Winnipeg Free Press - PRINT EDITION

The $17-billion question

The debate over building the Keeyask and Conawapa dams begins in earnest next week

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It's the granddaddiest of plans to make Manitoba a bigger player in the shifting North American energy market.

If you believe the provincial government's spin, it will end our reputation as the poster child of have-not provinces. Saskatchewan and Alberta will trip over themselves to buy our electricity. Take that, potash. Take that, oil. Even Ontario, a reluctant customer in the past, may ask for our forgiveness.

Then there are the Americans. They're already lining up to buy power from two mega-hydro dams that don't exist yet. They have no choice. They're facing tougher emissions standards under U.S. President Barack Obama and state laws, such as in Minnesota and Wisconsin, that require them to have roughly 25 per cent of their energy mix from renewables such as wind, solar and hydro. Of the three, hydro is the most reliable. Some days, the wind doesn't blow and the sun does not shine. So that means they have to look north to buy hydro power to keep the lights on in Minneapolis.

The latest example of that came Friday with word the Green Bay-based Wisconsin Public Service wants to buy 108 megawatts of power starting in 2016 and expanding to 308 megawatts in 2027.

Manitoba Hydro's dam-building plan has been in the works for more than a decade and it will all be condensed into a two-month review that starts Monday.

Millions of dollars have already been spent leading up to it and more will be spent before actual construction starts -- if it's allowed to start.

At stake is the already damaged credibility of the NDP government. Manitoba Hydro's reputation is also on the line.

Some would argue the future of the province is also at stake, but for different reasons and depending on which side they're on. Do we take advantage of our abundant water to sell electricity to eager customers to the east, west and south of us? Or do we spend billions on two huge hydroelectric dams we don't need and, pardon the cliché, bankrupt our grandchildren?

What follows is a primer on the upcoming hearing.

NFAT -- It's pronounced the letter 'n' and 'fat.' NFAT stands for Needs For and Alternatives To. It's a special hearing called by the province more than a year ago to examine if Manitoba Hydro's plan to build the Keeyask and Conawapa generating stations on the lower Nelson River, and their associated transmission facilities, is a good idea. It will also examine Hydro's export contracts with its growing list of U.S. customers and a proposed transmission line that will run from south of Winnipeg to Minnesota. By government decree, the contentious $3.28-billion Bipole III transmission line is not on the table. The province says the 1,384-kilometre high-voltage direct current line has already been dealt with by the province's environmental regulator, the Clean Environment Commission.

PUB -- The PUB has nothing to do with lager and ale. The Public Utilities Board is the independent regulator that has a number of duties, but its main job is to set the rates we pay for electricity, natural gas and car insurance. Five members of the PUB will pass judgment on Hydro's plan. They are PUB chairman Régis Gosselin, Marilyn Kapitany, Larry Soldier, Hugh Grant and Richard Bel.

Who are they? Gosselin was appointed two years ago by the Selinger government to replace Graham Lane, who retired and is now an outspoken critic of Hydro's dam-building plan. Gosselin is the former director of corporate service for the Canadian Grain Commission. Kapitany is a former assistant deputy minister at Western Economic Diversification for Manitoba and a YMCA-YWCA board member. Larry Soldier is the former chief of Swan Lake First Nation and owner/manager of Arbock Smoke Shop & Gas Bar in Headingley.

Grant is a professor of economics at the University of Winnipeg and teaches indigenous economic development. Bel is co-owner and managing partner of the Fort Garry Hotel and chairman of the Forks North Portage Partnership.

Who are the other players? Manitoba Hydro, of course. Its lawyers, executives and experts will take up residence in front of the PUB panel in the board's fourth-floor hearing room at Portage Avenue and Hargrave Street. On the crowded sideline are the NFAT interveners, organizations the PUB has allowed to represent Manitobans and cross-examine Manitoba Hydro. The interveners can also call their own evidence, such as the opinions of mostly U.S.-based private consultants. The interveners are the Consumers' Association of Canada (Manitoba branch), Green Action Centre, Manitoba Industrial Power Users Group, Manitoba Keewatinowi Okimakanak and Manitoba Metis Federation.

How much will the NFAT cost? For intervener lawyers' fees and the cost of their consultants alone, the price tag is about $2 million. That number does not include what Manitoba Hydro has spent. The Crown utility picks up the entire bill for the hearing because it's their plan getting vetted. Let's say, for the sake of argument, the entire NFAT will cost $5 million. It's not chump change, but it's not $17 billion -- the estimated price tag for Keeyask and Conawapa.

