Funny thing happened on way to future

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Mike Deal / Winnipeg Free Press Archives Premier Greg Selinger is all smiles after a tour of the Wuskwatim generating station on the Burntwood River this past July. (MIKE DEAL / WINNIPEG FREE PRESS) Photo Store

While neighbours in Alberta and Saskatchewan enjoyed the wealth of King Oil, Manitobans sat back and waited patiently for their own days of energy prosperity.

It would take time, a slow shift to a green-conscious economy and big investment in infrastructure, but sure enough, the province's clean, low-cost electricity, generated safely and reliably by northern power dams, would be the oil of the 21st century to meet the never-ending demands of American consumers.

But a funny thing happened on the way to the future.

The North American energy equation has changed so rapidly Manitobans are now taking a hard look at what was once a given -- continued massive expansion of hydroelectric generating capacity.

The NDP government, which has long sung the praises of northern hydro development, has asked the province's Public Utilities Board to review two proposed projects with a price tag of $13.4 billion to determine if there is a better alternative, such as electricity generated from natural gas.

The board will do a review, though it has already said Manitoba Hydro, the government-owned public utility, could build a natural gas-fired plant to supply Manitobans with power cheaper than that from the two northern dams.

The NDP is still saying publicly the Keeyask and Conawapa projects represent a major economic-development opportunity, one that could propel the province's economy for decades to come.

But the review has the feel of political cover for a government looking for a way out of a difficult situation. The NDP is in a tough spot, which could become a politician's nightmare -- rising electricity prices at home while Manitoba Hydro is financing expensive projects to generate power for consumers elsewhere who no longer want to buy it.

Power generated from the mighty Nelson River has been at the core of Manitoba energy development since the 1950s. Much of the water in the province is generating electricity. Lake Winnipeg, the 11th largest freshwater lake in the world, has been transformed into a giant hydroelectric reservoir for the Nelson River system.

Successive provincial governments have based energy policy on continued expansion of northern projects to produce more electricity to sell in export markets to the south, such as Minnesota and Wisconsin, while keeping rates in Manitoba low.

All major projects have been conceived with this in mind.

A new transmission line from the north is now proposed around the western side of Lake Manitoba instead of a much shorter and cheaper route on the eastern side of Lake Winnipeg, where it was originally planned. Why? Because of environmental concerns and fears U.S. consumers might boycott Manitoba power if a line cuts through the undeveloped boreal forest of eastern Manitoba.

But the model based on growing U.S. demand is cracking.

The first crack came with the economic crisis that began reducing demand in 2008. Now there are more permanent cracks.

What American consumers want most is cheap energy, and it has become more available due to much lower prices for natural gas, the result of new extraction methods.

There is growing reluctance in Manitoba to take the long-term gamble that new hydro power generation requires. Projects typically cost billions and take decades to plan and construct.

Keeyask planning started in the 1990s and it would not go into service until 2019. Conawapa would not produce power until 2025 at the earliest.

Manitoba enjoys the lowest electricity prices in Canada -- a fact the government trumpets to consumers and businesses alike. But those low prices are under pressure.

Manitoba Hydro got a 2.5 per cent rate increase as of Sept. 1 and has applied for a further 3.5 per cent increase as of April 1, 2013, and 3.95 per cent for each of the following 18 years.

The utility says the rate increases are necessary to partially offset the financial impacts of lower revenues due to economic conditions and lower prices in export markets.

Manitoba Hydro reported a net loss of $43 million for the first six months of the 2012-13 fiscal year and attributed part of it to lower demand for electricity due to economic conditions in the U.S.

It is hard to keep arguing for rate increases and planning for big projects in the face of such realities.

There is a renaissance in the U.S. oil industry that is changing the way Americans think about their need for Canadian energy of all types.

Just south of Manitoba, North Dakota is booming, drilling oil wells as fast as possible as it unlocks the potential in the Bakken Shale area.

There is a small pocket of drilling in southwestern Manitoba, but it is tiny compared with developments in Saskatchewan, North Dakota and Montana.

That's why Manitobans have always looked north -- only now the view is not what it once was.

Bob Cox is publisher of

the Winnipeg Free Press.

Republished from the Winnipeg Free Press print edition December 17, 2012 A11