December 11, 2017
Thank you for calling, visiting my office, and writing to me about the Site C dam.
The decision to proceed with the Site C project taken by our government today is not a happy one.
The strategies of the previous government to avoid oversight and push the project “past the point of no return” with the hope, achieved, of visiting financial ruin on the books of any government that would seek to cancel it, are unforgivable.
As you know, for several years I have been a critic of the Site C dam project. The previous government’s enthusiasm for this hydro project failed to recognize the massive and disruptive changes taking place in electricity generation and distribution and proposed billions in public spending for power demand that is at best uncertain. They pushed ahead over the objections of at least one First Nation in the area and shrugged at the destruction of valuable farmland in the Peace. Avoiding any independent review and oversight, the previous government made sure that this megaproject was well underway in May.
With all of this in mind, during the election we committed to send the Site C project for review to the BC Utilities Commission for advice on how to move forward.
The Utilities Commission reported back to us and to the public, that in their opinion terminating Site C and implementing a portfolio of alternative generation technologies would have comparable public and ratepayer costs to continuing with the Site C project.
That was very hopeful news.
In response, our government took the Utilities Commission’s information to experts in the Ministry of Finance for analysis about what options were available.
Devastatingly, at this stage we received unambiguous advice that while the net cost of the termination and continuation scenarios were broadly similar in the BCUC’s initial analysis, the accounting treatment of the two models was dramatically different. In particular, we were told that if we abandoned the Site C project, $3-4bn would have to be recovered from today’s BC Hydro ratepayers or government would incur an immediate write down of 3-4bn.
In contrast, we were advised that if we continued the project, even if it went significantly over budget, the accounting treatment of the completed project as a “revenue producing asset” would enable it to be repaid over 70 years by ratepayers with a significantly different impact on rates and on the public accounts of BC Hydro and the government.
There were two options we examined in a Site C termination scenario: funding the termination charge and debt through the government’s public accounts (taxpayers), or funding the termination charge and debt through BC Hydro (ratepayers).
In either scenario, the real world implications of the financial advice we received were dramatic.
For the first option, public financing of the immediate $3-4bn charge would mean $125-150m in new annual debt service charges to government, effective immediately on termination. This charge would reduce spending room for promised progress on childcare and many other government and public priorities.
Public financing of termination would similarly mean that billions in capital funding currently intended to be spent on critical public infrastructure like hospitals, school seismic upgrading, and transit would be consumed entirely on Site C, with no matching asset created. If we proceeded with our capital spending plans despite incurring this charge, there was high risk that our debt credit rating would erode, bringing with it additional increased interest charges for taxpayers and even more pressure against our other spending priorities.
Leaving the $4bn charge and debt with Hydro so ratepayers could finance it, with no matching asset, was no better. This approach would result in an acute risk that all of Hydro’s debt would no longer be considered “commercial” by bond raters. If BC Hydro’s overall $20bn in debt was suddenly reclassified as taxpayer-supported debt, it would be catastrophic for any hope of building the kind of province we need to build.
Thank you for writing to me about this important issue. I brought your voice to Victoria to speak against the project, and in favour of terminating. However, the costs of termination were ultimately too high for a government committed to making life better and more affordable for British Columbians. I hope that, while you may not agree with the decision, you may now understand how it was reached.