Power line costs don’t add up: NDP

PROVINCIAL NDP energy critic John Horgan is skeptical that BC Liberals didn't know BC Hydro's Northwest Transmission Line costs had soared

  • Jul. 9, 2013 12:00 p.m.

PROVINCIAL NDP energy critic John Horgan says he has a hard time believing the BC Liberal government didn’t know the cost of BC Hydro’s Northwest Transmission Line had soared during the lead up to the May provincial election.

The 344km line, which will run power from BC Hydro’s Skeena Substation near Terrace up Hwy37 North, was pegged at $404 million when first conceived more than six years ago but costs have risen steadily since.

Last year BC Hydro marked the cost at $561 million, increasing that figure to $617 million in the spring before the election only to revise the cost to $736 million last month.

“To be honest, his answers were a day late and a dollar short,” said Horgan of energy minister Bill  Bennett’s defence of the cost increase in the provincial legislature.

“To say he didn’t see this coming is pretty rich,” Horgan added.

While Bennett has promised to find out the reasons for the cost increase, Horgan said the province has to now consider how the new cost figure will affect companies with promising mineral properties who want to take power from the line.

And he’s worried BC Hydro might not be able to recover all of its new costs from industrial users in the area.

Should mineral prices drop, fewer companies will develop mines and that will reduce the line’s customer pool, said Horgan.

“It will then fall to ratepayers,” he said of cost recovery.

A BC Hydro workshop late last year, when the price tag was $561 million, laid out the crown corporation’s cost recovery plan.

BC Hydro is defraying its costs through a $130 million commitment from the federal government and a $180 million deal with Calgary energy-producer AltaGas.

AltaGas is building three run of river projects in the area and its $180 million deal provides  access to the provincial power grid via the transmission line.

The company is putting in $90 million upfront and spreading the remainder through the next decades.

At last year’s price tag of $561 million, BC Hydro needed to charge companies $251 million to break even once the federal government and AltaGas monies were deducted.

But with a new price tag of $736 million, the crown corporation now needs $426 million.

BC Hydro’s plan is to charge companies based on how much of the line’s capacity they will use.

The crown corporation’s engineers have pegged the line’s capacity at 375 megawatts so, for example, if a company signs up for 25 per cent of that capacity (roughly 100 megawatts), it will pay 25 per cent of the line’s construction costs or just under $110 million.

Companies will still have to pay for the actual power they use as is the case with any other BC Hydro customer.

BC Hydro so far has one power-buying customer – Imperial Metals which is building the copper/gold Red Chris mine north of Bob Quinn, the end point for the Northwest Transmission Line.

Imperial still needs a line to its Red Chris location and in a deal reached this spring with BC Hydro, an Imperial subsidiary will build a 287kv line 93km north of Bob Quinn to Tatogga Lake on Hwy37 and then a smaller line east to the mine site.

BC Hydro will then pay a flat fee of $52 million to gain access to the line as far as Tatogga.

The Imperial subsidiary is responsible for any line construction costs above that flat fee.

BC Hydro officials say this arrangement meets the needs of itself and of Imperial and that the flat fee is a good deal for the crown corporation.

BC Hydro describes this line – and its cost – as separate from the Northwest Transmission Line and is calling it the Iskut extension.

That’s a crucial distinction because it relates to the $130 million commitment from the federal government which BC Hydro is using to subsidize the Northwest Transmission Line.

That money comes from the federal Green Infrastructure Fund and was provided to take the tiny community of Iskut and surrounding area off of diesel powered generators.

To receive the $130 million, BC Hydro made a commitment to extend power to Iskut a year after the Northwest Transmission Line was completed.

But Iskut is still north yet of Tatogga Lake and BC Hydro estimates it will take an additional $5 million to run a small distribution line 16km to the tiny community.

BC Hydro is also paying for the work at what will be the Tatogga substation so it can build the line north to Iskut.

Taken together, the NDP’s Horgan says the combined cost of the Northwest Transmission Line and the extension north can easily hit the $1 billion level.