Winnipeg Free Press - PRINT EDITION

Hydro forecasts unravel

  • Print

Manitoba Hydro's latest plea before the Public Utilities Board for more cash effectively confirms the PUB's long-held belief that the Crown corporation has badly estimated its financial forecasts. Until this week's application was filed, Manitoba Hydro contended that export revenues from dams it wants to built would support its $23-billion decade of development. Now, Manitobans know that's all unravelled.

Conditions in the export market have depressed hydroelectric prices badly. This means there is a lot less to be made exporting power and Hydro wants to rewrite an agreement with its First Nation partner that saw Wuskwatim built. The dam came into service this year, but the changing market means it won't make a penny until 2022 at the earliest.

It was folly for former premier Gary Doer to have promoted the province's future as an energy giant, encouraging massive development based on speculation that export contracts with American companies would naturally follow. Since he began promoting a "decade of development" for Hydro, the price the utility gets for power has fallen dramatically, Hydroelectricity is no longer in high demand and the cost of building multi-billion-dollar dams has soared.

The allure of "clean" energy has dissipated -- countries around the world are reverting to coal in the wake of the economic crisis -- and the development of shale gas fields means the supply of natural gas will depress the price of electricity into the foreseeable future.

The PUB believes it all points to Hydro's new dams operating at a loss. Keeyask would produce power at 10 cents per kilowatt-hour; the current price for spot export is about three cents/kWh. About half the power Hydro exports is on the spot market. The PUB, however, says it cannot fully test Hydro's forecasts until it releases its export deals with American power companies. That means the PUB doesn't know the firm and spot market prices Manitoba Hydro uses to calculate forecasted export revenues.

Clearly, however, the forecasts are wrong. Until this week's application to the PUB, Hydro's capital program was predicated on domestic rate increases of 3.5 per cent for 10 years. This week, it said it needs 3.9 per cent increases for 18 years, which would more than double the average residential electricity bill.

Despite the shifting ground so apparent to most, Premier Greg Selinger firmly declares Hydro should forge ahead, and said so at his State of the Province address this week.

While there will be reviews prior to the construction of the planned Keeyask and Conawapa dams testing the "need for and alternatives" to those generating stations, this is not true of the construction of Bipole III, a transmission line the government has forced Hydro to run down the west side of the province despite the fact it will cost at least $1 billion more than a route on the east side. That extra $1 billion is to be shouldered by Manitoba ratepayers.

It is clear the PUB has been alone so far in testing the veracity of the financial plans of the "decade of development" promoted jointly by the utility and the NDP administration.

Hydro is so sure of its business case that it has spent $700 million already on pre-construction "activities" for Keeyask, which would not come into service until 2020. Conawapa would come into service in 2025. The earliest Manitobans would need power from either would be 2022/23, the same time Wuskwatim would start making money.

There may have been a day when building dams for the export market, on the hope of undefined sales contracts, looked like a sure thing. Markets and political economies change. Hydro, meanwhile, has to spend big now to rebuild and update its existing infrastructure.

Domestic demand for power is falling, not rising. There is no rush to build Keeyask or Conawapa, and that throws the necessity of Bipole III into question.

The PUB has been suggesting this for years. It is time for the government and Manitoba Hydro to listen.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien and Paul Samyn.

Republished from the Winnipeg Free Press print edition December 15, 2012 A16

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Peguis Chief Hudson comments on toddler's death upgrade to homicide investigation

View more like this

Photo Store Gallery

  • Goslings with some size head for cover Wednesday afternoon on Commerce Drive in Tuxedo Business Park - See Bryksa 30 Goose Challenge- Day 12- May 16, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • A Canada goose flies towards the sun near the Perimeter Highway North and Main St Monday afternoon – See Day 10 for Bryksa’s 30 goose project - May 11, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Should the city grant mosquito buffer zones for medical reasons only?

View Results

View Related Story

Ads by Google