Winnipeg Free Press - PRINT EDITION

PUB's credibility in doubt

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The Public Utilities Board is gearing up to conduct a government-directed NFAAT (need for and alternatives to) hearing on Hydro's planned expansion. This hearing, unfortunately, is fraught with serious problems. One is that the NDP government has restricted not only what PUB can receive and assess but also what can be shared with the public. Taxpayers and ratepayers are correct to think the proceedings are an expensive sham.

While the PUB has all of its members appointed by government, nevertheless, at least until now, it was rightfully perceived as a protector of consumers dedicated to make "independent" decisions in the public interest.

Recent events, however, bring its independence into question. In early May, the new PUB panel both approved an eight per cent Hydro rate increase and withdrew PUB's previously issued subpoena for Hydro's export contracts. PUB also agreed to hold the NFAAT, despite the restricted scope imposed by the Selinger government. Previous PUB panels had called for a NFAAT unrestricted in scope with full access to information. I know that because I was chairman of the PUB for a number of years. I cannot comment on whether the past PUB would have granted an eight per cent increase without having received all the information it had directed Hydro to provide.

The new PUB also agreed to review Hydro's export contracts in secret, treat the construction of Bipole III as a given, and not examine the contracts Hydro entered into with northern First Nations. By so doing, the PUB moved from being a protector of consumers to a lapdog for a government determined to go ahead with its risky plans, whatever the cost to ratepayers.

No better evidence of this negative metamorphosis is the eight per cent rate increase, implemented before a proper, full, independent and expert review of the government's overall Hydro development plan, a review that includes options. In acting as it did, the PUB appears to have displayed new ties to the Selinger government's agenda.

Among the many risks facing Hydro's ratepayers is the potential for new and expanding high-energy-consuming firms paying rates as little as one-fourth of the expected cost of the new generation and transmission planned by government. (Presently, approximately 30 per cent of Hydro's annual electricity production is consumed by large Manitoba industries.)

In past hearings, the PUB and Hydro were working toward much higher rates (to be based on the projected marginal cost of new generation and transmission) for new and expanding energy intensive industries.

Higher rates for such firms are justifiable for three reasons: 1) new electricity demand leading to increased supply costs more -- say, 12 cents per kilowatt hour -- than current large-industry rates, which average only 3.5 cents per kilowatt hour; 2) higher rates promote energy efficiency; and 3) without such higher rates consumers will subsidize the power costs of new and expanded firms' electricity bills.

In May 2013, the government lauded the successful "landing" of Canadian Tire's cloud computing centre while expressing disappointment over the failure to bring a Facebook server "farm" to the province. Cloud computing and server farms require large volumes of electricity, while generally lacking large numbers of employees. At the time, news reports indicated low Hydro rates were a major reason for the firms' interest in Manitoba.

Recognizing the absence of any follow-through by the PUB (in the hearing that resulted in a eight per cent rate increase) of the prior PUB's interest in higher marginal rates for new and expanding energy-intensive industries, I issued a review-and-vary application to the PUB, seeking that it reopen its hearing and examine and conclude on the need for new and higher marginal-cost-based rates for new and expanded energy-intensive industries. My application was made in the public interest; I then suspected the important matter had been inadvertently missed.

It is now more than two months since I filed the application, but despite several follow-up requests no response has come from the PUB. I can only conclude the PUB is going along with the government's enticing of energy-intensive industries with the promise of very low electricity rates.

Why would the Selinger government do this? Because higher provincial demand for electricity is needed to support its risky development plan, and the government is willing to allow the general ratepayer community to subsidize new or expanded industry to get that increased demand.

Why would the PUB go along? Because the PUB, it appears, has become a lapdog of government.

The PUB should move quickly to re-establish its adjudicative independence and focus on the public interest, and establish a higher rate for new and expanding energy-intensive firms so as to avoid the general ratepayer being forced to subsidize them. If inducements are required to attract new or expanded industry to Manitoba, the government should, transparently, fund them from its consolidated fund; the implications of covertly providing inducements are all negative.

Graham Lane is a retired chartered accountant that served as the chair of PUB during 2004-2012.

Republished from the Winnipeg Free Press print edition August 16, 2013 A13

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