The Aug. 26 1994 B.C. Hydro board meeting was a watershed moment for the transition of the $9 billion Crown corporation. Three years into the New Democrat mandate, the provincial government had placed it under the direction of the powerful new Crown Corporation Secretariat run by a former trade union official.
It was now being remade into a giant vehicle for advancing NDP doctrines that seemed at times to have less and less to do with supplying electricity as the primary mission.
As a result of taking the focus off Hydro’s core mission, under the NDP in the 1990s B.C. became a net importer of power for the first time and the party even considered selling off Hydro according to a 2000 policy paper.
Hydro had a new strategic plan calling for “socially progressive” electricity. Whatever that was, it came dressed. And under the new plan it was about to embark on an international mission to expand the business into uncharted – and, it proved, disastrous – territory.
Adrian Dix, aged 32, was with his boss Glen Clark at the August board meeting at Coast Harbourside Hotel in Victoria when directors worked their way through a thick package of papers to Item 12.
What an imbroglio it became.
As a result of imminent decisions that Dix was privy to, Hydro chair John Laxton and Hydro CEO John Sheehan were fired, other senior managers were under a cloud and Glen Clark was accused of knowing more than he was saying in the complex international investment scheme. Professional careers were on the line and the political credibility of the premier was tested. It took a team of investigators to be called in to spend eight weeks reviewing 23,000 pages of documents, interviewing 38 witnesses, reviewing 2,000 pages of transcripts, and writing a 167-page report.
Even then the answers were not found and the RCMP were later called in – at which point they requested a further set of documents from BC Hydro including the board minutes obtained by B.C. Political Reports that have never come to light until now.
Had Dix exercised the kind of judgment that he confessed during the 2013 leadership debate he did not even possess in his 30s, there might have been a very different outcome. He attended 21 Hydro board meetings in 1994-95 as the Pakistan scandal took shape and crucial questions of investment by directors were discussed.
The errors committed with Dix at the table cost taxpayer $11 million in the end, according to the Victoria Times-Colonist.
Sign first, get approval later
On the 26th of August, CEO Sheehan began his presentation by outlining to the assembled directors, Adrian Dix, Glen Clark and a handful of others the the fantastic business opportunity awaiting BC Hydro in Pakistan.
With the charm of an Anthony Robbins, he walked them through the proposed participation of Hydro’s international subsidiary BCHIL in a “Build-Own-Operate” power generation project in Pakistan” as well as a Memorandum of Understanding that had been “recently” reached between BCHIL to go ahead with the project.
The minutes refer back to a May board meeting where the issue had been discussed.
Strangely, the records reveal no director approval was specifically sought or granted to embark on the Pakistan adventure. Apparently, management had waited until now, with an MOU signed, to seek the go ahead.
Sheehan told directors and the others that the MOU he had signed included a condition requiring BCHIL to come up with a $1.2 million capital contribution. To get this money, which BCHIL did not have, it would be borrowed from another subsidiary of BC Hydro called Columbia Estate Company.
Sheehan and chairman Laxton now asked the board for the go-ahead to take five important steps toward getting their offshore excursion into gear:
- Approval for Sheehan and Laxton to proceed with the Pakistan that they had already agreed to;
- Retroactive approval of the signed MOU;
- Approval for BCHIL to invest the $1.2 million it did not have;
- Approval of $500k to start environmental and engineering work; and
- Approval to borrow $1.2 million from Columba Estate Company.
Directors were told the deal had already been approved by BCHIL directors and those of Columbia Estate. The last ones to be asked, it seemed, were those of BC Hydro itself.
The discussion that followed covered the principle of equity investment and the position of the government of British Columbia. The resolutions before the board were amended “to reflect that Board authorization would be subject to the approval of investment policy by Government.”
A motion then tabled gave management the go-ahead it needed to carry out with the plans. BCHIL gained authorized to do “all such things as are necessary to effect the Pakistan project” as long as the Hydro president approved them first. Borrowing of funds by BCHIL from Columbia Estate was also authorized “for any expenditures not covered by its income” – provided BCHIL’s board signed off first.
A new strategic plan moves ahead
Directors approved these motions and then gave consideration to the amended resolution on equity investment. Its preamble recognized that the new strategic plan of BC Hydro encouraged developing export markets for its technical services and expertise. In this regard, BC Hydro under the authority of the Crown Corporation Secretariat was being led down the same path as BC Ferries – another project where Adrian Dix had been directed by Glen Clark to ride her to make sure NDP intentions were carried out. (In both cases with memorably disastrous results.)
The final approval secured on Aug. 26 empowered Sheehan and Laxton to borrow the funds they needed from Columbia Estate “for the purposes of making equity investments from time to time”.
And thus were sown the seeds of the second most damaging governance disaster of Adrian Dix’s short career. But the concept of sharing risk with the private sector had not yet been broached.
At the next meeting where the Pakistan project came up – October 17, 1994 — it was clear that things were not going as hoped.
Read the minutes:
“The Board wishes to express to Government its frustration with the current mechanism for dealing with the Pakistan project and to notify them that the Board will be developing a comprehensive proposal for dealing with these matters in the future.”
Adrian Dix has chosen never to reveal what was going wrong at this point. But as later investigations showed, cracks were already becoming obvious by this time. Some disquieting signs even began to point in the direction of politicians and their staff like Dix.
The series so far:
Part 1: Documents reveal Adrian Dix’s pivotal role in Hydro scandal
Part 2: “An ill-fated partnership-cum-offshore-tax-dodge”
Part 3: NDP converts $9-billion BC Hydro into a social experiment
Next: Non-compliance in critical areas
B.C. Political Reports 