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Independent analysts join chorus of Hydro critics

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Perhaps, and hopefully, the Selinger government and its captive utility, Manitoba Hydro, will listen to the latest voice in a growing chorus calling for a pause and a rethink of what Hydro euphemistically calls its "preferred" development plan.

La Capra Associates, an American energy consultancy engaged by the Public Utilities Board to provide an independent and objective assessment of Hydro's $22-billion hydroelectric dams and transmission plan, has given it a failing grade.

You need not take my word for La Capra's view; you can read it yourself on the PUB's website.

Last June, I gave a public presentation of my perspective on Hydro's major capital expenditure plans at a Frontier Centre luncheon. In my presentation, I critiqued Hydro's plans and forecast that if the plan was fully implemented, consumer rates could triple while the government's income from the Crown corporation soared.

I openly worried about lower-income households relying on electric space and water heating.

I listed the major changes in the economic climate that had occurred since the plan was initially developed, changes that make proceeding with the "big build" a gamble, one that could prove disastrous for consumers and industry alike. I noted Hydro's historically poor record of forecasting, a record that includes underestimating construction costs and overestimating load growth, export sales prices and export revenues.

I reminded the government and Hydro that new technologies have been and likely will be developed to reduce load growth requirements for the grid.

I also expressed concern that, pressed by government, Hydro was implementing its plan ahead of a proper, expert and independent review of the plan and options to it. I suggested such a review was necessary and was already overdue by five years.

I reported that Hydro was spending millions of dollars a day on its plan, and that those dollars, and any infrastructure that was constructed as part of the plan, could not be rolled back if the plan didn't work out.

I put the big build in the larger context of the province that would be required to shoulder its implications. I noted the debt and deficits that plague this high-tax, low-wage environment and listed the risks for the overall provincial economy if the big build didn't work out.

I urged the government and Hydro to take a more cautious approach and consider more aggressive energy efficiency and demand suppression, including the mechanism of time-of-use rates. I suggested that to allow for a deferral of the big build, the construction of a combined-cycle natural gas plant should be considered, which could be built for a small fraction of the big-build plan favoured by the NDP government, provide diversity of supply, an asset in peak or drought times and promote and allow for the exploitation of Manitoba's natural gas resources.

I explained how Hydro planned to record its costs as implementation of its plans were carried out and suggested that through the accounting and rate-setting mechanisms being put in place, ratepayers might not realize the disaster in the making until it was too late -- perhaps two elections away.

Since then, government and Hydro have rejected my perspective and have continued to implement their plan. I have been accused of "back-of-the-envelope" reasoning, as if conceptual thinking is a sin.

Despite the coming together in opposition to the implementation of the big-build plan of two former premiers, former NDP cabinet ministers and retired Hydro executives, the Bipole Coalition, engineers, rural landowners, the Manitoba Métis Federation, Treaty Two First Nations and both opposition parties, Hydro plows on.

Hundreds have been hired for the construction, equipment has been bought and ordered, surveyors are in the field, commitments to First Nations and American utilities are being made or maintained and $6 million to $9 million a day is being spent. The gamble just gets larger with every passing day.

Yet the review now being undertaken by the PUB, and involving consultants such as La Capra Associates, is not even finished.

While not finished with its work, La Capra Associates has delivered a withering preliminary indictment of Hydro's preferred development plan. La Capra, employing careful and complex language and analysis, suggests, in essence, that Hydro has been premature in its commitments and its expensing already of $1.4 billion on the big build that Hydro and the Selinger government favours.

La Capra is not the canary in the mine -- I played that role; but, at least in its preliminary report, it joins the chorus in suggesting much more work and a better and deeper look at options to the big build needs to occur. This needs to happen before the Selinger government gives the final green light to a gamble of historic proportions.

The next time Hydro president Scott Thompson accuses a critic, acting in the public interest, of not being careful in his or her assessments and of using back-of-the-envelope theorizing, he should first check his own figures.

 

Graham Lane is a retired chartered accountant. From 2004 to 2012, he was the chairman of the Public Utilities Board. Earlier in his career, he managed or consulted to several large Crown corporations.

Republished from the Winnipeg Free Press print edition February 12, 2014 A11

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About Graham Lane

Graham Lane is a retired chartered accountant who worked in the public and private sectors for 50 years, concluding his career as chairman of the Manitoba Public Utilities Board.

He has also held key positions at Credit Union Central, Public Investments of Manitoba, the Manitoba Public Insurance Corp., the University of Winnipeg, and the Manitoba Worker's Compensation Board.

Before gaining his CA designation in Quebec, he was third in Canada in the then-national intermediate examination. He has a diploma in business administration from the University of Western Ontario and has served on numerous charitable and service boards.

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