Orders

Decision Information

British Columbia Hydro and Power Authority ~ Request to Amend Major Capital Project Filing Guidelines ~ Final Order with Reasons for Decision

Collection	Orders
Date	2024-01-31
Document No.	G-27-24A
Order Type	G-General
Company Name	BC Hydro
Primary Document Type	Final Order with Reasons

Decision Content

ORDER NUMBER

G-27-24A

IN THE MATTER OF

the Utilities Commission Act, RSBC 1996, Chapter 473

and

British Columbia Hydro and Power Authority

Request to Amend Major Capital Project Filing Guidelines

BEFORE:

A. K. Fung, KC, Panel Chair

A. C. Dennier, Commissioner

W. M. Everett, KC, Commissioner

on January 31, 2024

ORDER

WHEREAS:

A. On March 17, 2023, British Columbia Hydro and Power Authority (BC Hydro) filed an application (Application) with the British Columbia Utilities Commission (BCUC) seeking to amend the BCUC approved 2018 Major Capital Project Filing Guidelines (2018 Guidelines);

B. On December 2, 2019, by Order G-313-19, the BCUC approved the 2018 Guidelines, including BC Hydro’s commitment to submit applications to the BCUC for major capital projects with authorized cost estimates that exceed the following thresholds:

i. $100 million for Power System projects;

ii. $50 million for Buildings projects; and

iii. $20 million for Information Technology projects.

C. In the Application, BC Hydro seeks approval of:

i. An increase to the major capital filing thresholds, escalated annually by their respective price indices for the previously completed calendar year, starting from fiscal 2019; and

ii. BCUC confirmation that a Certificate of Public Convenience and Necessity is not required for Customer IPID 901943 Project.

D. By Orders G-113-23, G-118-23, G-132-23 and G-184-23 the BCUC established and amended a regulatory timetable for review of the Application;

E. On May 25, 2023, in its responses to the BCUC’s request for further information, BC Hydro sought the following amendments to the approvals sought in the Application:

a. Amending the escalation price index for Power System projects to the non-residential building construction price index, from the BC consumer price index;

b. Notifying the BCUC that BC Hydro will file a section 44.2 UCA application for the Mica Units 1 to 4 Circuit Breakers and Iso Phase Bus Replacement Project;

c. Updating the 2018 Guidelines and the applicable directives for the John Hart Dam Seismic Upgrade Project, Bridge River 1 Units 1 to 4 Generator Replacement Project, Peace to Kelly Lake Stations Sustainment Project and Mainwaring Substation Upgrade Project to move to annual progress reports from semi-annual progress reports, in instances where material change reports are a separate reporting requirement;

d. Adjusting the timing of filing final reports for the John Hart Dam Seismic Upgrade Project, Bridge River 1 Units 1 to 4 Generator Replacement Project, Peace to Kelly Lake Stations Sustainment Project and Mainwaring Substation Upgrade Project so that the final reports are due three months after review by BC Hydro’s Board of Directors rather than three months after substantial completion of the projects; and

e. Amending the 2018 Guidelines to clarify that the BC Hydro’s Board of Directors reviews, rather than approves, final reports.

F. In its response to BCUC and Intervener Information Requests No. 1, dated September 22, 2023, BC Hydro submitted that its initial application to increase the major capital project filing thresholds be placed in abeyance pending a further filing by BC Hydro on or before February 23, 2024 following the conclusion of the process for development of its next 10 year capital plan. BC Hydro also requested an amendment to its approvals sought to modify the BCUC directives to project reporting requirements for the Energy Management System project;

G. On September 28, 2023, BC Hydro and interveners filed submissions on further process;

H. By Order G-296-23, the BCUC granted BC Hydro’s request that its proposed changes to major capital project filing thresholds be held in abeyance and issued a further regulatory timetable including a Streamlined Review Process (SRP) to be held on November 23, 2023, the scope of which would be limited to a review of BC Hydro’s proposed changes to project reporting and final arguments on same;

I. By Order G-310-23, the BCUC amended the regulatory timetable directing BC Hydro to provide oral final argument at the conclusion of the SRP and further directing interveners, following conclusion of the SRP, to file written final arguments and BC Hydro to file written reply argument; and

J. The BCUC has reviewed the evidence and submissions relating to BC Hydro’s proposed changes to project reporting and makes the following determinations.

NOW THEREFORE, pursuant to section 99 of the Utilities Commission Act, and for the reasons for decision attached as Appendix F to this order, the BCUC orders the following:

1. BC Hydro is directed to file a blacklined version of the 2018 Guidelines, in accordance with the reasons accompanying this Order, incorporating the approved amendments to the 2018 Guidelines, to be renamed as the 2024 Updated Major Capital Project Filing Guidelines, in a compliance filing within 30 days of the date of the conclusion of this proceeding.

2. The project reporting directives for the Mainwaring Substation Upgrade Project in Appendix A to the Decision accompanying Order C-4-22 and varied by Order G-266-22 are superseded by Appendix A attached to this Order.

3. The project reporting directives for the Bridge River 1 Units 1 to 4 Generator Replacement Project in Appendix A to the Decision accompanying Order C-6-22 and varied by G-310-22 are superseded by Appendix B attached to this Order.

4. The project reporting directives for the Energy Management System Upgrade Project in Appendix A to the Decision accompanying Order G-39-23 are superseded by Appendix C attached to this Order.

5. The project reporting directives for the Peace to Kelly Lake Stations Sustainment Project in Appendix A to the Decision accompanying Order G-57-23 and varied by Order G-84-23 are superseded by Appendix D attached to this Order.

6. The project reporting directives for the John Hart Dam Seismic Upgrade Project in Appendix D to the Decision accompanying Order G-107-23 and varied by Order G-235-23 are superseded by Appendix E attached to this Order.

DATED at the City of Vancouver, in the Province of British Columbia, this 2^nd day of February, 2024.

BY ORDER

Original signed by:

A. K. Fung, KC

Commissioner

Attachments

British Columbia Hydro and Power Authority

Application for a Certificate of Public Convenience and Necessity

for the Mainwaring Substation Upgrade Project

PROJECT REPORTING

The scope of Project reporting for the duration of the Project will comprise the following:

1. Annual Progress Reports

Each report is required to detail:

• Actual costs incurred to date compared to the Project cost breakdown table estimate provided in Table 4-2 of the Application, highlighting variances with an explanation of variances greater than 30 percent for any row number or line item;

• Updated forecast of costs, highlighting the reasons for costs that are forecast to have variances greater than 30 percent for any row number or line item; and

• The status of Project risks provided in Chapter 6 of the Application, highlighting the status of identified risks, changes in and additions to risks, the options available to address the risks, the actions that BC Hydro is taking to deal with the risks and the likely impact on the Project’s schedule and cost.

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period, with the next report covering the period ending June 30, 2024.

2. Material Change Reports

A material change (Material Change) is a change in BC Hydro’s plan for the Project that would reasonably be expected to have a significant impact on the schedule, cost or scope, such that:

• Schedule - There is a delay in the forecast project In-Service Date of October 2026 provided in Table 4-4 of the Application;

• Cost - The Authorized Cost of the project is forecast to exceed the BC Hydro Authorized Amount of $143.3 million provided in row 22 of Table 4-2 of the Application; or

• Scope - There are one or more changes to the Project deliverables and the work required to create those deliverables or the main components of the Project scope provided in Chapter 4 of the Application.

In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the Project risk and the options available, and actions BC Hydro is taking to address the Material Change. BC Hydro must file the Material Change report within 30 days of the Material Change occurring or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

3. Final Report

A Final Report is due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the project in-service date. The report is to include:

• The final cost of the Project, including a breakdown of the final costs; and

• A comparison of these costs to the estimates provided in Table 4-2 of the Application and an explanation of all material cost variances for any of the cost items provided in Table 4-2 of the Application that exceed 10 percent.

British Columbia Hydro and Power Authority

Application for Certificates of Public Convenience and Necessity for the Bridge River Projects:
Bridge River 1 Units 1 to 4 Generator Replacement Project

Bridge River 1 PROJECT REPORTING

The scope of the Bridge River 1 (BR1) Project reporting for the duration of the BR1 Project will comprise the following:

1. Annual Progress Reports

Each report is required to detail:

• Actual costs incurred to date compared to the BR1 Project cost breakdown table estimate provided in Table 5-3 of the Application, highlighting variances with an explanation of variances greater than 30 percent for any row number or line item;

• Updated forecast of costs, highlighting the reasons for costs that are forecast to have variances greater than 30 percent for any row number or line item; and

• The status of identified risks noted in Chapter 7 of the Application, highlighting the status of identified risks, changes in and additions to risks, the options available to address the risks, the actions that BC Hydro is taking to deal with the risks and the likely impact on the Project’s schedule and cost.

