From: "Tom Hackney" <thackney@island.net>
Subject: GSX Hearing Day 1 & 2
Date: February 24 & 25, 2003

Hi all,

Report on the second day of the GSX hearings:

The first day dealt mainly with procedural issues, hence press reports that
it wasn't interesting.

The second day, Tuesday 25th, moved quickly into matters of substance, as
GSX PL's first panel of witnesses was brought forward to answer questions
about the Project Overview, Corporate Structure, Management of Risk and
Financial Liabilities.

The highlight of the day was the cross-examination of that panel by Bill
Andrews, counsel for GSX Concerned Citizens Coalition. GSXCCC's aim is to
ensure a full and thorough examination of GSX and to promote a sound energy
policy for Vancouver Island (and BC). Or concern with GSX is that it is an
ill-conceived project, a relic of the Glen (fast ferries) Clark days. Bill
Andrews highlighted this issue immediately, forcing the panel of witnesses
to admit that there is no real cost-benefit assessment to show that GSX is
the best and cheapest way to supply VI's electricity. There was an initial
government order,  forcing Hydro to pursue a strategy of gas-fired
generation. It's not clear at what point this decision impelled BC Hydro to
consider a second gas pipeline to VI -- before Island Cogeneration was
built? or after? BC Hydro didn't seem to know.

Also, Hydro was essentially indifferent to the long-term price of gas, and
how it would affect the economics of GSX. Claiming that they would need gas
generation either on or off VI (do they need it because they need it, or
because the BC government told them to build it?), they say that it
therefore does not matter what the price of gas is: they still want to build
GSX.

Therefore, in Hydro's thinking, it also doesn't matter that the estimated
price of the pipeline (US and Canadian parts combined) has gone from about
$180 million in 1999/2000 to a present estimated price of about $310
million, and the reference toll (i.e. the figure that establishes what it
would cost Powerex to transport gas on the pipeline to fuel the power plants
on VI) has gone up by 42%.

Finally, Mr. Andrews and various other intervenors who succeeded him in
cross-examining the first panel, established that the financing of GSX is
100% by BC Hydro, and the risk of price increases in gas is borne entirely
by Powerex (BC Hydro's subsidiary responsible for procuring gas for BC
Hydro) -- yet, Williams Gas Pipeline Company is sharing 50-50 in the
after-expenses proceeds. And Powerex has to pay the tolls even if they don't
transport the gas, so GSX is essentially a guaranteed money-maker.

Questions filed by Mairi McLennan established that the legal entities that
have the legal liability for misadvantures relating to GSX have few assets,
while the deep-pocketed parent companies are isolated from liability by
their subsidiaries.

Tim Howard, counsel for David Suzuki Foundation and SPEC, brought out that
in its public statements, BC Hydro is committed to divest itself of GSX and
the associated Vancouver Island Generation Project.

Panel 2 of GSX PL's witnesses was sworn late in the day. This panel is one
of the more important ones for the basic rationale and economic feasibiliy
of GSX. Bill Andrews led off a cross-examination of this panel which will
continue tomorrow, Wednesday, addressing the question of whether there is
likely to be enough natural gas in the future to keep GSX filled and the
power plants on VI running -- or to put it in more sophisticated terms: what
price will Powerex have to pay in the future in order to keep gas in the
pipeline? GSXCCC says there won't be enough gas (or it will become
prohibitively expensive, to the detriment of BC Hydro ratepayers and the
ultimate owners of BC Hydro, i.e. the people of BC). We also expect to
address the question of whether BC Hydro is right when they say there is a
danger of the lights going out on Vancouver Island if they don't get their
way with GSX. Again, GSXCCC evidence says no.

Our cross-examination on these issues resumes at 9:30 Wednesday morning. It
should be an event worth watching.

Tom Hackney
BC Chapter - Sierra Club of Canada
and GSX Concerned Citizens Coalition
(250) 381-4463; fax (250) 381-4407
thackney@island.net