Hydro revives global energy consulting subsidiary to raise revenue, lower rates

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This article was published 29/07/2024 (430 days ago), so information in it may no longer be current.

The NDP government and its new Manitoba Hydro board are reviving the Crown corporation’s global consulting arm in an effort to boost revenues and lower electricity rates three years after it was unplugged by the Progressive Conservatives.

“This will bring in another source of revenue to keep rates low,” Finance Minister Adrien Sala, who is in charge of Hydro, said Monday.

In 2021, when the PCs were in power, the utility announced it would wind down Manitoba Hydro International, a subsidiary providing global energy consulting and management services.

The Crown corporation said it could then focus on its core operations rather than compete with international consulting firms.

“They hiked hydro rates on Manitobans and they got rid of MHI, resulting in a loss of revenue that used to help keep rates low,” Sala said Monday at Manitoba Hydro’s downtown headquarters.

“This will help lower costs for families, it will keep hydro public and it will result in our expertise being shared around the world.”

Hydro potentially lost out on some 30 global contracts worth “tens of millions of dollars” since MHI was sidelined, said Ben Graham, the utility’s board chair.

“Every dollar earned from international clients is a dollar that goes directly towards reliable and affordable energy for everyone in this province,” he said, adding the subsidiary delivered net income of between $6 million and $8 million, on average, over a period of 20 years.

Tapping back into that revenue stream “isn’t going to be an overnight thing,” and positive returns aren’t expected for four to five years, said the president and CEO of Manitoba Blue Cross.

MHI is expected to be up and running right away, he said.

“Every dollar earned from international clients is a dollar that goes directly towards reliable and affordable energy for everyone in this province.”–Ben Graham

Close to half of the 150 MHI staff remained with Manitoba Hydro, Sala noted.

Graham said he expects up to 20 more employees may be hired.

The announcement drew a harsh reaction from Manitoba’s Tories.

PC hydro critic Obby Khan called Monday’s news “smoke and mirrors” to distract from the NDP’s failed promise to cut hydro rates and improve affordability.

“The mandate of Manitoba Hydro is to supply power to meet the needs of Manitobans,” Khan (Fort Whyte) told the Free Press.

“This announcement is not doing that.”

He said the province is facing a huge demand for energy that’s expected to outstrip supply by 2029.

“This NDP has no plan to address that,” he said. “Manitobans need to know where their energy is coming from, that it’s clean, affordable and sustainable.”

“The mandate of Manitoba Hydro is to supply power to meet the needs of Manitobans.”–MLA Obby Khan

Khan said MHI’s revenues and profits were in decline when the decision was made to shut it down three years ago.

In 2020, former Manitoba Hydro CEO Jay Grewal said the subsidiary’s revenue declined by 22 per cent since 2017, with profitability declining by 40 per cent over the same period.

Safety and security risks of operating in developing and emerging markets, where MHI conducted a lot of its operations, increased significantly, Grewal said at the time.

“They cannot compete in a market that’s so crowded and solely dedicated to this type of service,” Khan said Monday.

“Sure they missed out on bidding on dozens of jobs, but bidding on dozens of jobs doesn’t mean you’re going to get dozens of jobs.”

An academic who studies Canada’s Crown corporations said reviving MHI is “a great idea” for a public utility swimming in red ink with a $24.6-billion debt, growing demand and aging infrastructure in need of massive upgrades.

“Hydro is in a real jam here,” University of Winnipeg political science professor Malcolm Bird said.

“We need to be leveraging our skills.”

Manitoba Hydro needs all the revenue it can get and should be taking advantage of its wealth of expertise and sharing it with the world, including the lessons it has learned the hard way from Indigenous people, Bird said.

“We talk a lot about the green transition and being green and blah, blah, blah but we don’t do a lot to help other developing nations get there and we have a lot to contribute.

“Large-scale hydro is, hands down, the most effective way to produce electricity.”

The latest chapter in the MHI story shows how successive provincial governments in Manitoba meddle with Crown corporations, which Bird said should be run as corporations by experts not driven by political ideology.

“When the governments change, the boards get booted and new boards get appointed,” he said.

“That doesn’t happen in other provinces or at the federal government, it’s quite unique to Manitoba. And I would say, overall, it is problematic and both (parties) do it.”

— with files from Erik Pindera

carol.sanders@freepress.mb.ca