Letter to editor

Correcting the record on 70-year economic life for Site C

An article in Business in Vancouver (Taxpayers to be on hook for Site C dam until 2094, Oct. 31, 2016) is wrong to suggest that the 70-year economic life applied to Site C was not made public by BC Hydro. In fact, BC Hydro has provided this information publicly on the record countless times dating back to 2004.

The 70-year economic life has been discussed in multiple electricity planning documents, the Site C Business Case, the Site C Environmental Impact Statement and BC Hydro’s 2013 Integrated Resource Plan.

This 70-year economic life was also discussed in the Report of the Joint Review Panel in 2014. In that report, the Joint Review Panel concluded that: "Site C would be the least expensive of the alternatives, and its cost advantages would increase with the passing decades as inflation makes alternatives more costly."

Contrary to what is suggested in the BIV article, the difference in the economic life applied to Site C and independent power projects reflects their true costs to ratepayers. That is, for independent power projects, electricity purchase agreement (EPA) costs are recovered over a shorter period of time (e.g., 40 years, although this can vary based on negotiations with the producer) because the private contractor requires cost recovery within the term of the EPA.

For a long-term public asset like Site C that will last more than 100 years, the 70-year economic life reflects the weighted average depreciation term of the asset. Asset depreciation periods are based on standard accounting practice and the methodology is applied to other large hydro projects and approved by the BCUC. This amortization period also means that the costs for Site C are paid for by the ratepayers who are benefiting from the project.

Finally, intermittent resources like wind and run-of-river hydro are not always available to generate electricity (e.g., when the wind is not blowing or when the river is not running). As a result, they are not, on their own, an alternative to Site C since they may not be available to meet peak demand.

As a source of dependable and flexible electricity, Site C would support the development of renewable resources in B.C. by providing a reliable backup to intermittent resources. Other jurisdictions that are pursuing wind and run-of-river hydro usually need to include gas-fired generation to provide needed backup, a point not mentioned in the BIV article.

Dave Conway
Community Relations Manager, Site C

Background

BC Hydro has provided information about the 70-year economic life of Site C numerous times since it started evaluating the project in 2004. Below are some selected examples.

  • 2004 Integrated Electricity Plan

(Appendix F, Large Hydro and Resource Smart)
Reference in document: "[Site C] Project Life (years): 70 years"

  • Site C Feasibility Review: Stage 1 Completion Report, 2007

(Appendix 2, Financial Model Assumptions)
Reference in document: "Period of Evaluation: 70 years"

  • Site C Business Case Summary

(January 2013 and May 2014 Update, page 26)
Reference in document:  "For Site C, this calculation is performed for the 70-year planning life of the project. This 70-year period represents an appropriate evaluation period, however the project is expected to operate as long as it is maintained through regular investment of sustaining capital.”

  • Site C Environmental Impact Statement

(June 2013 Technical Memo: Project Costs, page 3)
Reference in document: "BC Hydro has assumed amortization of the project capital costs would take place over the financial planning life of the project (i.e., 70 years)."

  • 2013 Integrated Resource Plan

(Chapter 6 – Resource Planning Analysis)
Reference in document: "…the Site C F2024 ISD portfolio is shown to have rate savings compared to the no Site C portfolio starting around F2030 (i.e., about 6 years into its economic life of 70 years and physical life of over 100 years)…."