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No decision on hydro gas plant for 4 years

"Flexible' plan dependent on economic conditions

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Manitoba Hydro President and CEO Scott Thomson


Manitoba Hydro President and CEO Scott Thomson Photo Store

It's been dubbed Plan 5 and it doesn't include the proposed Conawapa mega-generating station.

Instead of building the estimated $10.7-billion Conawapa dam in the next few years, Manitoba Hydro has floated the idea of building a cheaper natural gas-burning plant to produce electricity.

Hydro president and CEO Scott Thomson said a decision to build a gas plant will be based on what makes the most economic sense when a final decision on Conawapa's fate is needed in about four years. Thomson spoke at a Building Owners and Managers Association luncheon on Wednesday.

"Our plan has the built-in flexibility to delay Conawapa or even delay it indefinitely," Thomson said. "The Conawapa generating station will only get built if the business case remains sound."

Thomson's comments come as critics, including Brian Pallister's Progressive Conservatives, argue Hydro and the NDP government are rushing into a decision to build the Keeyask and Conawapa dams without doing enough homework.

Premier Greg Selinger has said a recent export-power deal with Green Bay-based Wisconsin Public Service (WPS) for 308 megawatts of firm power for up to 10 years would trigger development of Conawapa on the Nelson River.

But under Plan 5 the WPS export sale could be designated as being supplied out of Keeyask, and Manitoba's own power needs would be met by new natural gas-fired, combined-cycle combustion turbines. A combustion turbine that produces 480 megawatts of electricity costs about $500 million to build.

Thomson said in a interview the advent of new drilling (fracking) techniques to extract once-untouchable sources of cheap natural gas changed the energy market and, if gas prices stay low over the next four years, Conawapa may not get built.

"If interest rates and construction costs go up dramatically, and if gas and electricity prices stay low, then that would be problematic for more hydro (Conawapa)," Thomson said. "But generating with natural gas is not an efficient way to go. The best combined-cycle gas plants are about 60 per cent efficient."

Plan 5 was presented as one of several options to the Public Utilities Board earlier this week as part of a wider presentation by Hydro officials on the need for new electricity generation in the province, export and transmission opportunities and an economic evaluation of all alternatives. The hearing is last into late May and the PUB is to report back June 20.

Hydro has also produced a plan for all natural gas generation if it does not get regulatory approval to build the $6.5-billion Keeyask dam and a new transmission line from Winnipeg to Duluth, Minn. Hydro wants Keeyask in service by 2019 and the line built -- Hydro will own 49 per cent of it and share in its construction -- by 2020 to meet export commitments.

Hydro is banking that tougher carbon emissions standards in the United States, closing numerous coal plants in the American Midwest, and state laws that require American utilities to sell a percentage of their electricity from renewable sources will earn billions for the province.

Hydro officials told the PUB there has been $10.3 billion in export revenues to the province since 1960. The Limestone generating station alone has earned more than $6 billion for a plant that cost $1.6 billion to build when it opened in 1990.

Hydro said last week it wants a 3.95 per cent general rate increase effective April 1 to generate $56 million in 2014-15, money it says it needs to help it build Keeyask and the 850-kilometre line to Minnesota, estimated to cost about $775 million.

Republished from the Winnipeg Free Press print edition March 13, 2014 A14

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