Former chairman of the Manitoba Public Utilities Board, Graham Lane, continues as an outspoken critic of Manitoba Hydro's plans for supplying electricity to the next generation of Manitobans (Manitoba Hydro's halcyon days are gone, Free Press, May 4).
Perhaps his most disturbing charge is Hydro "will not seriously consider other options to meet future increased domestic electricity demand." This is simply incorrect. In fact, in the upcoming public review by the PUB, we will be presenting an analysis of seven different development scenarios, including natural gas as the base case, with gas-wind, gas-hydro, all-hydro portfolios and multiple assumption scenarios considering capital costs, interest rates and energy price forecasts and more, such that a total of 189 possibilities will be reviewed.
After examining the options, 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, resulting in the lowest electricity rates in future years. It is also the best option from an environmental perspective.
While it is true the PUB panel members are not utility experts, they hire expert advisers to assist them, and the board is being augmented for this specific review with respected members from the Manitoba business community. As well, interveners in the process will be granted funding in part to allow them to hire their own experts to review the Hydro plan.
It is curious that Mr. Lane should be skeptical that the PUB, the entity he once chaired, is not capable of assessing the validity of Hydro's plans. We have been working to build a healthy, constructive relationship with the new PUB chairman and board members, and in particular are progressing toward a mutually acceptable agreement for the review of commercially confidential information, a dispute that ended up in the courts under Mr. Lane's tenure at the PUB.
Contrary to Mr. Lane's assertions, our customers should note electricity demand in Manitoba continues to grow. Manitoba Hydro must be in a position to meet the requirements of our domestic customers.
Utility customers in the U.S. have committed to firm contracts for Manitoba hydroelectricity at attractive prices -- based on the environmental attributes of hydro, and also on their preference for diversity of supply so they are not subject to fuel-price volatility associated with natural gas.
Hydro's economic analysis of the development options is based on the current low price for natural gas and uses consensus forecasts of future prices.
Existing long-term export contracts continue to yield double the price charged to Hydro's largest industrial customers in Manitoba, the ones most directly comparable to the export customers.
While electricity spot-market prices have been low recently, spot-market prices continue to fluctuate; in the most recent six-month period, spot-market prices rose 46 per cent compared to the same period the year before.
It has historically been the case and is well understood, that large capital projects, such as hydroelectric generating stations, lose money in the first years of operation but become profitable over the long lifetime of the project. The proof is the existing Manitoba Hydro system -- capital-intensive hydroelectric developments resulting in the low-cost utility Manitobans currently enjoy. Comments about Wuskwatim "losing money" are misleading.
Mr. Lane criticizes Hydro for spending money on the proposed hydro projects in advance of any review and approvals. Part of this spending is required for technical and environmental assessments for engineering and regulatory purposes. The rest is to support partnership arrangements with First Nations who will be affected by the projects. While it certainly costs money to engage with and support participation by First Nations, it is no doubt an improvement on the approach used in the 1960s and 1970s that has resulted in Manitoba Hydro paying almost $1 billion in compensation and mitigation after the projects were in place.
Bipole III will not result in a domestic rate increase of 30 per cent. While we have recently applied for electricity-rate increases and expect to have to do so in the future, both to pay for new generating capacity and also to rebuild existing infrastructure, we are confident Manitobans will still be paying among the lowest electricity rates in Canada.
Our preferred development plan will be shown to be the most economic option for Manitobans and, in addition, will provide more than 31,000 person-years of employment, much of which will be in the north and create economic activity and training opportunities that will greatly benefit aboriginal residents of the north.
Manitoba Hydro agrees that the multibillion development plan deserves serious attention and a full airing of the proposal in a public forum. We suggest judgment be reserved until the proposal has been presented, analyzed and challenged in the appropriate public forum.
Scott Thomson is the president and CEO of Manitoba Hydro.