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VANCOUVER, B.C. — BC Hydro’s President and COO Chris O’Riley says that Hydro will miss the deadline to divert the Peace River by at least one year, causing an increase in the budget of the Site C dam by over $600 million.
Thursday O’Riley issued a response to questions by the B.C. Utilities Commission that were raised by the Commission after two reports by Deloitte were released on September 8th. In his letter, O’Riley stated that BC Hydro has encountered some geotechnical and construction challenges on the project, and those challenges have meant the river won’t be diverted by September 2019.
On September 27th, BC Hydro met with Peace River Hydro Partners, the dam’s Main Civil Works contractor, and heard that PRHP will not be able to meet the current timeline for river diversion in 2019. Despite this, O’Riley added that while that delay will set some activities back a year, BC Hydro had a one-year float built into its schedule, adding that Hydro is confident that it can still get Site C built on time by November 2024.
According to O’Riley’s letter, the delay of one year has caused BC Hydro to re-estimate the project’s cost by an increase of 7.3 percent, or $610 million. That would put the total cost of Site C at $8.945 billion. O’Riley added that BC Hydro’s contingency fund has been retained and remains available.
O’Riley also admitted in his letter that BC Hydro expects to continue to face risks in other areas, including during procurement of the Generating Station and Spillway contract, which is estimated to cost over $1.2 billion.
O’Riley added that despite those challenges, he still said in his letter that Hydro’s analysis “continues to confirm that completing Site C as planned is still the most cost-effective option for our customers. Suspending, or terminating and finding the power we need from other sources – which carries its own set of uncertainties – would cost billions more than completing Site C.”
O’Riley’s entire letter reads as follows:
Dear Mr. Wruck:
RE: British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Site C Inquiry – Round 2 Information Responses
I write to submit further BC Hydro responses to the questions set out in the British Columbia Utilities Commission’s Preliminary Report issued on September 20, 2017.
It has been very important to us in this process to be forthcoming with timely and accurate information. Today’s filing provides an opportunity for us to share new information with the Commission and the public.
Like all large, complex projects, Site C faces risks and uncertainties. In our quarterly progress reports to the Commission and in our August 30, 2017 filing, we identified risks that could result in greater cost pressures for the project, including risks to the river diversion timeline. Deloitte identified those same risks in the report it delivered on September 8, 2017.
BC Hydro has encountered some geotechnical and construction challenges on the project and the risk to the river diversion timeline has now materialized. Based on the recent completion of a constructability review and an executive meeting with our Main Civil Works contractor on September 27, 2017, we have now determined that we will not be able to meet the current timeline for river diversion in 2019. While this will set some activities back a year, we had a one-year float built into our schedule and are confident we can still deliver this project on time, by November 2024.
Not meeting the current river diversion timeline has created new pressures on the project’s budget. We estimate that this development in the project is expected to increase its cost by 7.3 per cent or $610 million, for a total forecast project cost of $8.945 billion. We’ve retained the contingency and it remains available to prudently manage risks on the project.
Due to the project’s complexity, we expect to continue to face risks in other areas, including our second largest procurement (i.e. the Generating Station and Spillway) that remains open and the highway realignment. We will work to mitigate those challenges.
Despite the challenges we have encountered and the risks that remain, our analysis continues to confirm that completing Site C as planned is still the most cost-effective option for our customers. Suspending, or terminating and finding the power we need from other sources – which carries its own set of uncertainties – would cost billions more than completing Site C.
We work every day to ensure that we are acting in the best interest of our customers. We remain committed to Site C and are confident in our ability to deliver the project. Site C continues to be the best option to provide a long-term supply of low cost, clean energy to British Columbians.
I will be at the Technical Panel Session on October 14, 2017, along with other BC Hydro subject matter experts, to answer the Commission Panel’s questions on this submission or any other matters to assist the Commission in its final report in this Inquiry.
President and Chief Operating Officer
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