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period, with the next report covering the period ending June 30, 2024. Each report must provide the information set out above.

2. Material Change Reports

A material change (Material Change) is a change in BC Hydro’s plan for the BR1 Project that would reasonably be expected to have a significant impact on the schedule, cost or scope, such that:

• Schedule - There is a delay in the forecast project in-service date of July 2030 provided in Table 5-5 of the Application;

• Cost - The Authorized Cost of the Project is forecast to exceed the Authorized Amount of $326.3 million provided in row 24 of Table 5-3 of the Application; or

• Scope – There are one or more changes to the BR1 Project deliverables and the work required to create those deliverables or the main components of the Project scope detailed in section 5.2 of the Application.

In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the BR1 Project risk and the options available, and actions BC Hydro is taking to address the Material Change. BC Hydro must file the Material Change report within 30 days of the Material Change occurring or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

3. Final Report

A Final Report is due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the project in-service date. The report is to include:

• The final cost of the BR1 Project, including a breakdown of the final costs;

• A comparison of the final costs to the estimates provided in Table 5-3 of the Application; and

• An explanation and justification for any material cost variances that exceed 10 percent for any of the cost items provided in Table 5-3 of the Application.

British Columbia Hydro and Power Authority

Application for Approval of Capital Expenditure Schedule for the

Energy Management System Upgrade Project

PROJECT REPORTING

The scope of Project reporting for the duration of the Project will comprise the following:

1. Annual Progress Reports

Each report is required to detail:

• Actual costs incurred to date compared to the Project cost breakdown estimate provided in Table 5 and Table 6 of the Confidential Application, highlighting variances with an explanation of variances greater than 30 percent for any row number or line item;

• Any access to the Special Reserve funding, with an explanation of the amount and reason(s) for accessing the Special Reserve funding;

• Updated forecast of costs, highlighting the reasons for costs that are forecast to have variances greater than 30 percent for any row number or line item; and

• The status of identified risks noted in section 5.2 of the Application, highlighting the status of identified risks, changes in and additions to risks, the options available to address the risks, the actions that BC Hydro is taking to deal with the risks and the likely impact on the Project’s schedule and cost.

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period, with the next report covering the period ending June 30, 2024.

2. Material Change Reports

A material change (Material Change) is a change in BC Hydro’s plan for the Project that would reasonably be expected to have a significant impact on the schedule, cost, or scope, such that:

• Schedule - There is a delay in the forecast project in-service date of July 2024 provided in Table 10 of the Application;

• Cost - The Authorized Cost of the Project is forecast to exceed the Authorized Cost Estimate of $32.8 million provided in Table 8 of the Application; or

• Scope - There are one or more changes to the Project deliverables and the work required to create those deliverables or the main components of the Project scope detailed in section 4.1 of the Application.

In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the Project risk and the options available, and actions BC Hydro is taking to address the Material Change. BC Hydro must file the Material Change within 30 days of the Material Change occurring or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

3. Final Report

A Final Report is due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the project in-service date. The report is to include:

• The final cost of the Project, including a breakdown of the final costs and an explanation for any Special Reserve funding accessed;

• A comparison of the final costs to the estimates provided in Table 5 and Table 6 of the Confidential Application; and

• An explanation and justification for any material cost variances that exceed 10 percent for any of the cost items provided in Table 5 and Table 6 of the Confidential Application.

British Columbia Hydro and Power Authority

Application for Orders regarding the

Peace to Kelly Lake Stations Sustainment Project

PROJECT REPORTING

The scope of Project reporting for the duration of the Project will comprise the following:

1. Annual Progress Reports

Each report is required to detail:

• Actual costs incurred to date compared to the Project cost breakdown table estimate provided in Table 4-3 of the Cost Estimate and Schedule Update (Exhibit B-8), highlighting variances with an explanation of variances greater than 30 percent for any row number or line item;

• Updated forecast of costs, highlighting the reasons for costs that are forecast to have variances greater than 30 percent for any row number or line item; and

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period, with the next report covering the period ending October 31, 2024.

2. Material Change Reports

A material change (Material Change) is a change in BC Hydro’s plan for the Project that would reasonably be expected to have a significant impact on the schedule, cost or scope, such that:

• Schedule - There is a delay in the forecast Project in-service date of October 2028 provided in Table 4-5 of the Cost Estimate and Schedule Update (Exhibit B-8);

• Cost - The Authorized Cost of the Project is forecast to exceed the BC Hydro Authorized Amount of $354 million provided in Table 4-3 of the Cost Estimate and Schedule Update (Exhibit B-8); or

In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the Project risk and the options available, and actions BC Hydro is taking to address the Material Change. BC Hydro must file the Material Change report within 30 days the Material Change occurring or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

3. Final Report

A Final Report due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the project in-service date. The report is to include:

• The final cost of the Project, including a breakdown of the final costs; and

• A comparison of these costs to the estimates provided in Table 4-3 of the Cost Estimate and Schedule Update (Exhibit B-8) and an explanation of all material cost variances for any of the cost items provided in Table 4-3 of the Cost Estimate and Schedule Update (Exhibit B-8) that exceed 10 percent.

British Columbia Hydro and Power Authority

Application for Orders Regarding the John Hart Dam Seismic Upgrade Project

PROJECT REPORTING

The scope of the Project reporting for the duration of the Project will comprise the following:

1. Annual Progress Reports

Each report is required to detail:

• Actual costs incurred to date compared to the Project cost breakdown table estimate provided in Updated Expenditure Schedule Table 5-2 of Appendix 2A to the Updated Project Cost Estimate (Exhibit B-18 and Confidential Exhibit B-18-1), including the use of Special Reserves, if accessed, highlighting variances with an explanation of variances greater than 30 percent for any row number or line item;

• Updated forecast of costs, highlighting the reasons for costs that are forecast to have variances greater than 30 percent for any row number or line item; and

• The status of identified risks noted in Chapter 7 of the Application, including applications for all permits, approvals, and authorizations necessary to complete the Project, highlighting the status of identified risks, changes in and additions to risks, the options available to address the risks, the actions that BC Hydro is taking to mitigate the risks and the likely impact on the Project’s schedule and cost.

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period, with the next report covering the period ending October 31, 2024.

2. Material Change Reports

A material change (Material Change) is a change in BC Hydro’s plan for the Project that would reasonably be expected to have a significant impact on the schedule, cost or scope, such that:

• Schedule - There is a delay in the forecast project in-service date of July 2029 provided in Updated Project Schedule Table 5-4 of Appendix 4A to the Updated Project Cost Estimate (Exhibit B-18);

• Cost - The Authorized Cost of the project is forecast to exceed the BC Hydro Authorized Amount of $922.7 million provided in Updated Expenditure Schedule Table 5-2 of Appendix 2A to the Updated Project Cost Estimate (Exhibit B-18); or

• Scope - There are one or more changes to the Project deliverables and the work required to create those deliverables or the main components of the Project scope detailed in Section 5 of the Application.

In the event of a Material Change, BC Hydro must file a Material Change report with the BCUC explaining the reasons for the Material Change, BC Hydro’s consideration of the Project risk and the options available, and actions BC Hydro is taking to address and mitigate the Material Change. BC Hydro must file the Material Change report within 30 days of the Material Change occurring or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

3. Final Report

A Final Report due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the Project in-service date, whichever is earlier. The report is to include:

• The final cost of the Project, including a breakdown of the final costs;

• A comparison of the final costs of the Project to the estimates provided in Updated Expenditure Schedule Table 5-2 of Appendix 2A to the Updated Project Cost Estimate (Confidential Exhibit B-18-1); and

• An explanation for any cost variances that exceed 10 percent for any of the cost items provided in Updated Expenditure Schedule Table 5-2 of Appendix 2A to the Updated Project Cost Estimate (Confidential Exhibit B-18-1).

British Columbia Hydro and Power Authority

Request to Amend Major Capital Project Filing Guidelines

REASONS FOR DECISION

Page No.

