Hydro’s development plan: How did things go so badly wrong?

Hey there, time traveller!
This article was published 08/07/2014 (4288 days ago), so information in it may no longer be current.

The editorial Hydro plan a costly NDP legacy (July 4), speaks of Hydro’s loss of credibility with its proposed multi-billion dollar development plan. Let’s examine the decisions that lead Hydro to its severely flawed plan.

The seminal moment, which spun the development plan out of control, occurred in 2003 when the NDP government first chose to reject Hydro’s plan to build Bipole III on the east side. Since then, there has been a series of ill-considered decisions to try to fix the problem created by that choice.

To grasp how the plan mushroomed, it’s necessary to retrace the critical decisions leading to and following that fateful choice.

After Bipoles I and II were placed in service, it was always recognized within Hydro, even before 2003, that Bipole III would be required at some future date. The route was a constant source of discussion.

There are only three north-south corridors available within Manitoba, to transport Nelson River power to southern Manitoba. The map (above) shows the Interlake corridor, where Bipoles I and II currently run, a corridor on the east side of Lake Winnipeg, and a corridor on the west side near the Saskatchewan border. Because of separation requirements, the Interlake corridor was ruled out for Bipole III.

After a tornado damaged Bipoles I and II in 1996, work commenced in earnest on Bipole III. Both east-side and west-side corridors were studied. In 2003, a report was submitted to the NDP government, recommending construction of Bipole III on the east side. This recommendation was rejected. The NDP government, wishing to impress the environmentalists, including notables like David Suzuki and Robert Kennedy Jr., with its “greenness,” claimed the line would compromise prospects for a UNESCO World Heritage Site designation in the east-side boreal forest. Ironically, the west-side line causes a much greater environmental impact due to its longer length. Besides, it crosses prime farmland in southern Manitoba.

Hydro’s original plan in 2003 was to build a direct current transmission line for service beginning in 2017, at a cost of $1 billion. It would require no converters until the next generation was built for domestic needs, expected to occur in 2024. After the government’s redirection, Hydro work proceeded exclusively on the west-side option. In 2007, it became apparent that converters would be required because of the length of line, inflating costs to $3.3 billion.

This posed a financial problem. It would be extremely burdensome on domestic customers to absorb the higher cost. The simple solution seemed to be to sell power to the Americans, using the U.S. revenue to help pay for the converters and longer line. At this juncture the plan had only started to come unglued.

Selling power meant building generating stations immediately. Remember that new generation wasn’t required for Manitobans until 2024. So now, not only was Hydro confronted with additional Bipole III costs, but it also had to deal with new generation costs. To make matters still worse, the American market was soft. Discovery of low-cost gas enabled the Americans to generate their own low-cost power. To complicate matters even further, the low-cost power in the U.S. was primarily in the market where transmission is already in place. A higher-cost market had to be found. It was in Wisconsin. This meant a new high-voltage line has to be built from Winnipeg to the Wisconsin market. Even more cost!

Another bone of contention was Hydro’s refusal to release the export power contracts to the Public Utilities Board (PUB) for review. With its newly-appointed NDP board members, the PUB cut a deal with Hydro to review the agreements in secret. One would have to be very naive to believe the review by PUB will be introspective. This is another glaring example of the NDP government’s interference on Hydro issues, and a sad commentary on a PUB which calls itself “public.”

At the 2014 PUB hearing, Hydro proposed an upgrade to its AC transmission system, two new generating stations (Keeyask and Conawapa) and a transmission line to Wisconsin.

The NDP deceptively excluded the $3.3 billion Bipole III from the review, on the grounds it is needed exclusively for reliability. Its cost was treated as a “sunk cost,” chargeable to all ratepayers. In reality, Bipole III is an integral part of the proposed plan. The total cost of Hydro’s development plan is $22 billion. The original plan, back in 2003, was a mere $1 billion and would be adequate until 2024.

Two independent energy consulting firms, La Capra and Philippe Dunsky, submitted reports to the PUB, revealing that with aggressive conservation measures, new generation would not be required until 2034.

Had the government accepted Hydro’s original plan in 2003, conservation measures could have taken us to 2034 at a cost of only $1 billion, instead of the reckless irresponsible $22 billion. This government’s refusal to allow Hydro to build on the east side has catapulted Manitoba Hydro into a financial quagmire.

That’s how things went so badly wrong!

Will Tishinski is a former vice-president of generation and transmission planning at Manitoba Hydro.