"In the case of the Northwest Transmission Line, BC Hydro shares concerns about the $736 million cost for this project. Clearly, we underestimated the challenges of this particular project and didn't have sufficient early warning systems to identify the additional costs."
Charles Reid, president, CEO, BC Hydro.
AS I was reading over recent paragraphs I wrote on BC Hydro, I realized the airwaves were buzzing with a story that the corporation was cancelling bonuses for 2,000 staffers.
But if Hydro President and CEO Charles Reid hoped that news would be good enough to outweigh the bad yet to come, he was to be royally disappointed.
Not only were the bonuses for staff at Hydro subsidiary Powerex to be retained - supposedly to persuade the 'best minds' to stick around and lead us into economic paradise - but hard on the heels of that news came the thunderbolt about the doubled-up cost of the Northwest Transmission Line.
I listened idly as media balloons began to burst. Initial excuses for the massive cost-overrun were that the terrain was more challenging than expected and the costs of bringing in labour were higher than anticipated.
All of this was known in advance of the election. In fact, it was likely known before March 22, when Rich Coleman, then minister of mines and natural gas, announced work was about to begin on the 287-kilovolt Iskut extension to the line.
Coleman said the 93kilometre extension was to be built by "the Imperial Metals Corporation, owner of the Red Chris mine, in partnership with the Tahltan Nation Development Corporation."
Knowing what we know today, that announcement contained the first cryptic clue to raise a red flag: "Once the Iskut extension is complete, BC Hydro will acquire it from Imperial Metals."
So who pays for the construction? Imperial? Red Chris? B.C. taxpayers? Are those dollars tucked into the escalation of Northwest Transmission Line costs from the May 28, 2010 guesstimate of $404 million announced by then Energy Minister Blair Lekstrom?
What will Hydro pay Imperial for the acquisition? Will it be the $160 million to $201 million shown separately for the Iskut in Hydro's revised 2013/14 to 2015/16 service plan?
Whatever the answers, the combined total for the Northwest Transmission Line-Iskut projects comes to a whopping $896 million to $947 million.
Incidentally, Lekstrom originally predicted the Northwest Transmission Line project would generate 280 construction jobs and 400 long-term jobs. Now, we're told it'll be 600 construction jobs and 300 long-term jobs. No wonder the costs of labour have ballooned.
But we're not done yet. The more Hydro talks, the deeper the quagmire of questions becomes. The traditional advice is to 'follow the money.'
If Hydro is unhappy with that suggestion then British Columbians need Reid to provide them with a more fulsome explanation than his July 2 Vancouver Sun opinion column - before their pockets are picked to the tune of a billion dollars.
Politics aside, 50 per cent or more of Reid's article was a reprise of Hydro's "long, proud history" since the 1960s and of the good news yet to come.
Fair enough; but he came nowhere close to explaining a construction cost increase of at least $330 million dollars.
We understand fluctuations in Canadian dollar values can adversely affect the cost of major items such as the turbines Reid mentioned in his opinion piece.
But currency values are always volatile, so why did his rationale fail to acknowledge the savings that should have been achieved on a mass of other items when our dollar was nudging par?
Currencies and cost of goods aside, Reid's comments that Hydro had "clearly underestimated" the Northwest Transmission Line project and "didn't have sufficient early-warning systems to identify the additional costs" are mindboggling.
The Northwest Transmission Line construction has been underway for the better part of three years. Did the best minds not notice the invoice amounts rolling in?
Although Hydro has taken the brunt of the flack for the overruns, Campbell-Clark fingerprints have been all over the project since 2008 when Gordon Campbell dusted off a 30-year old idea.
That phase culminated on Sept. 1, 2011 when Hydro's then president and CEO, Dave Cobb, said he was pleased to have selected two high-quality contractors who would "provide the highest overall value to [Hydro's] ratepayers at the most cost-effective price."
The successful bidders: Valard Construction, a Quanta Services company, and Burns & McDonnell.
Of interest is that, on Oct. 25, 2010, Houston-based Quanta acquired Edmonton's Valard Construction for "approximately US$219 million" and retained Adam and Victor Budzinski as president and CEO of its new "platform operating unit".
A partial list of Quanta's expertise: electric power, natural gas and pipeline infrastructure; horizontal directional drilling (important for power-water-hungry shale gas extraction), transmission lines and acquisitions.
Connect the dots however you will; just make sure you include Christy Clark's trillion-dollar LNG dreams which, in turn, will be used to justify construction of the $8 billion Site-C dam.
Last point: the successful bidder of this or any other capital project is required to provide assurances that it can design and build it for the dollars on the table.
So, truthfully now, who really "underestimated" the challenges and lacked "sufficient early warning systems" - BC Hydro or Quanta-Valard?
And if BC Hydro was not responsible for estimating the project at $404 million, whose legal team wrote up the contract?
The unprotected ratepayers who will be told to pay the piper are entitled to some answers - now, not later.