Preferred development plan (PDP for short) -- Manitoba Hydro will use these three words a lot. Simply, the PDP is to build Keeyask, PDQ. Hydro says it has customers lined up to buy the extra power from it, paying for the cost of building the dam. The PDP says Conawapa should be built ASAP as more U.S. customers step up.

Keeyask generating station -- Keeyask means "gull" in Cree. The most recent projected cost published a year ago says it'll cost an estimated $6.2 billion. When fully up and running by 2021, it'll churn out 695 megawatts of power. It will be the fourth-largest hydro plant in the province after Long Spruce (1979), Kettle (1974) and Limestone (1990).

Keeyask Hydro Power Limited Partnership -- To make hydro development more palatable, and to mitigate the impact of flooding, Hydro has forged a deal with the Tataskweyak and Fox Lake Cree Nations, and the War Lake and York Factory First Nations. The agreement governs how the project will be developed and sets out how members from each community can get training and jobs during the project. Most importantly, it sets out how each community can profit in the dam's operations and get a cut of revenue from export sales. The four communities will own up to 25 per cent of the partnership.

Conawapa generating station -- If it gets built and is up and firing on all 10 turbines by 2025, it'll be the biggest dam in Hydro's kit, producing up to 1,485 megawatts. The most recent projected cost is $10.2 billion. Plans to build Conawapa have been on the books for decades (The first mention in the Winnipeg Free Press was in November 1974). Its construction was cancelled in 1992 by the former Progressive Conservative government of Gary Filmon when Ontario pulled out of a 22-year power-chase deal. Back then the price tag was $5.7 billion. With the power sale to Wisconsin Public Service, the province says that will justify the construction of Conawapa, as Keeyask won't handle it.

Wuskwatim -- It's the 200-megawatt dam on the Burntwood River west of Thompson. It was christened in late 2012 and cost $1.4 billion, almost twice its 2004 estimate of $800 million. Hydro blames unforeseen ballooning construction costs and the U.S. recession in 2009 that axed what were to be big profits from selling surplus power to the United States.

Critics say the cost overrun shows Hydro does a poor job of forecasting, so its numbers for Keeyask and Conawapa should be not be trusted. Wuskwatim is also the template for Keeyask. Hydro negotiated a 33 per cent ownership deal with the Nisichawayasihk Cree Nation (NCN) as a way to right past wrongs, such as the massive flooding caused by Hydro's Churchill River diversion project in the 1970s. Hydro renegotiated its 2006 profit-sharing deal with NCN so it did not have to contribute immediately to Hydro's overall losses. Under the old agreement, NCN would have to contribute $14 million in 2012 and $24 million in 2013-14.

CT -- It's short for combustion turbine, and what it means in this hearing is combined-cycle combustion turbine or natural gas combined cycle. A CT burns natural gas and uses exhaust heat to power turbines. Critics of Hydro's plan say this would be more affordable for Manitoba Hydro to build than spending billions on two dams. A CT that generates about 500 MW and costs about $500 million. Plus, critics say because new drilling methods have tapped into new domestic supplies of natural gas, the price of gas will stay relatively low for at least the next 20 years.

CSI -- No, not the TV show. In this case, it stands for commercially sensitive information and pertains to Hydro's export contracts with its U.S. customers. Hydro does not want the details of what U.S. utilities pay for surplus power released. The U.S. utilities do not want that information released, either.

Who are the our customers? -- Utilities in Minnesota and Wisconsin: Minnesota Power, Northern States Power, Wisconsin Public Service and Great River Energy. Hydro also recently signed a deal with Saskatchewan. Premier Greg Selinger recently suggested talks with Ontario could be revived if mining development proceeds in a mineral-rich area north of Thunder Bay known as the Ring of Fire. Beneath the ground are significant deposits of copper, zinc, nickel, platinum, vanadium and gold. Reports say the most promising discovery is North America's first commercial quantities of chromite, used to make stainless steel. The government argues that with Americans and other provinces buying our power, it helps pay for the dams and keeps our rates comparatively low. The total value of Manitoba Hydro's recently signed export contracts now totals more than $9 billion. However, electricity rates are anticipated to more than double from current levels over the next 20 years, rising at about twice the forecast level of inflation, as Hydro has signalled it needs increases of up to 3.95 per cent annually until 2021 to help pay for the two dams.

Due date: The PUB's report, including recommendations, is to be submitted to the government by June 20.

 

bruce.owen@freepress.mb.ca

Republished from the Winnipeg Free Press print edition March 1, 2014 A6

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