Under BC Liberals, big projects often double in cost…Why would Site C Dam be any different?

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Seeing red: The roof on BC Place Stadium is just one of many cost overruns on the BC Liberals’ watch

Posted July 17, 2014 by Damien Gillis in Economics

Oh, for the days of the fast ferries…compared to what we have now.

Most British Columbians will recall Premier Glen Clark’s late 1990’s boondoggle, which saw the construction of three new coastal vessels balloon from a projected $210 million to nearly $460 million.

How could we forget? After the relentless salvos from pundits like Vaughan Palmer and Mike Smyth led to the NDP government’s collapse, in every election cycle since, the incumbent BC Liberals have dragged out these ghost ships to bolster their own economic credentials. To Gordon Campbell and Christy Clark, the fast ferries are the gift that keeps on giving.

Liberal fiscal record sets new lows

The Fast ferries scandal sank the NDP

The only problem is the Liberals’ own fiscal fiascos absolutely dwarf those of their NDP predecessors – though they’re consistently able to get away with it.

Sure, Mr. Palmer has poked holes in the government’s laughable election promise of a debt-free BC and raised red flags over the government’s routine cost overruns, but the pundits’ knives have been decidedly less sharp over the past 13 years. Unlike the NDP, Liberal governments face no real consequences for their misdeeds.

With the Liberals on track to double the $34 Billion provincial debt they inherited from what history would now suggest was a surprisingly restrained NDP, it’s high time for an update to their fiscal report card. (That debt doesn’t even include an additional $100 Billion in contractual taxpayer obligations, like private power contracts, which they’ve swept under rug).

This is especially important with projects like the $8 Billion proposed Site C Dam currently under review (and if you believe that sticker price, I’ve got some pond-front property in northern Alberta you may be interested in).

In the real world, budgets don’t double

On that last point, Fort St. John businessman Bob Fedderly put the Liberals’ woeful record of project management in perspective when I interviewed him recently about Site C, which he and a growing number of businesspeople are opposed to.

“If you look back over the last 10 or 12 years to every project of any magnitude, it’s ballooned right out of proportion – two times, three times is not uncommon,” Fedderly noted. “This is a pattern that’s appearing on project cost management.”

Contrasting the government’s track record with his own companies’ construction projects, he acknowledged a 10% margin for error was acceptable – but no more than that.

In the real world of people building houses, they don’t double in price.

How bad is the government’s legacy with major capital projects? Pretty darned awful. Here are a few lowlights:

1. Port Mann Bridge/Hwy 1 widening: 550% of initial estimate

Artist's drawing of new Port Mann Bridge

According to The Canadian Taxpayers’ Federation, “Originally, the government said the cost of improvements to the Port Mann would be $600 million. That ballooned to $1.5 billion in 2006 when the government announced it would twin the bridge. Now, the total cost of the project is expected to be $3.3 billion” (that’s $2.46 Billion, rising to $3.3 Billion including operation and maintenance costs).

Extra demerits for a serious design flaw that led to falling ice bombs, putting passengers at risk and ringing up $400,000 in insurance claims for ICBC.

2.  BC Place Stadium roof upgrade: 514% of initial estimate

While the official line is that the upgrade to BC Place Stadium skyrocketed from $365 to $514 million, a January 2008 letter from operator PAVCO’s Chairman David Podmore to Vancouver City Manager Judy Rogers pegged the total cost at just $100 million. I’m no architect, but that seems like a reasonable price, whereas $514 million does not. After all, Seattle built a perfectly good stadium for its Seahawks in 2002 for just $360 million. All we got is a roof.

Extra demerits for design flaws which restricted the retractable roof’s ability to…well, retract.

3. Northwest Transmission Line: 182% of initial estimate

Crown corporation BC Hydro’s construction of the Northwest Transmission Line – designed to power an assortment of proposed mines in the Sacred Headwaters region of the province – has nearly doubled from initial estimates of $404 million to the most recent tally of $736 million (expect the final number to be considerably higher).

Extra demerits for management error that could cost BC $130 million in federal “green infrastructure” support for the project. The Liberal government received the grant to electrify the village of Iskut, getting it off diesel power. All the province had to do was file a plan for the spur with the feds by June 30, 2012 – but it missed its deadline by nearly a year, meaning that, technically, the BC public is on the hook to repay the entire $130 million.

4. Vancouver Convention Centre: 178% of initial estimate

The Vancouver Convention Centre (Wikipedia)

For all its LEED certifications and architectural attributes, the Vancouver Convention Centre also exploded from estimates of under $500 million to nearly $900 million by its 2009 completion.

What’s worse, all this could have been avoided if the Liberal government simply followed its own critique of the NDP’s fast ferries experience – namely, not having people without construction experience overseeing the project (i.e. Liberal powerbroker Ken Dobell) and being sure to have finalized plans for the contractor to execute. Lacking the latter, a fixed-price contract proved impossible to nail down.

5. South Fraser Perimeter Road: 169% of initial estimate

Perhaps the only way for the Liberal government to assert it’s on time and on budget with a major project is to lie about it, as this unnecessary, convoluted truck highway through Delta and Surrey demonstrates. Laila Yuile, a blogger and one of the province’s shrewdest transportation project watchdogs, recalled last year that initial estimates for the project ranged from $700-800 million.