Executive Summary. i

1 .0 Background and Regulatory Process. 1

1 .1 Scope and Structure of the Decision. 3

2 .0 Approvals Sought: Request to Vary Project Reporting. 3

2 .1 Project Progress Reports. 3

2 .1.1 Revised Reporting Template. 6

2 .2 Material Change Reports. 8

2 .3 Project Final Reports. 14

3 .0 Summary of Directives. 17

4 .0 Regulatory Efficiency. 18

4 .1 Timeline of Amendments to BC Hydro’s Approvals Sought. 18

Executive Summary

On December 2, 2019, by Order G-313-19, the British Columbia Utilities Commission (BCUC) approved British Columbia Hydro and Power Authority’s (BC Hydro) 2018 Major Capital Project Filing Guidelines (2018 Guidelines). On January 17, 2020, BC Hydro filed its updated 2018 Guidelines.

On March 17, 2023, BC Hydro filed an application with the BCUC seeking approval of certain amendments to the 2018 Guidelines (Application) including, among other things, approval of an increase to the major capital filing thresholds. Over the course of the proceeding, BC Hydro filed further proposed amendments to the Application, including proposed changes to project reporting for five of its major capital projects previously approved by the BCUC, as well as placing the original request for a change in major capital filing thresholds in abeyance pending the development of BC Hydro 10-year capital plan. In accordance with the regulatory timetable, BC Hydro will file an update on or before February 23, 2024.

After a public review process, the Panel approves certain amendments to project reporting in both the 2018 Guidelines, along with amendments to the relevant orders pertaining to reporting requirements for the five previously approved projects.

The Panel approves an amendment to the 2018 Guidelines to move from semi-annual to annual progress reports. With respect to reporting on project cost variances, the Panel directs BC Hydro to provide explanations of variances greater than 30% on an individual line item instead of a fixed dollar value. We find that reporting based on that percentage change to be reasonable because this reflects the upper range of uncertainty on a Class 3 cost estimate. The Panel supports BC Hydro’s proposed revisions to the template for required project progress reports on capital projects and commends BC Hydro on its efforts to find efficiencies and reduce costs in its project reporting process.

The Panel expects that going forward, material change reports combined with annual progress reports will fulfill the BCUC’s mandate to keep itself informed on major capital project progress. A material change is defined as follows:

• The Authorized Cost of the project is forecast to exceed the Authorized Cost that is part of the BCUC’s Decision and Order granting a Certificate of Public Convenience and Necessity or accepting the capital expenditure schedule for a project.

• There is a forecast delay in the forecast In-Service Date of the project defined in the Application (CPCN or section 44.2 expenditure schedule).

• There are one or more major changes to the project’s deliverables and the work required to create those deliverables or the main components of the Project scope provided in the Application.

The Panel recommends that BC Hydro identify specific values and wording for each of the scope, scheduled In-Service Date and Authorized Cost in its major capital project applications, on which to determine the need to file material change reports.

The Panel concludes that adoption of the same material change reporting criteria for all of BC Hydro’s approved capital projects would be more efficient for reporting on material changes to the BCUC. The Panel directs BC Hydro to file material change reports within 30 days of a material change occurring as defined in this decision or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

The Panel approves BC Hydro’s request to adjust the timing for filing of Project Completion and Evaluation Reports for major capital projects so that they are due the earlier of one month after BC Hydro’s Board of Directors’ review of these reports or 24 months after the project In-Service Date.

The Panel directs BC Hydro to file a blacklined version of the 2018 Guidelines, in accordance with the reasons accompanying this Order, incorporating the approved amendments to the 2018 Guidelines, to be renamed as the 2024 Updated Major Capital Project Filing Guidelines, in a compliance filing within 30 days of the date of the conclusion of this proceeding.

1.0 Background and Regulatory Process

On December 2, 2019, by Order G-313-19, the British Columbia Utilities Commission (BCUC) approved the British Columbia Hydro and Power Authority’s (BC Hydro) 2018 Major Capital Project Filing Guidelines (2018 Guidelines), including BC Hydro’s commitment to submit applications to the BCUC for major capital projects with authorized cost estimates that exceed certain monetary thresholds along with project specific compliance reporting requirements.

On January 17, 2020, BC Hydro filed its updated 2018 Guidelines.

The 2018 Guidelines set specific project cost thresholds at amounts above which BC Hydro would submit a major capital project filing to the BCUC, as follows:

i. $100 million for Power System projects;

ii. $50 million for Buildings projects; and

iii. $20 million for Information Technology projects.

BC Hydro filed this application on March 17, 2023, seeking BCUC approval of certain proposed amendments to the 2018 Guidelines (Application) including, among other things approval of an increase to the major capital filing thresholds, escalated annually by their respective price indices for the previously completed calendar year, starting from fiscal 2019. [1]

The following interveners participated in this proceeding:

• BC Sustainable Energy Association (BCSEA);[2]

• British Columbia Old Age Pensioners Association et al (BCOAPO);[3]

• The Commercial Energy Consumers Association (the CEC);[4]

• Residential Consumer Intervener Association (RCIA);[5] and

• St’at’imc Chiefs Council (SCC).[6]

On May 25, 2023, BC Hydro filed further proposed amendments to the Application, in part, to:[7]

• Seek an update to the 2018 Guidelines and to the applicable BCUC directives for the John Hart Dam Seismic Upgrade Project (John Hart Project),[8] Bridge River 1 Units 1 to 4 Generator Replacement Project (Bridge River Project),[9] Peace to Kelly Lake Stations Sustainment Project (Peace to Kelly Lake Project)[10] and Mainwaring Substation Upgrade Project (Mainwaring Project)[11] to move from semi-annual to annual progress reports in instances where material change reports are a separate reporting requirement;

• Seek adjustments to the timing of filing final reports for the John Hart Project, Bridge River Project, Peace to Kelly Lake Project and Mainwaring Project so that the final reports are due three months after review by BC Hydro’s Board of Directors rather than three months after substantial completion of the projects; and

• Clarify that the BC Hydro’s Board of Directors reviews, rather than approves, the final reports.

On September 21, 2023, BC Hydro made further submissions on process seeking, among other things, that:[12]

• The BCUC place BC Hydro’s request to amend the expenditure thresholds for filing a major project application in abeyance, pending a further submission from BC Hydro on or before February 23, 2024.

• The parties proceed to final submissions on BC Hydro’s requested amendments to Orders G-107-23 (John Hart Project), C-6-22 (Bridge River Project), C-4-22 (Mainwaring Project), G-57-23 (Peace to Kelly Lake Project), and similar amendments to the 2018 Guidelines to:

o Move to annual progress reports in conjunction with material change reports;

o Align reporting on material changes to BC Hydro’s reporting to its Board of Directors; and

o Adjust the timing of final reports such that final reports are due three months after review by the Board of Directors.

• The parties proceed to final submission on an amendment to the approvals sought to move from semi-annual to annual progress reports to include the Energy Management System Upgrade Project.[13]

On September 28, 2023, BC Hydro and interveners filed submissions on further process.

By Order G-296-23, dated October 31, 2023, the BCUC granted BC Hydro’s request to place in abeyance it proposed amendments to the expenditure thresholds for filing a major capital project and directed a Streamlined Review Process (SRP) to review BC Hydro’s proposed changes to project reporting on November 23, 2023.

BC Hydro delivered its final oral argument at the conclusion of the SRP. On December 4, 2023, the interveners delivered their written final arguments, followed by BC Hydro’s written reply argument on December 11, 2023.

In accordance with the regulatory timetable provided in Order G-310-23, following the development of its 10-year capital plan, BC Hydro will file an update on further proposed amendments to the 2018 Guidelines relating to major project expenditures thresholds on or before February 23, 2024 for review by the BCUC.

1.1 Scope and Structure of the Decision

As the BCUC has granted BC Hydro’s request to place its request for escalation of major projects thresholds in abeyance pending the filing of an update on or before February 23, 2024, this Decision only addresses the following:

• Section 2 addresses BC Hydro’s approvals sought related to changes to its project reporting to the BCUC, including proposed changes to progress reports, material change reports, and final reports as directed for certain major capital projects;

• Section 3 provides a summary of directives related to the above; and

• Section 4 addresses the topic of regulatory efficiency in this proceeding to date.

