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Power rates rising as PUB explores Hydro finances

Whistleblower allegations public?

By: Mary Agnes Welch

10/02/2010 1:00 AM | Comments: 12

Power rates will go up nearly three per cent in April, a stop-gap measure while Manitoba Hydro's regulators prepare for a mega-hearing on the Crown corporation's risk and a whistleblower's allegations.

The Public Utilities Board ruled Tuesday that rates will go up 2.9 per cent starting April 1, a hike that will cost homeowners with gas furnaces about $2 extra a month. Manitobans who heat their homes with electricity will pay about $3.80 extra a month.

The rate hike is an interim one meant to tide Manitoba Hydro over until the end of the year while the PUB spends the summer and fall delving into Hydro's finances, its dam-building projects, its export prices and its risk.

Those hearings, slated to start June 1, could give Manitobans their first detailed glimpse of whistleblower allegations that Hydro has misjudged the amount of power it has available for Manitobans and for export, wasted more than $1 billion and developed flawed financial forecasts.

The whistleblower, a New York-based consultant, will be asked to testify at the PUB hearings and could even be compelled to appear, though that requires some legal manoeuevring since she lives outside the board's jurisdiction.

"There is a strong indication the New York consultant is prepared to co-operate with the PUB," said PUB lawyer Bob Peters.

The Free Press has not named the whistleblower since details of her allegations became public last fall. There is now a publication ban on her name as part of a related court case filed by Manitoba Hydro.

Over the next several weeks, there could be internal wrangling over what portions of Hydro's documents become public during the hearing.

Hydro has filed more than 25 internal risk reports with the PUB -- many containing "blue pages" indicating Hydro wants the information kept confidential because the pages contain sensitive commercial information like export prices.

The board will go through all the blue pages to determine if they really ought to be kept secret, and consumer and environmental groups will also have a chance to challenge the confidentiality provisions. The whistleblower's reports are among those that could be made partly or entirely public come June.

maryagnes.welch@freepress.mb.ca

Dissenting voice

NOT everyone on the Public Utilities Board wants to give Manitoba Hydro a break.

Kathy Avery Kinew, a social worker and policy analyst, wrote a dissenting opinion saying Hydro should be denied the 2.9 per cent rate increase. She chided the utility for repeatedly missing filling deadlines, delaying the hearing process and failing to come up with a good low-income rate program even though the PUB has asked for one repeatedly.

She said she'd rather hear all the evidence about Hydro's upcoming capital projects and its risks before dinging customers with a rate hike, especially when Hydro is still making a profit this year.

It's extremely rare for a member of the PUB to issue a dissenting opinion. The last time board officials recall it happening was in the early or mid-1990s.

Republished from the Winnipeg Free Press print edition February 10, 2010 A4

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12 Commentscomment icon

The Provincial gov't would be taking their cut for allowing the electric company to use our lake system as a massive resevoir regardless who owned it but it wouldn't phase people if the gov't charged a private company more.

I'm going to go ahead and say you are WAY off the mark on what are rates would be. There is NO doubt the rates would be higher just like they are at EVERY SINGLE other private utility. And here is why:

1) They'd try to maximize profit in other words they'd charge as much as they can for their product which is what every private business attempts to do. I could really just stop here but some how you still believe that the private sector has consumers (and not shareholders) best interest in mind.

2) Hydro subsidizes our rates with all the electricity they sell in the US. No way a private company would EVER do that. That would just be dumb and their shareholders would never let it happen.

3) New generation would only be built at the last second possible otherwise they'd have excess supply which would lower the market price and thus their profit.

4) Do you realize why large hydro generation systems are for the most part owned by Crown Corps. Dams are REALLY expensive and payback is LONG. You have to know you'll be guaranteed a market. So given the choice private sector will choose to build a natural gas plant close to city (less transmission) and pay off the investment quicker. However operating cost will be higher.

Just admit you are wrong

I hate to take up 2 posts but I had an after thought... You mention shareholder dividends, what do you think of the NDP raiding Hydro's bank account? Very, very similar. [edited]

For Algonquin, their pre-construction cost estimates over the 25 year life span of the project were all over the press at that time. The Hydro-Alg deal details are not public info.

I do believe the rates would be similar. You are correct shareholders would expect a dividend, I would also like to point out that we have not started really paying for Wakwatim yet, nor Conawapa. I believe that had MB hydro been public all this time, we would see several more dams already built in Northern MB. They would have been built to supply the export market, while construction was 1/2 the cost it is now. Bi pole III would have already been built, down the east side of lake WPG, saving $$$ (before the notion of a world heritage site ever came to mention.) But instead we went for nearly 20 years without building a dam, meanwhile our demand caught up with supply, don't forget we had to IMPORT power as recent as 2008. And where are left now? Building new dams when construction costs are the highest they've ever been, First Nations have us on the shortest leash ever, environmentalists are the most powerful they've ever been ETC. So in short, yes our rates might be slightly higher now, however they would remain the same for years to come. As it stands now, we will soon be paying for dams that cost 2X what they should, thanks in large part to poor long term management on behalf of MB Hydro. Your rates have only started to climb, get ready for them to go much higher.

