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Pipeline expansions bolster Hydro's bid for mega-dams

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There are two pipeline proposals on the table in Canada that would see more crude oil shipped from Alberta’s oilsands to Eastern Canada and to the United States. And that means a need for more electric power.

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There are two pipeline proposals on the table in Canada that would see more crude oil shipped from Alberta’s oilsands to Eastern Canada and to the United States. And that means a need for more electric power.

It's been one of the longest and most in-depth reviews of Manitoba Hydro's operations and ends next week.

In almost nitpicking detail, the Crown corporation's plan to build two more northern dams and a transmission line to the United States has been pulled apart so many times it's become known as K19/C26/750MW for the sake of brevity and to save paper.

In short, K19/C26/750MW is Hydro's plan to keep supplying the province with electricity for decades to come and to make some money off the Americans, who are becoming more power hungry as they shut down old, smoke-belching, greenhouse-gas-emitting coal plants.

It means building the Keeyask generating station by 2019, Conawapa by 2026 and a 750-megawatt transmission line to Minnesota by mid-2020.

Since March 3, a small cadre of lawyers and independent consultants -- most flown in from their U.S. homes -- have met each weekday in a somewhat dreary hearing room to strip bare the inner workings of Hydro and its thinking on K19/C26/750MW. In response, a core group of Hydro officials has answered each and every question without blinking.

It hasn't been cheap. Because the hearing -- before a special panel of the Public Utilities Board -- is driven by Hydro's plan to build Keeyask and Conawapa, the Crown utility pays the freight. Hydro's own cost for putting together its argument, and the external costs of paying for the five intervenors to rip it apart, was already at $15.4 million at the end of March. The total projected cost when the hearing wraps up is expected to be in the range of $20 million, Hydro says.

The PUB is considering whether Keeyask and Conawapa, and the new transmission line, make economic sense or whether they should be postponed until more is known about how much power the Americans are willing to buy. The PUB's report is due June 20.

The one consistency through the hearing is Hydro's position demand for electricity in Manitoba is steadily increasing each year-- it grew 1.7 per cent annually over the past decade -- and is forecast to increase at an average annual rate of 1.6 per cent, or 1.5 per cent if we adopt more aggressive energy-efficiency programs over the next 20 years. To meet this demand, a new supply of electricity is forecast to be required in or around 2023.

Hydro's plan is to get Keeyask up and running by 2019 to sell more power south sooner and to help cover its estimated $6.5-billion price tag. Critics say that assumption is fraught with risk as the Americans could easily make their own power by burning natural gas in big combustion generators and building more wind and solar farms.

But what hasn't been talked about much publicly and what is built into Manitoba's rising domestic demand is something Hydro calls "pipeline load."

Hydro has told the PUB there are two pipeline proposals on the table in Canada that would see more crude oil shipped from Alberta's oilsands to Eastern Canada and the United States through already existing pipeline routes.

For all that oil to flow, both pipelines need a round-the-clock supply of electricity. Lots of it. All that power is to be sucked up by a series of pumping stations along each line.

"We're looking at increased energy consumption from the pipelines -- the oil pipelines need electricity for their pumps," Ed Wojczynski, Hydro's manager of portfolio projects, said. "The amount of electricity is much more than Wuskwatim would produce."

Wuskwatim, the province's newest dam that opened in 2012, has a capacity of 200 megawatts. The proposed Keeyask dam would have a net capacity of 695 megawatts.

The pipelines themselves would require just under 2,000 gigawatt-hours of energy, which is roughly half the dependable energy of Keeyask, Wojczynski said.

"They need to be running whether it's a drought or a high flow year, so you have to plan for under-dependable conditions, so we would need more power just for that aside for anything else in Manitoba."

The Crown utility has also said it needs annual rate increases of about four per cent over the next few years, although most recently the PUB held this year's rate increase to 2.75 per cent, to pay for Keeyask and the transmission line.

This new load from the pipelines highlights the sometimes overlooked electrical demand by Manitoba's industrial users, the big mining companies and fertilizer plants that need a steady supply of affordable power to operate. The relationship can be complicated when Hydro's projections don't bear fruit, because it means more costs for those big companies.

"We're always concerned when utilities, such as Manitoba Hydro, propose to take on big risk on behalf of the ratepayers with projects that require a long lead time to satisfy load or contracts that are predicted to show up decades away," Dave Forsyth, the regional energy manager responsible for the Gerdau Long Steel rolling mill in Selkirk, recently told the PUB.

"If this turns out to be overbuilding or the major assumptions turn out to be wrong, it could result in cost skyrocketing for existing customers."

bruce.owen@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 24, 2014 A6

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