Winnipeg Free Press - PRINT EDITION

What Manitoba Hydro's critics know

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In an Aug. 22 article in the Free Press, Manitoba Hydro president Scott Thompson defends Hydro's capital plans: "Our analysis demonstrates that continuing to develop our hydro-power resources is in the best long-term interest of Manitoba Hydro customers and the province of Manitoba."

The same article notes Hydro's vision and the NDP's vision are one and the same. They should not be.

Hydro is supposed to be an independent Crown corporation, separate from the government. Regrettably, that is not the case. The NDP has chosen to treat Hydro as an arm of government. The Hydro board and now apparently Hydro's senior management have accepted this intrusion.

Hydro writes off the opinions of critics of its capital plans by implying there can be no substitute for its own analysis. Unfortunately, this analysis does not stand up to any respectable level of scrutiny. Even an expensive media blitz has not convinced most Manitobans Hydro's planning is sound.

There has been no logical explanation by Hydro why, in its submission for the Public Utilities Board's coming review, it bases its development plan on a projected annual increase in peak capacity requirement over the next 20 years of 76 megawatts when, in the past 20 years, peak capacity requirement has increased at only 40 MW annually.

What, then, is the rationale for using an exaggerated 76 MW for annual growth in Hydro's planning?

Further, critics ask: "What is the rationale for Hydro's projections in its 2013 annual report of export revenues of $16 billion over the next 20 years and $29 billion over the next 30 years?"

Crunching these numbers reveals Hydro is projecting growth in annual export revenue averaging $800 million over the next 20 years and $1.3 billion over the 10 years beyond that.

The reality is annual extra-provincial revenue peaked at $827 million in 2006 and has decreased consistently each year since then. Hydro's annual report admits that, for the year ended on March 31, 2013, it had declined precipitously to $353 million. To use Hydro's current overstated export revenue projections is to ignore the trends and the underlying causes for those trends.

The problem with Hydro's projections is they have not been adjusted realistically since the market crash of 2008 and the discovery in the U.S. (and Canada) of new ways to access previously difficult-to-extract natural gas, a competitor to hydroelectricity in Hydro's U.S. energy market.

There is really no basis to selectively choose, as Hydro frequently does, short-term recoveries in the price of natural gas in what is always a volatile market and to write off the longer-term trend of decreased prices for natural gas and decreasing export revenue from hydroelectricity.

Hydro's development plan is also unrealistic because its projects fit a pattern of exceeding cost estimates. The Wuskwatim generating facility and associated transmission line was approved at a cost of $900 million. It was completed last year at $1.8 billion.

Wuskwatim, trumpeted by both Hydro and the NDP as a groundbreaker because a First Nation community holds an option for a 33 per cent equity position in the facility, is losing more than $100 million a year.

Hydro is now re-negotiating its agreement with the Nisichawayasikh Cree Nation because the original agreement, predicated on a sharing of profits, no longer makes sense. Wuskwatim will be a losing proposition for at least the next 20 years. The cost of the re-negotiated agreement has still not been reflected in Hydro's development plan.

There are many other reasons to question the basis for Hydro's development plan but these few examples illustrate why critics ask questions and doubt Hydro's claims about the soundness of its plan.

The critics know more than Hydro is willing to admit publicly. They know now, for example, Bipole III, which the minister responsible for Manitoba Hydro insisted as recently as two years ago would not cost Manitobans one cent, will have to be paid for by Manitoba ratepayers beginning in 2017 when it comes into service.

On reflection, most Manitobans know that, in a paradoxical sort of way, the minister was right. It won't cost us one cent, it will cost a lot more.

 

Garland Laliberte is dean emeritus of the faculty of engineering, University of Manitoba, and vice-president of the Bipole III Coalition.

Republished from the Winnipeg Free Press print edition September 5, 2013 A13

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