2.0 Approvals Sought: Request to Vary Project Reporting

2.1 Project Progress Reports

BC Hydro seeks a variance in the frequency of project progress reporting, from semi-annually to annually in instances where material change reports are a separate reporting requirement. BC Hydro seeks to have this variance apply to the 2018 Guidelines and to orders for the John Hart Project, Bridge River Project, Peace to Kelly Lake Project and Mainwaring Project. Where applicable, BC Hydro has requested that these project progress reports be due within 45 days of the end of each annual period.

BC Hydro offers the following explanation for the proposed amendment from semi-annual to annual project progress reports where there is a requirement to file material change reports:

...the newly added requirement, if it is added, for timely reporting on material changes to a project's scope, cost, or schedule, does provide an opportunity to balance keeping the BCUC informed and regulatory efficiency by ensuring there is timely reporting of material changes while moving to an annual cadence for regular progress -- project progress updates.[14]

BC Hydro further states that these two types of reports (material change reports and annual reports) will keep the BCUC appropriately informed.[15] If the requirement for filing of material change reports is not directed by the BCUC, however, BC Hydro concedes that it would be appropriate to continue to file semi-annual project progress reports.[16]

Appendix A to Order C-6-22 relating to Bridge River Project is an example of the information that the BCUC requires to be included in semi-annual project progress reports:[17]

Each report is required to detail:

• Actual costs incurred to date compared to the Bridge River Project cost breakdown table estimate provided in Table 5-3 of the application, highlighting variances with an explanation of significant variances;

• Updated forecast of costs, highlighting the reasons for significant changes in Project costs anticipated to be incurred; and

BC Hydro further states “The first semi-annual progress report is more effort intensive than successive reports. A greater level of effort and time is required to develop the structure and content and project team specific processes to support these submissions. Successive filings then benefit from this experience.”[18] BC Hydro claims that semi-annual progress reports take two to three months to prepare and involve 20 to 30 people, totalling 350 to 500 hours of work at a cost of $42,000 to $60,000. BC Hydro describes its internal process for preparing a progress report for the BCUC as one that involves four levels of iterative review including reviews by its Chief Regulatory Officer, Executive Vice President of CIPD, and Executive Vice President of Integrated Planning.[19]

BC Hydro claims that the project progress reports are not prepared for its Board of Directors; they are prepared solely for filing with the BCUC.[20] BC Hydro states that it monitors its projects regardless of whether the BCUC requires reporting.[21] BC Hydro notes that although it produces a variety of internal reports, none of those would be suitable for submission to the BCUC based on the latter’s reporting criteria.[22] BC Hydro posts all of its BCUC progress reports publicly on its website.[23]

Internally, BC Hydro provides project updates to its Board of Directors quarterly, which are not posted on its website. “[I]t's a one-page summary of all the things that are going on in the project, including cost, schedule, engagement with First Nations, engagement with stakeholders, at a different level than when we report a material change to the BCUC.”[24]

Positions of the Parties

BCSEA supports BC Hydro’s proposal to move from semi-annual to annual project progress reports in circumstances where there is a requirement for material change reports. BCSEA submits that BC Hydro’s time, effort and cost to prepare project reports to the BCUC are excessive and not sustainable. Therefore, BCSEA submits that the reporting requirements should be amended to eliminate the excessive costs of compliance.[25]

BCOAPO and RCIA support BC Hydro’s request to change its reporting to the BCUC on capital projects from a semi-annual to annual basis.[26]

The CEC also supports the BC Hydro change from semi-annual reporting to annual reporting, and submits this to be a significant efficiency opportunity. However, the CEC is concerned that the public interest may require the BCUC, ratepayers and public interest groups, to become aware of any threats to the normal and successful prosecution of projects on a timely basis.[27]

Additionally, the CEC recommends that the BCUC consider its responsibilities to be aware of emergent potential threats to major capital projects, and BC Hydro’s handling of such threats. The CEC submits the BCUC can do so efficiently by being copied in on BC Hydro’s internal quarterly reports to its Board of Directors. The CEC submits that reports on projects submitted a year later may not adequately meet the BCUC’s public interest responsibilities.[28]

In Reply to the CEC, BC Hydro submits that the CEC’s concerns about ongoing project threats are not warranted, and its proposal would be highly inefficient and is unnecessary for the following reasons:[29]

• BC Hydro already keeps the BCUC informed about threats to a project through its reporting on project risks in progress reports;

• The CEC’s suggestion would result in significantly more reporting, on a quarterly basis. BC Hydro submits that this does not reflect a reasonable balance between the need for regulatory efficiency and the need to keep the BCUC informed;

• Due to the nature of large projects, there will always be numerous ongoing project risks that BC Hydro is continually managing on such projects; and

• It is solely BC Hydro’s obligation to manage its projects, and quarterly reporting is more a management level of oversight than a regulator’s oversight role.

BC Hydro submits for the foregoing reasons that the CEC’s proposal should be rejected.

Panel Determination

The Panel approves an amendment to the 2018 Guidelines to move from semi-annual to annual progress reports.

The Panel notes broad support for this amendment to the 2018 Guidelines by BCSEA, BCOAPO, and RCIA. The CEC, however, expresses concern that the public interest may require the BCUC, at a minimum, and potentially the ratepayer and public interest groups to become aware on a more timely basis of any threats to the normal and successful prosecution of projects.

The Panel does not agree with the CEC’s submissions. The Panel accepts that BC Hydro’s interpretation and handling of the BCUC’s current capital project reporting requirements to date have resulted in inefficiencies and excessive investments of time and resources to prepare its progress reports along with significant costs that are borne by the ratepayers. The Panel considers that requiring BC Hydro to provide the BCUC with further internal reporting, including Quarterly Reports, would blur the BCUC’s regulatory oversight role in respect of large capital projects with BC Hydro’s role to manage its projects. Nor would this strike a reasonable balance between the need for regulatory efficiency and the need to keep the BCUC properly informed on the progress of BC Hydro’s large capital projects.

The Panel finds that BC Hydro’s proposed amendments to the 2018 Guidelines to move from semi-annual to annual progress reports on large capital projects, coupled with the requirement to file material change reports, will strike a reasonable balance between regulatory efficiency and timeliness of reporting. This change is expected to reduce BC Hydro’s regulatory burden and costs to ratepayers without compromising the quality of the information received by the BCUC to enable it to efficiently exercise its supervisory role in respect of such projects.

Accordingly, the Panel orders that directive 1 contained in Appendix A of the Decisions accompanying Orders C-4-22, C-6-22, G-39-23, G-57-23 and G-107-23 and the 2018 Guidelines for Power Systems, Buildings and Information Technology Projects be varied as follows:

BC Hydro must file annual progress reports within 45 days of the end of each annual reporting period.

2.1.1 Revised Reporting Template

BC Hydro states that its project reports have developed, evolved and grown in scope based on the BCUC’s directives relating to different projects over the years. This has resulted in an increase in the time and effort required from the many participants to produce the progress reports. BC Hydro realizes that the level of effort is not sustainable especially considering the potential need for future progress reports on capital projects. As a result, BC Hydro has developed a revised streamlined template with the purpose of achieving a reduction in the time, effort and cost required to prepare progress reports by reducing the number of participants involved in their preparation and the level of information required from each participant.[30]

BC Hydro has provided, as an example of its proposed revised template, a version of its previously filed Semi-Annual Progress Report #2 for the Bridge River Project, and a black-lined version of the revised template that shows the reduction in scope compared to the previously required reporting.[31] The revised template now contains the following headings:[32]

• Background;

• Project Status;

• Project Schedule;

• Schedule Variance Explanation;

• Project Cost;

• Project Cost Summary as of [date];

o Actual Costs Incurred: Update on Project Activities;

o Project Cost Forecast Variance Explanation; and

• Project Risks.

The revised template also contains a change for the reporting of project cost variances. In the revised template, BC Hydro proposes to report only on project cost variances of greater than $3 million. The previous template required an explanation for project cost variances of greater than $1 million.[33]

When questioned during the SRP about the cost to prepare a project progress report under the revised template, versus the cost to prepare a report under its previous template, BC Hydro estimated that the reduction in time and effort associated with the preparation of reports using the revised template could possibly result in approximately a 30 percent cost reduction.[34]

Positions of the Parties

BCSEA was the only intervener to make submissions on this issue and supports approval of BC Hydro’s proposed improvements to the template for required project reporting on capital projects.[35]

Panel Discussion

The Panel supports BC Hydro’s proposed revisions to the template for required project progress reports on capital projects and commends BC Hydro on its efforts to find efficiencies and reduce costs in its project reporting process.

