River diversion setback at Site C hydropower project in Canada will result in cost overruns

British Columbia Hydro and Power Authority (BC Hydro) recently announced it has encountered some geotechnical and construction challenges on the 1,100-MW Site C hydropower project, and the risk to the river diversion timeline it thought could happen has now materialized.

In late August, BC Hydro identified risks that could result in greater cost pressures for the project including risks to the river diversion timeline. 

A letter sent Oct. 4 to the British Columbia Utilities Commission (BCUC) from BC Hydro President and Chief Operating Officer, Chris O’Riley, said, “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.”

BC Hydro stated this information in the latest development as the utility answered questions set out in BCUC’s preliminary report on the project that was issued Sept. 20. “Not meeting the current river diversion timeline has created new pressures on the project’s budget,” BC Hydro said.

Cost overruns for failing to meet the current 2019 timeline to divert the Peace River as part of constructing the project will cost millions.

BC Hydro said estimated project costs will increase by “7.3% or C$610 million, for a total forecast project cost of C$8.945 billion. We’ve retained the contingency and it remains available to prudently manage risks on the project.”

BCUC has requested additional information from the utility, prior to the commission releasing its final report Nov. 1, on whether to continue with completing Site C.

On Sept. 25, a government-mandated hearing was the first held since BCUC released the results of its inquiry, which in turn followed an independent review performed on the agency’s behalf by consulting firm Deloitte LLP.

The investigation found:

  • Site C, as of June 30, is on time for an in-service date of November 2024; 
  • A reasonable estimate to terminate the project and remediate the site is C$1.1 billion; 
  • Canceling the project would trigger “incremental costs” to replace energy that would have otherwise been produced by Site C; and 
  • It is “premature to reach a conclusion” about the project’s total costs in the event work were to be temporarily suspended.

BC Hydro, in essence, seems to be in agreement with the panel’s finding “about the project’s total costs” in that the utility said it expects to continue to face risks in other areas.

“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.”

Site C has created controversy throughout its development. It was a particular point of contention for the province’s New Democratic Party, which under the direction of its newly elected Premier John Horgan, has directed many of the inquiries into the project’s future.

O’Riley said he will attend the Technical Panel Session on Oct. 14, along with other BC Hydro subject matter experts, to answer BCUC questions prior to the commission’s final report.

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Gregory B. Poindexter formerly was an associate editor for HydroWorld.com.

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