Manitoba Hydro up against the Wall

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It’s not surprising that former Saskatchewan premier Brad Wall’s report on Manitoba Hydro is receiving a lot of attention. It is rife with omissions and misinterpretations that result in an overly pessimistic account of Hydro’s finances and practices. His conclusions conveniently justify a call to alter the utility’s operations, as contemplated in Bill 35, the Public Utilities Ratepayer Protection and Regulatory Reform Act.

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Opinion

Hey there, time traveller!
This article was published 09/04/2021 (546 days ago), so information in it may no longer be current.

It’s not surprising that former Saskatchewan premier Brad Wall’s report on Manitoba Hydro is receiving a lot of attention. It is rife with omissions and misinterpretations that result in an overly pessimistic account of Hydro’s finances and practices. His conclusions conveniently justify a call to alter the utility’s operations, as contemplated in Bill 35, the Public Utilities Ratepayer Protection and Regulatory Reform Act.

If passed, the bill will reduce the power of the Public Utility Board (PUB) to set Hydro rates by concentrating power over rate-setting with cabinet, removed from public scrutiny. It also introduces measures that would ostensibly prevent the sort of mismanagement the Progressive Conservatives accuse the NDP of, while making it easier to covertly privatize parts of the public utility.

Wall’s report narrates how Manitoba Hydro, at the behest of the NDP government of the day, failed to consider certain information when planning construction of the Keeyask Generating Station and the Bipole III transmission line. By questioning decisions made years ago and ignoring more recent developments, he has given us a stale-dated and disappointingly unhelpful rendition of the utility’s current position.

Wall underplays the role Bipole III and Keeyask play in connecting us to a continental energy system that increases our energy security. The recent breakdown of the Texas energy grid demonstrates the importance of government regulation and connectivity to adjoining energy grids. It was the energy generated and transmitted from the very projects of which Wall is so critical that helped send energy to our southern neighbours during the cold spell. 

These investments also provide a reliable revenue stream from firm export contracts and less reliable, but still significant, revenue from spot-market sales. As climate change weighs heavier by the day, Wall does not recognize that fossil fuels, including shale gas, face a precarious future.

But he should. He was premier of Saskatchewan when it signed its first contract with Manitoba Hydro, allowing his province to start weaning itself from coal generated power. When it signed a second contract with Saskatchewan (“Hydro’s $5-billion deals with Saskatchewan ‘deliberately covered up'”, March 23) Hydro’s firm export sales reached $9.4 billion, representing 70 per cent of the $13.4-billion cost of Keeyask and Bipole III.

Undeterred, Wall concludes that the utility will be “power heavy” for the next 10 years when in fact, locked-in export sales will use much of the surplus power available from Keeyask and the interconnection to the U.S. for the next two decades. The $5-billion Saskatchewan contracts are for 30 years, yet he claims, “There are firm contracts in place that provide some protection for the near term, but there is no guarantee that they will be renewed at the current prices or for an extended period of time.”

When Keeyask was approved, the PUB and bond rating agencies approved the debt Hydro took on, understanding the long lifespan of the infrastructure and increased export revenues would allow for repayment without overburdening ratepayers. Since then, interest rates have bottomed out, allowing the government to issue two 100-year low-interest (less than three per cent) bonds for Hydro worth $300 million each (“Cheap money may wash away drive for balanced budget,” Jan. 22).

Wall also concluded that $1.2 billion in sunk costs were presented so as to mislead the PUB to approve a project that he presents as untenable. He recommends projects should limit pre-approval expenditures to those that are necessary to assess the merits of the project such as preliminary engineering and environmental work, Indigenous engagement, suggesting the sunk costs did not cover such expenses.

A reliable source with first-hand knowledge of Keeyask’s planning process advises the majority of the sunk costs did exactly what Wall recommends. The money was spent on planning studies, engineering and environmental studies, PUB hearings and consultation and negotiations with the four Keeyask Cree Nations who are partners and stakeholders.

Wall’s arguments do not stand up to scrutiny and will not convince the public that rate increases are required to shore up Manitoba Hydro’s finances, or that the PUB’s oversight should be restricted.

Finally, the report pays surprisingly little attention to the climate crisis, and it seems to have been completed before U.S. President Joe Biden (who has promised to spend trillions greening the economy) was elected president. Our own federal government is signalling that it, too, is ready to invest heavily in renewable energy. This sea change bodes well for Manitobans.

We have made investments in Manitoba Hydro that will continue providing us with reliable, affordable and renewable energy that will increase in demand in a carbon-constrained world.  We can electrify our transportation system and use hydro to complement and support solar, wind energy and green hydrogen energy. We have made great strides in including First Nations so they benefit from development.

Maybe Wall’s report has actually done us a service by raising so many questions and reminding us that we need to keep our eyes on the Hydro ball. It’s definitely in play.

Lynne Fernandez is a research associate with the Canadian Centre for Policy Alternatives — Manitoba.

 

 

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