Editorials

Winnipeg Free Press - PRINT EDITION

Bloom off Hydro expansion

By: Editorial

Posted: 04/3/2012 1:00 AM | Comments: 0

The numbers have not been adding up in Manitoba Hydro's favour for some time and consumers are paying for it. On Sunday, interim rates rose two per cent. The Crown utility's net revenues tumbled badly in 2011-12 and the next few years look worse. Premier Greg Selinger should demand a major rethink of Hydro's capital plans, including building a new transmission line in western Manitoba.

A few short months ago, the Public Utilities Board, in a battle with Hydro over the information it gets to judge its rate applications, cut an interim hike for 2010 of 2.9 per cent to 1.9 per cent. Hydro had to calculate overpayments and set up a deferral account until it was decided how to compensate ratepayers.

The account now holds $23 million. On the weekend, however, the PUB dealt with an emergency application from Hydro, which now says net revenues for 2011-12 have dropped from the $100 million forecast to $73 million (or $50 million, when the $23 million is deducted from it). The news gets worse: Hydro is forecasting losses this year of $51 million and $58 million next year. That's after a requested (but not yet approved) 3.5 per cent increase to rates in each of the years.

Hydro says the culprit is the warm winter that saw domestic customers use less power. And, as the PUB has noted in past orders, revenues from export sales are falling because utilities south of the border have cheaper power options.

Hydro's newest generating station, Wuskwatim, which comes into service at year's end, has cost substantially more to build, at $1.6 billion. The PUB's latest order notes the operating costs of the dam, whose construction was moved up to capitalize on export sales that have not materialized, are up.

It will cost Wuskwatim about 10 cents per kilowatt hour to produce electricity, at a time when export spot-market prices are about three cents/kwh in peak hours. Manitobans, the PUB warns, will be picking up the difference.

Hydro has a series of capital projects planned, including the $7.7-billion Conawapa dam. With declining export sales, that generating station might be put off for a long time, the PUB says, which means Bipole III may not be needed for long time. The Selinger government, insisting the transmission line be built down Manitoba's west side rather than the $1.1-billion-cheaper east side, should rethink those plans. It has the time to weigh all the risks of making an expensive error. Manitobans do not need more, costly projects to burden further their hydro bills.

Republished from the Winnipeg Free Press print edition April 3, 2012 A10

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