a cost of $6.9 billion – roughly 0.4% over budget overall.
That’s reasonable.
What’s not reasonable, however, is the more than $10 billion being
invested in the Site C dam project.
Numbers in Hydro’s 2017-18 annual report continue to confirm that Site C power will be far more expensive than any break-even return for Hydro, B.C. and ratepayers.
For example, even though the price per megawatt hour (MW-h) from domestic sources is up 4.8% to $91.04 from $86.90 compared with the previous year, the estimated break-even rate for Site C at what will likely be a price tag closer to $12 billion will be around $125 per MW-h.
Revenue from exports into a North American grid that now has an abundance of cheap natural gas-generated power is also up, but only 4% to $34.76 per MW-h.
Hydro is, of course, playing the long game here. Power from Site C is not scheduled to come on stream until 2024. The price paid for power then might be much higher than it is now. But advances in technology for natural gas and other power generation coupled with energy efficiency improvements will have much to say about market pricing.
Meanwhile, power demand predictions used to justify Site C have been overly optimistic and industrial customer demand looks to be far less than estimates even five years ago would have forecast. In addition, Hydro’s electricity requirements to meet customer needs have dropped approximately 11% over the past five years.
Building a dam is a massive engineering and financial gamble. For B.C., the odds on winning that gamble remain poor.