However, the Panel notes that a pattern has developed in BC Hydro’s progress reports whereby the first progress report on a capital project provides all the information required by the BCUC and more, and that in any subsequent progress reports on the project BC Hydro updates all the items originally reported in the first progress report, regardless of whether there have been any changes to those items. We find that practice to be inefficient. Tere is no need to re-state information from the first progress report in subsequent reports. We encourage BC Hydro to limit its subsequent progress reports on a project to information that is new or different from that provided in the previous report.

The Panel also notes that the revised progress report template still includes the following information which is not specifically directed by the BCUC as part of project progress reporting:

• Background

• Project Status

• Project Schedule

• Update on Project Activities.

The Panel encourages BC Hydro to work collaboratively with BCUC staff to further reduce the scope of its project progress reports to include only those specific items that the BCUC has directed BC Hydro to report on in its capital project reports in order to further increase efficiency and reduce costs.

With respect to reporting on project cost variances, the Panel directs BC Hydro to provide explanations of variances greater than 30 percent on an individual row number or line item instead of a fixed dollar value. We find that reporting based on that percentage change to be reasonable because this reflects the upper range of uncertainty on a Class 3 cost estimate.

2.2 Material Change Reports

In Orders C-4-22, C-6-22, G-57-23 and G-107-23, the BCUC directed BC Hydro to file a material change report in the event of any of the following changes:

• There is a schedule delay of greater than six months compared to the schedule provided in the schedule summary table of the application;

• The total project cost exceeds 10% of the estimated project cost provided in the project cost summary table of the application; or

• There is a change to the project scope provided in the application.

The material change report is due within 30 days of the change occurring. Material change reports are not contemplated in the 2018 Guidelines but have since become a practice directive commonly adopted by the BCUC in approving capital projects.

BC Hydro requests modification to the wording for what constitutes a material change triggering a material change report in its variance request for orders for John Hart Project, Bridge River Project, Peace to Kelly Lake Project and Mainwaring Project, and its request for variance of the 2018 Guidelines as follows:[36]

• Cost – The Authorized Cost[37] of the project exceeds the Authorized Cost that is part of the BCUC’s Decision and Order granting a Certificate of Public Convenience and Necessity (CPCN) or accepting the Capital Expenditure Schedule for a project;

• Schedule – There is a delay greater than three months[38] in the forecast In-Service Date of a project; or

• Scope – The scope of a project as outlined in the application is changed to the extent that the objectives of the project are altered, thereby requiring BC Hydro’s Board of Directors to be informed.

Further, BC Hydro submits it will file a report with the BCUC of a material change meeting the above criteria within 30 days of the change being approved by the appropriate authority within BC Hydro.[39] BC Hydro clarifies its definition of appropriate authority as follows: “So, for the authorized cost, is the Board. For a schedule or scope change -- material change without an impact on cost, is the initiator and sponsor. It's the executive vice president of integrated planning, and executive vice President of operations.”[40]

BC Hydro states that these revised material change criteria are aligned with its internal reporting to the Board of Directors for information (scope or schedule changes) or approval (cost changes).[41] BC Hydro clarifies that:

• The Authorized Cost is the Expected Cost (P50 estimate) plus the Project Reserve. BC Hydro states that both the Authorized Cost and any changes to the Authorized Cost are approved by the Board of Directors.[42]

• The In-Service Date is defined as the date when the project assets are available for their intended use and includes schedule contingency. BC Hydro states that if the In-Service Date is preserved within three months, other changes to the schedule are not material. BC Hydro further notes that a change in the In-Service Date is reported to the Board.[43] However, by proposing to define a material change to be reported to the BCUC as a three-month delay in the In-Service Date, BC Hydro explains it intends to avoid reporting a delay to the BCUC attributable to common causes such as a change in an outage window impacting the In-Service Date. BC Hydro considers these changes to not be material.[44]

• The current criterion around Project Scope is broad and includes non-scope sections of projects such as permits. BC Hydro states a material impact in project scope will usually impact schedule and cost, and therefore the change would be captured within one of the criteria constituting a material change. BC Hydro further explains that its definition of a material change due to a scope change is associated with a change that would result in a change in project objectives. BC Hydro states it will include a statement of objectives in future major project applications to the BCUC going forward, so it will be clear what changes in scope are measured against.[45] BC Hydro explains that when a material change in scope occurs it is approved by the project initiator and sponsor, and then the Board is informed.[46]

BC Hydro seeks a change to the wording of a material change report for Power System and Building Projects generally in the 2018 Guidelines. However, BC Hydro seeks no change to the wording of a material change report for the Energy Management System project, nor to IT projects generally in the 2018 Guidelines.[47]

Regarding project costs, BC Hydro adds that specifically identified risks are included in the base cost prior to the calculation of contingency, whereas the expected contingency accounts for cost risks not specifically identified but which could occur during the Project.[48] BC Hydro states that access to Project Reserves[49] will require additional financial approval from BC Hydro’s Board of Directors, and Special Reserves relating to known risks are only accessible if those specific risks materialize.[50]

Regarding Special Reserves, for the John Hart Project, BC Hydro has been directed to update the BCUC in its semi-annual compliance filing whether Special Reserves are accessed and for which of the two specified uses: i) additional escalation; and ii) potential design refinement.[51] BC Hydro states “given this concern, BC Hydro submits the scope of the material change report for the John Hart Project should be expanded to include filing of the Report if the Special Reserve is accessed.”[52] BC Hydro later rescinded this proposal, stating it does not believe there is any benefit in establishing a separate requirement for a material change report when the special reserve is accessed because:[53]

• Special Reserves or Project Reserves are included in the project cost estimate that is examined during a proceeding and have been considered as part of a project approval or expenditures schedule acceptance;

• The BCUC will be informed of any access to the Special or Project Reserve in a periodic progress report; and

• Accessing the Special Reserve does not change the total project cost estimate.

BC Hydro submits that accessing the project reserve, which is within the Authorized Cost, does not constitute a material change.[54]

Regarding the due date for filing the material change report, BC Hydro explains that a material change is not deemed to have occurred until it has been approved by the appropriate authority.[55] If the appropriate authority does not grant the change, there would be no material change report.[56] The project team does not have the authority to make material changes to the project, unless they have been approved by the appropriate authority within BC Hydro.[57] BC Hydro notes that if a change was not approved, and was deemed to be part of the project risk, it would be reported to the BCUC in the next annual progress report.[58]

Positions of the Parties

BCSEA submits that the BCUC should approve the proposed combination of material change reports and annual progress reports. This would reduce regulatory burden and improve the value of the information received by the BCUC for its supervisory role.[59]

BCSEA supports approval of the proposed clarification of the criteria for material change reports to the effect that the criteria track BC Hydro’s governance regime. BCSEA notes that this proposal is “common sense,” and changes that do not meet the criteria for a material change report would still be included in the required annual progress report if necessary.[60]

BCOAPO and RCIA support BC Hydro’s proposed implementation of material change reporting to the BCUC.[61]

The CEC approves of the addition of the material change reports as a significant effectiveness improvement in the reporting process. However, the CEC finds that the criteria BC Hydro has proposed may leave the BCUC unaware of potential threats to a possible material change to critical major projects being developed by BC Hydro.[62]

In reply to the CEC, BC Hydro submits that it already keeps BCUC informed on project risks and threats through progress reporting and material change reports. BC Hydro states that there will always be ongoing risks to manage on large capital projects. BC Hydro submits that it would not be reasonable to keep the BCUC informed on all project risks and it will report on material changes to the risks through project compliance reporting.[63]

Panel Determination

The Panel accepts that material change reports combined with annual progress reports will fulfill the BCUC’s mandate to keep itself informed on major capital project progress. The Panel agrees with the interveners that the addition of material change reports coupled with annual progress reports in lieu of semi-annual progress reports contributes to improved regulatory efficiency and should lead to reduced costs for BC Hydro based on its estimates.