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By the time it was completed in 2013, it was a year late and the cost had risen to $1.264 Billion – significantly more than a revised estimate of around a billion dollars. But that didn’t stop the government from boasting that its project was “on time and on budget”. As Vaughan Palmer quipped at the time, “Regular readers of this space will be familiar with the more flexible approach that the B.C. Liberals have taken toward the concept of being on time and on budget.”

Why won’t the NDP stand up for itself?

Perhaps the biggest mystery in all of this is the NDP opposition’s failure to call the government out for its dismal fiscal record. How “Mr. Nice Guy” Adrian Dix saw fit to let the Liberals off the hook for this series of blunders that make the fast ferry overruns look like pocket change is baffling. It cost them the last election, as I noted in the aftermath of that sorry affair.

Liberal record a harbinger of Site C boondoggle

Alberta concerned about downstream impacts of BC's Site C Dam proposal

These numbers and examples of the Liberals’ fiscal ineptitude should be of real concern to BC taxpayers today as we ponder projects like Site C Dam – whose $8 Billion estimate (making it one of the highest-priced  government infrastructure undertakings in Canadian history) is surely only the tip of the iceberg. Dams, as a rule, are highly prone to cost overruns – the World Bank estimates an average of 27% around the globe.

This is a project that will not serve the homes and businesses of BC, which are already self-sufficient in electricity far into the foreseeable future – rather, we’re told it’s to power liquefied natural gas production or to export to California (likely at a considerable loss for some time).

When you factor in the usual Liberal premium of doubling the cost, it’s not hard to see how this dam could sink us in more ways than one.

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About the Author

Damien Gillis

 

Damien Gillis is a Vancouver-based documentary filmmaker with a focus on environmental and social justice issues – especially relating to water, energy, and saving Canada’s wild salmon – working with many environmental organizations in BC and around the world. He is the co-founder, along with Rafe Mair, of The Common Sense Canadian, and a board member of both the BC Environmental Network and the Haig-Brown Institute.

 

BC Hydro being used to funnel tens of billions to Liberal friends

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BC Hydro being used to funnel tens of billions to Liberal friends

Posted April 26, 2016 by Common Sense Canadian in WATER

By Norman Farrell – republished from In-sights

Readers may tire of reports on BC Hydro but the more I examine this public utility, the more convinced I am that citizens of BC are victims of massive financial deception.

In 20 years leading up to 1996, BC Hydro’s average annual revenue from trading in North American electricity markets was $115 million. In three years ended March 2003, the utility realized gross trading revenue of  $11.25 billion, although that sum was tempered by the $1 billion or so BC Hydro paid to end a subsequent lawsuit by California.

Transferring risk

Construction of a private power project on the Ashlu River (Photo: Range Life)

Although the American power market had been manipulated by Enron and other criminal fixers, Gordon Campbell and his colleagues believed that British Columbia could become a permanent power supplier to the western USA. Liberals wanted the electricity to be created by private operators, but it was soon clear that private entrepreneurs were not prepared to take significant financial risks.

The provincial government was determined to proceed so it decided that BC Hydro would sign long-term contracts to purchase power produced by independents at prices that made projects attractive to investors. This effectively transferred all business risks from private operators to the public. While dumb, it’s a fairly common occurrence today when governments are keen to be seen as business-friendly.

Compounding the situation was the Liberals’ misjudgment of future markets because they didn’t anticipate improved technologies and growing availability and affordability of alternative power. Consumption efficiencies, declining heavy industries and falling costs of solar and wind permanently changed the energy industries.

A losing proposition

BC Hydro has contracted with independent power producers for increasing quantities at prices adjusted upwards each year for inflation. But, domestic demand has been flat for a decade and the export market in the last five years has returned only 2.8¢ per KWh, a fraction of the 22.8¢ gained in the heyday of 2001.

Because it is buying each KWh from IPPs at over 9¢ but has no need for the total it must buy, BC Hydro is left with two choices. One is to generate less power in its own facilities and the other is to dump power outside the province at prices less than 1/3 of the amount IPPs are paid. BC Hydro is doing both.

Spending more to make less

power sourcesI’ve had utility defenders argue the company has never reduced its own output to accommodate private power so I reviewed sources of power reports for more than two decades. Here is a chart showing the last five years under Premier Clark’ leadership and the five years between 1996 and 2001.

The situation is not improving. In FY 2015, BC Hydro facilities generated 41,443 GWh of electricity. In FY 2001, those very same sites produced 49,940 GWh, which is 20% more.

However, here’s a vital point. In 2001, BC Hydro had assets of $12.6 billion. In 2015, assets had grown to $27.8 billion. The company has been spending heavily, allegedly to make the system more efficient. In fact, what is continuing is misappropriation of public wealth for the benefit of suppliers, contractors and other BC Liberal friends.

Some people believe the government intention is to privatize BC Hydro. However, I believe the present situation, with another $10 billion of public funds being thrown at Site C, is working just fine for Christy Clark, her cabinet colleagues and their sponsors.

Citizens should be asking for explanations, from politicians and the pro-media journalists who choose to ignore these facts.

A longtime blogger and publisher of In-sights, North Shore resident Norman Farrell has experience in a broad range of small business activities with a particular focus on accounting and financial management.

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