@Blue Tie:
Wow, I'm glad were not splitting hairs: "MB Hydro does have distribution monopoly, and a dam monopoly, but NOT a generating monopoly." I'm going to go out on a limb and say that Algonquin Powers 1% of the energy market share doesn't really make a difference and that Hydro has a monopoly with 99% of the electricity market share.

Can you provide a link referencing the Algonquin-MB Hydro deal. I've never seen $ figures and assumed it was like the vast majority of wind deals across the world. In other words, only viable due to getting a price premium over the market rate due to subsidies. Although true viability will hopefully come soon either by efficiency gains in wind power or by market price increases.

So your big point is that you "don't believe that crown corps. are capable of looking out for the public's best interest." I laughed pretty good at this one because it implies the private sector does. *cough* Enron *cough.*

Now let's be clear in the following I'm ONLY talking about energy generation, which is a Natural Monopoly (have you even looked it up yet?)Let's cut to the chase, do you honestly think that if MB Hydro were a private company that electricity would be more or less expensive and I remind you about all the private companies rates that are way higher that I already provided you yesterday??? Nope I guarantee it would be more expensive as shareholders need to get paid and some how according to you that scenario is in our best interest

@SoberThought
I will explain your contradiction for you in the simplest of terms, you said: it is cheaper for only one entity to make electricity, you then touted how wonderful monopolies are, and reading between your lines boasting MB Hydro's generating monopoly. You then wave a bright banner challenging others to base their opinions on fact, when in fact, you were mistaken all along. MB Hydro does have distribution monopoly, and a dam monopoly, but NOT a generating monopoly. That was your contradiction. (For the record, St. Leon does not increase your rates. They produce power for slightly less than $.03/KWh, leaving $.0325/KWh for MB hydro to distribute it, and Algonquin to make a profit. They are plated at 99MW, and actually produced 44 MW in 2008. But thanks for the "unfounded opinion" none the less.)

You'll also notice that BC and Quebec also have in common with us: An enormous water shed. The low rates are not due to crown corps., rather the fact that extraction/transportation/burning of coal, oil or natural is NOT required (with the exception of some small examples.)

I agree that an urban DISTRIBUTION monopoly (only) is more efficient, but that has never really been my point.

I don't believe that crown corps. are capable of looking out for the public's best interest, whether it is Hydro, MPI, MLCC, Peak of the Market, CWB, formally MTS, etc. Their fundamental motivators leave citizens with no recourse for their mistakes, other than at election time.

Kinew guess how long she will remain on the board!!!!

@Blue Tie: I fail to see how I contradicted myself...

...moving on. I hope you finally read up on the rates of other electricity companies in Canada. As I said we have the lowest or near to lowest rates depending on what rate class you compare (even with an increase mandated by the PUB). Did you notice who else was competing for the cheapest energy. BC Hydro & Hydro Quebec then the rest aren't even in the same ballpark. Gee, what do MB Hydro, BC Hydro & Hydro Quebec have in common. Yes, for those keeping score at home they are all CROWN Corporations providing their provincial residents the cleanest energy at the best price. And yes, they are Natural Monopolies. Did you google natural monopolies yet?

The St. Leon Wind farm, as beautiful as it is, is a drop in bucket and I believe it actually raises our rates as hydro from a dam is cheaper to make electricity from a windmill but diversification is good.

That said I do like the idea of wind farms and I agree the PUB is politically appointed and I don't usually agree with them but I didn't vote for them; however thats an opinions...not a fact.

@ Soberthought,
You've contradicted your own statement.
"one producer can make...electricity" & "more arguments based on facts please"

The wind farm in St. Leon is indeed owned and operated by Algonquin Power, not MB Hydro.
Of course MB Hydro distributes that power.

"sell electricity far cheaper"
Right... That's really going well for them, please re-read the article.

And for the record, I don't trust the PUB to look after my best interests, current of future. The board members are appointed, not elected. As impressive as the board members' resumes may be, the fundamental motivators of the PUB leaves much to be desired.

My vote is with Ms. Kenew. The only strong and true backbone person on the PUB. Thanks for echoing the voice of the people. I think the rest of the PUB are scaredy cats and should be holding people accountable.

To Blue Tie: Let's clear up a few things. The PUB IS the body that keeps Hydro accountable. That's why it appears Hydro employees appear to be spending more time reporting to the PUB then doing there day-to-day jobs. You pretend to know so much about free market economies then maybe you'd realize that economics considers electricity utilities to be "natural monopolies"; ie: one producer can make and sell electricity far cheaper then two producers so its beneficial for them to be a regulated monopoly, such as we have. And for the record free market economy has not been around since the beginning of time. Its been around for less then 200 years.

Less unfounded opinions; more arguments based on facts please

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