BC Hydro submits that a material change is not allowed to be reflected in a project until it is approved by the appropriate BC Hydro authority. If material changes are not approved by the appropriate authority within BC Hydro, project managers will need to resort to managing the material change within their cost or schedule contingencies. The Panel considers that BC Hydro’s practice subjects its project managers to immense pressure to “absorb” the non-approved material change in their projects, expending a significant amount of work and resources, which could represent a significant project risk. To avoid such consequence, the BCUC should be informed promptly of material changes that are submitted to the appropriate authority for approval within BC Hydro, whether or not they are subsequently approved as material changes by the appropriate authority. This will allow the BCUC to be kept informed of any material changes that may threaten the cost, schedule or scope of BC Hydro’s major capital projects sooner rather than later. Therefore, the Panel finds that further changes to the material change report criteria as proposed by BC Hydro and the associated notification timeline are necessary.

The Panel accepts the material change report criterion for a material change in cost as proposed by BC Hydro, with one change to add the word “forecast” to the forecast Authorized Cost. The word “forecast” is added to the definition, as a material change should be reported at any time the forecast total project cost during project execution is expected to exceed the Authorized Cost that is part of the BCUC’s Decision and Order granting a CPCN or accepting the capital expenditure schedule for a project. This change is necessary to ensure that the BCUC is informed of any project threats to the Authorized Cost that are of a material nature. Whether or not the BC Hydro’s Board of Directors approves any change to the Authorized Cost, a change in cost, that is significant enough to be flagged for approval by its Board of Directors, should similarly be flagged and reported to the BCUC. Therefore, the criterion for a material change to cost is defined as:

BC Hydro proposes to notify the BCUC when a change to the In-Service Date of a project is greater than three months. The Panel appreciates that BC Hydro wishes to avoid reporting to the BCUC any short delays to the In-Service Date which BC Hydro states occur commonly due to change in outage windows. However, since the BC Hydro’s Board of Directors is notified of a delay in the forecast In-Service Date of a project, the Panel views any delay to the In-Service Date to also be appropriate for BCUC notification as a potential material change. Whether or not the appropriate approval authority approves the change to the In-Service Date, the change is significant enough to be flagged for BC Hydro approval and should similarly be flagged and reported to the BCUC. Therefore, the criterion for a material change to schedule is defined as:

• There is a forecast delay in the forecast In-Service Date of the project defined in the Application (CPCN or section 44.2 expenditure schedule).

BC Hydro proposes to notify the BCUC of a material change to scope when the scope of the project as outlined in the application is changed to the extent that the objectives of the project are altered, requiring BC Hydro’s Board of Directors to be informed. The Panel finds BC Hydro’s proposed definition is too broad and imprecise to be useful. The Panel notes that the BCUC grants a CPCN or expenditure schedule to address a specific need or needs via the execution and completion of a project. The detailed description of the work or activities that need to be accomplished to deliver the project constitutes the project scope.

The Panel is not persuaded by BC Hydro’s definition of a material change in scope being tied to changes that alter the objectives of the project. The Panel finds that objectives are simply the various drivers behind the project need, whereas the detailed project scope forms the actual basis for the cost and schedule of the project. When a CPCN is granted or a capital expenditure schedule is accepted, the project scope as presented in the application is what is approved by the BCUC, subject to minor modifications. The BCUC should be notified when there are one or more major changes to the project’s deliverables and the work required to create those deliverables or changes to the main components of the project scope provided in the application (CPCN or section 44.2 UCA expenditure schedule). Therefore, the criterion for a material change to scope is defined as:

• There are one or more major changes to the project’s deliverables and the work required to create those deliverables or the main components of the Project scope provided in the Application.

Regarding the treatment of reporting access to special reserves for the John Hart Project, the Panel supports BC Hydro’s proposal to provide that information as part of the annual progress report. As the special reserves are already part of the Authorized Cost, accessing the Special Reserve does not change the total project cost, and therefore does not result in a material change.

The Panel notes that BC Hydro has requested different material change criteria for Technology projects, including the previously approved Energy Management System Upgrade project. The Panel concludes that a similar material change reporting criteria for all projects filed for BCUC approval would be more efficient and directs the above amended material change criteria to apply to all major projects.

In summary, the project reporting requirements attached as directive 2 contained in Appendix A to the Decisions accompanying Orders C-4-22, C-6-22, G-39-23, G-57-23 and G-107-23 and the 2018 Guidelines for Power Systems, Buildings and Information Technology Projects are varied to define a material change as follows:

• Cost – The Authorized Cost of the project is forecast to exceed the Authorized Cost that is part of the BCUC’s Decision and Order granting a Certificate of Public Convenience and Necessity or accepting the capital expenditure schedule for a project; or

• Schedule – There is a delay in the forecast In-Service Date of the project as compared to the application; or

• Scope - There are one or more major changes to the project’s deliverables and the work required to create those deliverables or the main components of the Project scope provided in the application.

The Panel finds it prudent for BC Hydro to keep the BCUC informed of these project risks in a timely manner. Accordingly, the Panel directs BC Hydro to file material change reports within 30 days of a material change occurring as defined in this decision or within 30 days of the appropriate approval authority within BC Hydro being informed of a potential material change, whichever is earlier.

The Panel also recommends that BC Hydro identify specific values and wording for each of the main components of project scope, scheduled In-Service Date and Authorized Cost in its future major capital project applications, which would aid in determining the occurrence of a material change triggering the need for the filing of material change reports for future project reporting purposes.

2.3 Project Final Reports

BC Hydro seeks an amendment to Orders C-4-22, C-6-22, G-57-23 and G-107-23 to adjust the timing for filing final reports for these projects so that the final reports are due three months after review by BC Hydro’s Board of Directors rather than three months after substantial completion of the project. BC Hydro states that this change is consistent with the 2018 Guidelines.[64] Further, BC Hydro seeks an amendment to the 2018 Guidelines to clarify that the BC Hydro’s Board of Directors reviews, rather than approves, the final report for a project.[65]

BC Hydro states that project work on Major Projects continues for longer than three months after substantial completion or the In-Service Date. BC Hydro explains that if final reports are due within three months of substantial completion or the In-Service Date:[66]

• The project final costs will not be available.

• BC Hydro will not have prepared its internal Project Completion and Evaluation Report (PCER), and will need to prepare a separate report specifically for BCUC compliance.

• Without further progress reporting, the BCUC will lose visibility on the final stage of the project between the in-service and completion of the project. This period may include the correction of deficiencies and the resolution of potential contractual disputes.

BC Hydro’s expectation is that projects are closed-out (including review of the Project Completion and Evaluation Report by the BC Hydro’s Board of Directors) within 12 to 24 months of being placed into service.[67]BC Hydro defines the In-Service Date as the date on which the last major component is placed in service.^{^[68]}

At the SRP, BC Hydro’s witnesses indicated that BC Hydro was amenable to filing its PCER within 24 months of the project In-Service Date, with the understanding that BC Hydro could file for an extension to file the final report if necessary.[69] In response to IRs, BC Hydro stated it is amenable to filing the final report at a shorter interval (i.e., one to two months) after the review by the Board.[70]

BC Hydro confirms that it will continue to file annual progress reports until the submission of the final report.[71]

Positions of the Parties

BCSEA supports BCUC approval of an amendment to clarify that the BC Hydro’s Board of Directors reviews, rather than approves, the PCER for a project.[72]

The CEC supports the BC Hydro proposal to provide the final project reports to the BCUC within three months after the BC Hydro’s Board of Directors review of these reports. However, to govern the potential issues which could occur such that the BC Hydro Board may not meet to review these reports on a timely basis, the CEC recommends that these reports be provided to the BCUC at the earlier of three months after the Board of Directors’ review of the final reports or four to six months after the fiscal year end for BC Hydro.[73]

BCOAPO does not support BC Hydro’s request to modify the timing of its final report to the BCUC. Instead, BCOAPO strongly urges BC Hydro to clarify its final position on the proposal on timing put to its witnesses and counsel at the SRP in its final submission, “the earlier of the two, 24 months after substantial completion, or the earlier of – the Board of Directors’s [sic] review of the final report.” If BC Hydro has modified its request, to reflect the timing requirements as agreed to by its witnesses and counsel, then BCOAPO’s final point of disagreement with BC Hydro’s Application is resolved. If not, BCOAPO’s position is that the BCUC should reject BC Hydro’s Application on this point and instead implement a modification to the 2018 Guidelines that reflects the timing discussed in the excerpt reproduced above.[74]

