Winnipeg Free Press - PRINT EDITION

Hydro must serve citizens, not government

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I have followed with great interest and concern the uproar about Manitoba Hydro's plans, which have been circulating lately. Things started out last week with former Public Utilities Board chairman Graham Lane's op-ed piece in the Free Press (Manitoba Hydro's halcyon days gone, June 4), and continued with his talk to the Frontier Centre on June 5. Lane's comments were followed up by Energy Minister Dave Chomiak's incomprehensible reaction, claiming Manitoba will run out of electricity by 2022; and, finally, the week ended with Manitoba Hydro CEO and president Scott Thomson's Free Press op-ed (Hydro plans will be scrutinized in public).

I find Lane to be credible and not conflicted. He has had a distinguished career serving the people of Manitoba at the Workers Compensation Board, Manitoba Public Insurance, the University of Winnipeg, St. Amant Centre, and, lately, the Public Utilities Board. Lane criticized Hydro and the government for the high degree of risk Hydro's ratepayers will incur with the implementation of the utility's capital expenditure plans, some $33 billion to be spent over the next 20 years. Just $3 billion of this, for Bipole III, would lead to an increase of at least 30 per cent in electricity costs and rates. The rate impacts of the other $30 billion can only be guessed at. In his presentation, Lane forecasted a possible tripling of rates in the end. I note with alarm that, with Hydro's current rate schedule, industrial ratepayers are being charged only about a third the cost of new production. With electricity now being sold on the export spot market at a significant loss, it appears the poorest of our residential customers, particularly those who heat their homes with electricity, will face the distinct prospect of not being able to afford to pay their electricity bills.

Hydro's Thomson claims a scheduled review by the new PUB of Hydro's capital plans, the "need for and alternatives to" review, will be open and transparent, and will seriously consider alternatives other than new dam-building. He makes this claim despite the fact the government has severely restricted the terms of the NFAAT review. For example, the review is required to accept as a given the building of Bipole III, and will not even be allowed to consider alternative routing. As well, the NFAAT can't consider the contracts Hydro has entered into with First Nations, or provide for an open review of export commitments and terms. How can the PUB, a supposedly independent body, have accepted such terms for its upcoming review? Do the conditions not make the review the sham Lane claims it will be?

Writing about the NFAAT review, Thomson suggests "judgment be reserved" until Hydro's multibillion-dollar development plan "has been presented, analyzed and challenged in the appropriate public forum." Yet almost in the same breath, he states "Manitoba Hydro has determined its proposed development of additional hydroelectric generation with increased transmission to the U.S. (providing not only export capacity but also import capability) in drought or emergency is the best one for our customers." Thomson wants us to reserve our opinions until we learn what Hydro has already determined is best for us.

Lane has provided information demonstrating Hydro's forecasting of costs has been woefully inadequate, citing cases where Hydro has been out by 100 per cent or more. He pointed to the Wuskwatim generating station, which started out with a cost estimate of $900 million and ended up with a cost of $1.8 billion as an example. Not only that, he reported, but the forecast revenues upon which Wuskwatim's co-ownership agreement between Nelson House First Nation and Hydro was based are turning out instead to be an annual loss of $100 million. This has caused Hydro to have to renegotiate the agreement with Nelson House and will add to the red ink once a new agreement has been negotiated. Despite this dismal financial performance, Hydro frequently points to Wuskwatim as an example of groundbreaking co-operation between a utility and its affected First Nations.

Given Hydro's poor forecasting history, what, then, can we make of Chomiak's over-the-top claim Manitoba will run out of electrical generating capacity by 2022? How believable is that claim? Some experts have suggested a gas-fired generating plant near Brandon could not only provide a new source of power generation to Manitoba for a fraction of the cost of new dams and transmission lines, but also reduce Hydro's financial risks in the event of a drought. Will the planned NFAAT review really be allowed to assess the value of reduced risk through diversification?

The provincial auditor has recused herself from any review of Hydro's capital plans, probably because she was previously a member of Hydro's board. Why does that result in her office not being able to review Hydro's actions and plans? If not the provincial auditor's office, could a review of the utility's actions -- such as the $250 million apparently already spent negotiating with the First Nations -- and its plans be assigned to a private firm of accountants for review? The auditor's office has contracted out other audits in the past.

As a citizen and taxpayer of Manitoba, as a residential ratepayer and a retiree, I am deeply concerned about the implications for my pocketbook, and for the future to be faced by my children and grandchildren. The expenditure of $33 billion and the taking on of major commitments to American utilities and northern First Nations are extraordinary measures that represent a great risk for Manitoba's relatively small population, particularly given what appears to be a challenging provincial fiscal debt and deficit situation.

I call on the PUB to make a serious, open and transparent review of Hydro's capital-expenditure plans. I also would like to be assured Hydro's actions in the past meet normal prudency standards. I especially desire that PUB's NFAAT review will truly consider what are the real prospects for demand over the next several decades; what are the real prospects for export sales; and I trust that the review will consider all reasonable alternatives to building or deferring new dams and transmission. Risk avoidance and reduction must be a factor in any review. If a third transmission line from the north is required, I ask the review to inquire honestly what would be the best route from an economic perspective. Furthermore, a candid look at the fairness of future rates to be charged to residential users, as compared to industrial users, particularly to new high-demand industry, is required. Above all, the PUB must remember that the raison d'�tre for Hydro and PUB is to serve the needs of Manitoba's citizens, not the wants of its government.

I also call on the provincial auditor to perform a value-for-money audit of Hydro's expenditures on planning and negotiating contracts and partnerships, as well as an examination of preliminary expenditures for Hydro's capital plans. If this audit cannot be carried out by her office for any good reason, I ask that an all-party committee of the legislature (all-party to avoid the perception of a conflict of interest) be commissioned to contract it out to an independent accounting firm, one that is not presently involved with any of Manitoba's Crown corporations. I would also wish such an audit include the financial risks of going forward with Hydro's plans.

Government must put aside its ideological and other self-interested objectives and move ahead to safeguard us, the taxpayers and ratepayers of Manitoba.

 

Roger Kingsley is a retired professor of mathematics and an administrator, University of Winnipeg.

Republished from the Winnipeg Free Press print edition June 11, 2013 A7

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