RCIA proposes that the timing for the filing of final reports should be the earlier of 24 months after substantial completion or three months after BC Hydro’s Board of Directors’ review.[75]

In Reply, BC Hydro submits that while it is amenable to this proposal, its proposal that the final report be filed after review by the Board of Directors, which is consistent with the approved 2018 Guidelines, is BC Hydro’s preferred approach. BC Hydro is amenable to filing the final report at a shorter interval (i.e., one to two months) after the review by the Board.[76]

In support of its proposal, BC Hydro notes that of the six project PCERs reviewed by the Board in the last two years, three of them were reviewed more than 24 months after substantial completion. Therefore, the 24 month deadline may not be practical, or may result in the need for extension requests. Alternatively, if the BCUC’s objective is to link the timing of the filing of the final report to a project milestone, the appropriate milestone, in BC Hydro’s view, would be the Project Completion date. At this milestone, the project costs are finalized, and the final report is completed and reviewed by the Board.[77]

As for the CEC’s submission to tie the PCER to a fiscal year end date, BC Hydro finds that is unclear.[78]

Panel Determination

The Panel accepts BC Hydro’s request to adjust the timing for filing Project Completion and Evaluation Reports for major capital projects so that the PCERs are due the earlier of one month after the BC Hydro’s Board of Directors’ review of the PCERs or 24 months after the project In-Service Date.

The Panel finds that by aligning BC Hydro’s filing of the PCER with BC Hydro’s internal processes, an additional document is not required to be prepared, thus promoting regulatory efficiency. With the proposed filing deadline tied to 24 months after the project In-Service Date, the Panel finds that the BCUC will have more certainty on the latest possible filing date of the PCER, providing an alternative to the open-ended filing which is aligned with the completion of the BC Hydro’s Board of Directors’ review. The filing of the PCER 24 months after the project In-Service Date will encourage BC Hydro to complete and close out its projects within 24 months of the In-Service Date, a timeline already reflected in BC Hydro’s internal processes. The Panel views that longer timelines between project In-Service Date and project closure may result in inefficiencies and additional project costs. Furthermore, BC Hydro internal processes already require notification to the BC Hydro’s Board of Directors if the PCER is delayed more than 24 months after the project In-service Date. If this were to occur, however, BC Hydro would need to file an extension request with the BCUC concurrently, which should not result in significant regulatory burden relative to the benefits of having a defined date for filing the PCER.

The Panel agrees with BC Hydro’s submission that progress reporting after In-Service Dates but before project completion will allow BC Hydro to fully document any correction of deficiencies and resolution of potential contractual disputes, providing a wholesome summary of the project at completion. The PCER will account for the complete project and associated costs.

In summary, the Panel orders that directive 3 contained in Appendix A to the Decisions accompanying Orders C-4-22, C-6-22, G-39-23, G-57-23 and G-107-23 and the 2018 Guidelines are varied as follows:

• Project final reports are due the earlier of one month after review by BC Hydro’s Board of Directors, or 24 months after the project In-Service Date.

3.0 Summary of Directives

Panel Determination

As stated above, the project reporting requirements attached as Appendix A to the Decisions accompanying Orders C-4-22, C-6-22, G-39-23, G-57-23 and G-107-23 are varied as follows:

Project Progress Reports must be filed annually.

Material change reports are due within 30 days of the change occurring or within 30 days of the appropriate authority being informed of a potential change, whichever is earlier.

A material change is defined as follows:

• Scope - There are one or more major changes to the project’s deliverables and the work required to create those deliverables or to the main components of the Project scope provided in the application;

• Schedule – There is a delay in the forecast In-Service Date of the project as compared to the application; or

The BCUC recommends that BC Hydro identify specific values and wording for each of the scope, scheduled In-Service Date and Authorized Cost in its major capital project applications, on which to base material change criteria for future project reporting.

Project final reports are due the earlier of one month after BC Hydro’s Board of Directors review, or 24 months after the In-Service Date.

The Panel directs BC Hydro to file a blacklined version of the 2018 Guidelines, in accordance with the reasons accompanying this Order, incorporating the approved amendments to the 2018 Guidelines, to be renamed as the 2024 Updated Major Capital Project Filing Guidelines, in a compliance filing within 30 days of the date of the conclusion of this proceeding.

The Panel acknowledges, however, that future panels reviewing major capital project applications from BC Hydro are not bound by these Guidelines, nor any past BCUC decisions on project reporting or other matters, but may direct specific reporting requirements as they see fit. For consistency, certainty and regulatory efficiency, however, we recommend that the BCUC and BC Hydro adhere to the 2024 Updated Major Capital Project Filing Guidelines wherever possible. We further recommend that BC Hydro provide reasons in circumstances where it departs from the new project reporting guidelines in future major capital project applications.

4.0 Regulatory Efficiency

Having dealt with BC Hydro’s requests relating to project reporting in this Application, the Panel reviews the unfortunate events that have adversely impacted the regulatory efficiency of this proceeding to date.

4.1 Timeline of Amendments to BC Hydro’s Approvals Sought

As already noted, BC Hydro filed its Application in March, 2023. In its initial filing BC Hydro set out the following:

BC Hydro’s intention to file four major project applications from Oct 1, 2022 to Sept 30, 2023;
An approval sought to update the 2018 Guidelines to increase the major capital project expenditure thresholds, above which BC Hydro has agreed to file an application for approval to the BCUC, by their respective price indices starting from fiscal 2019:

Power System projects escalated by the Consumer Price Index (CPI);
IT projects escalated by the CPI; and
Buildings projects escalated by the Non-Residential Building Construction Price Index;

A statement of BC Hydro’s planned approach for four projects that would be otherwise be Major Projects under section 44.2 of the UCA: three buildings projects, and the Bridge River 1 Strip and Recoat Penstocks project. BC Hydro states it will not file applications for approval to the BCUC for these four projects;
A request that the BCUC confirm that a CPCN is not required for the Customer IPID - 901943 Project;
An update on upcoming Technology projects;
A statement that BC Hydro intends to file an upcoming application to seek relief from Directive 3 of Order G-47-18 requiring a CPCN for the Westbank Substation Upgrade Project; and
A request for a decision on the Application by August 2023.

On May 9, 2023, the BCUC established a regulatory timetable for review of the Application, including:

A request for further information to BC Hydro, regarding details of which approvals were sought, which projects would be affected;
Public notice;
Requests for submissions on the Application; and
A BC Hydro reply submission.

On May 16, 2023, BC Hydro requested an extension on filing further information. The BCUC granted that extension the following day.

On May 25, 2023, BC Hydro filed its response to the BCUC request for further information. As part of its response, BC Hydro amended its approvals sought as follows:

Escalate Power System projects by the non-residential building construction price index instead of the CPI;
Seek an update (variance) to the 2018 Guidelines and the applicable directives for the John Hart Project, Bridge River Project, Peace to Kelly Lake Project, and Mainwaring Project to move to annual progress reports where material change reports are a separate requirement;
Seek adjustment to the deadline for final reports for the same projects, such that these reports would be due three months after Board of Directors’ review, and update 2018 Guidelines that the Board "reviews" rather than "approves" project final reports; and
Contrary to the BCUC’s previous directive for the John Hart Project requiring semi-annual reporting on permits and special reserves, BC Hydro submits that material change reports would be sufficient to capture updates on permit delays and that the scope of material change reports should be expanded instead to include a criterion to file same if the Special Reserve is accessed.

On June 1, 2023, the BCUC received a letter of comment from the St'at'imc Chiefs council that they received late notice of the Application, and therefore cannot review and consider the Application substantively. On June 2, 2023, in response to the St’at’imc Chiefs Council, BC Hydro confirmed that it did not notify the St'at'imc Chiefs Council of the Application until May 25, 2023, and BC Hydro was therefore not in compliance with the public notice directive. On June 7, 2023, the BCUC amended the regulatory timetable to extend the time for submissions from the St'at'imc Chiefs Council to account for BC Hydro’s failure to provide public notice by the stipulated deadline.

On July 13, 2023, the BCUC established a timetable including intervener registration and a round of information requests.

On July 18, 2023, BC Hydro submitted yet another amendment to its approvals sought to put its earlier request not to file a CPCN in respect of Customer IPID –901943 Project into abeyance pending direction from Government. On July 25, 2023, the BCUC granted the abeyance request and requested BC Hydro to revisit its request for confidentiality of the customer name and file exhibits publicly, where possible. On July 31, 2023, BC Hydro filed previously redacted exhibits publicly, including a list of notified parties during public notice and responses to the BCUC’s request for further information.

On August 24, 2023, BC Hydro submitted a request for a two-week extension for filing responses to BCUC and intervener information requests. On August 25, 2023, the BCUC granted the extension request.

On September 22, 2023, BC Hydro submitted responses to BCUC and intervener information requests. In the submission BC Hydro included yet further amendments to its approvals sought as follows:

To place its earlier request to amend the major projects expenditures threshold into abeyance pending further submission on or before February 23, 2024 following development of BC Hydro’s revised 10-year capital plan;
To add a request for variance to the project reporting directive for the EMS Upgrade project and move to annual rather than semi-annual project progress reporting;
To materially modify the wording for what constitutes a material change triggering a material change report in its variance request for orders for the Bridge River, John Hart, Mainwaring and Peace to Kelly projects, and its request for variance of the 2018 Capital Filing Guidelines;
To remove the requirement to report on accessing the special reserve triggering a material change report for the John Hart Project; and
To specify that material change reports are due within 30 days of approval by the appropriate authority within BC Hydro, instead of 30 days within the occurrence of the material change as currently directed by the BCUC.

On November 21, 2023, BC Hydro submitted its Streamlined Review Process material. In the submission, BC Hydro again made an amendment to its approvals sought as follows:

• To modify the wording to the criterium for a material change report based on changes to the project schedule, as follows:[79]

o Schedule – There is a delay greater than three months in the forecast In-Service Date of a project; and

• To clarify that the approval sought regarding material change reports applies to power system projects and buildings projects, and not to technology projects. In support of that request, BC Hydro provided a blacklined copy of the most recently filed semi-annual progress report number 2 for the Bridge River Project, as if the report were written under BC Hydro’s revised internal project reporting template.

On November 23, 2023, the BCUC conducted the SRP to review BC Hydro’s various amended requests relating to project reporting.

Panel Discussion

As the above chronology shows, in the eight months that have elapsed between the filing of BC Hydro’s initial Application in March, 2023 until the conclusion of the SRP in November, 2023, BC Hydro has amended its approvals sought and requests multiple times. In fact, this Decision deals with proposed general capital project reporting changes that were not specifically sought in BC Hydro’s original Application, the main focus of which is ostensibly to escalate the major project expenditures thresholds, a matter which has now been held in abeyance at BC Hydro’s request pending its filing of an update by February 23, 2024.

Not surprisingly, these frequent and substantive changes detract from regulatory efficiency and have created confusion and unnecessary delays in the adjudication of this Application, which the Panel finds could have been avoided had BC Hydro taken the time and effort to properly frame its Application and various requests prior to the filing of that Application. As a result, it will be more than a year since that filing before the Panel can effectively review the crux of the Application, namely, the request to escalate major capital project expenditure thresholds to reflect factors including inflation since fiscal 2019, pending BC Hydro’s filing of its February 2024 update. The Panel finds this delay regrettable and frustrating.

Given the rather convoluted history of this proceeding to date, the Panel strongly urges BC Hydro to ensure that its February update provides greater clarity, certainty and rationale for its proposal to escalate the expenditure thresholds to facilitate a more timely and efficient resolution of this matter.

[1] Exhibit B-1.

[2] Exhibit C1-1.

[3] Exhibit C2-1.

[4] Exhibit C5-1.

[5] Exhibit C3-1.

[6] Exhibit C4-1.

[7] Exhibit B-1-1, p. 2, pp. 4-6.

[8] Decision and Order G-107-23.

[9] Decision and Order C-6-22; Order G-310-22.

[10] Decision and Order G-57-23; Order G-84-23.

[11] Decision and Order C-4-22; Order G-266-22.

[12] Exhibit B-9, cover letter, pp. 3-4; Exhibit B-1-1-1.

[13] Decision and Order G-39-23.

[14] SRP Transcript Vol 1 Revised, pp. 14-15.

[15] SRP Transcript Vol 1 Revised, p. 11 and pp. 14-15.

[16] SRP Transcript Vol 1 Revised, pp. 13-14.

[17] Appendix A, Order C-6-22.

[18] BC Hydro Mainwaring Substation Upgrade Project Extension Request to File Semi-Annual Progress Report No. 1, August 18, 2022.

[19] Exhibit B-9, BCUC IR 1.4.4, p. 2.

[20] SRP Transcript Vol 1 Revised, p. 27.

[21] Ibid., p. 28.

[22] Ibid., p. 31.

[23] Ibid., p. 11.

[24] SRP Transcript Vol 1 Revised, p. 23.

[25] BCSEA Final Argument, p. 2.

[26] BCOAPO Final Argument, p. 3; RCIA Final Argument, p. 6.

[27] The CEC Final Argument, p. 3.

[28] Ibid., pp. 2-4.

[29] BC Hydro Reply Argument, pp. 3-4.

[30] SRP Transcript Vol 1 Revised, pp. 24-31.

[31] Exhibit B-12, Attachments 2 and 3.

[32] Exhibit B-12, Attachment 2, p. i.

[33] Exhibit B-12, Attachment 3, p. 11.

[34] SRP Transcript Vol 1 Revised, pp. 64-65.

[35] BCSEA Final Argument, p. 3.

[36] Exhibit B-9, BCUC IR 1.4.1.

[37] The Authorized Cost is the sum of the Expected Cost and the Project Reserve and includes all contingencies, inflation, capital overhead, interest during construction and reserves.

[38] Exhibit B-9-2; Exhibit B-12.

[39] Ibid.

[40] SRP Transcript, Vol 1 Revised, p. 34.

[41] Ibid., p. 15.

[42] Ibid., pp. 15-16.

[43] Ibid., p. 18.

[44] SRP Transcript Vol 1 Revised, pp. 18-19.

[45] Ibid., pp. 19-21.

[46] Ibid., p. 22.

[47] Exhibit B-12, Attachment 1, p. 4; SRP Transcript Vol 1 Revised, p. 74.

[48] Bridge River 1 Units 1-4 Generators Project proceeding, Exhibit B-1, p. 5-16.

[49] In the Bridge River 1 Units 1-4 Generators Project Application, BC Hydro defined Project Reserve as follows (Application, p. 5-18): The Project Reserve accounts for the additional financial impact of known risks to the Project and is comprised of two distinct cost components:
1) The difference between the P90 contingency and the P50 contingency, used to accommodate the same blended impact of known non-specific risks as identified under the P50 contingency, but with a higher confidence level regarding the probability of the estimated total project cost not being exceeded; and
2) Special Reserves, which includes known specific risks, which have not been assigned a probability of occurrence but may be realized by the Project.

[50] Bridge River 1 Units 1-4 Generators Project proceeding, Exhibit B-1, p. 5-18.

[51] Exhibit B-4, p. 5.

[52] Exhibit B-4, p. 5.

[53] Exhibit B-10, BCOAPO IR 1.6.2.

[54] SRP Transcript Vol 1, pp. 36-37.

[55] Ibid., pp. 35-36.

[56] Ibid., pp. 36-37.

[57] Ibid., p. 40.

[58] Ibid., pp. 42-43.

[59] BCSEA Final Argument, p. 3.

[60] Ibid.

[61] BCOAPO Final Argument, p. 3; RCIA Final Argument, p. 6.

[62] The CEC Final Argument, p. 3.

[63] BC Hydro Reply Argument, pp. 3-4.

[64] Exhibit B-1-3, cover letter, p. 4.

[65] Ibid.

[66] Exhibit B-9, BCUC IR 1.4.8.

[67] Ibid.

[68] SRP Transcript Vol 1, pp. 92-93.

[69] SRP Transcript Vol 1, pp. 94-95, pp. 153-154.

[70] Exhibit B-9, BCUC IR 1.4.6.

[71] Ibid.

[72] BCSEA Final Argument, p. 1.

[73] The CEC Final Argument, p. 4.

[74] BCOAPO Final Argument, p. 3.

[75] RCIA Final Argument, p. 9.

[76] BC Hydro Reply Argument, p. 2.

[77] Ibid., p. 3.

[78] Ibid., pp. 4-5.

[79] Exhibit B-9-2, pdf pp. 12, 13.

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