October 20, 2019

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Things to know about Hydro

In no particular order, here's are a few things you should know about Manitoba Hydro.

Most of what's below comes from the Hydro's continuing application before the Manitoba Public Utilities Board for a 3.95 rate increase for this year.

One can argue that a lot of what's come out to date is more a reflection of the current state of North American energy market. The lingering effects of the 2008 recession, the shale gas boom and onset of more renewable power from solar and wind has thrown a stick in the spokes of Hydro's plan to build more transmission line and dams to sell more power to the Americans, who are slowly moving away from burning coal to produce electricity to new sources.

Hydro has already revised its 2013 numbers to show that export prices for long-term electricity will be, on average, seven per cent lower over the period 2016-17 to 2035-36.

In no particular order, here's are a few things you should know about Manitoba Hydro.

Most of what's below comes from the Hydro's continuing application before the Manitoba Public Utilities Board for a 3.95 rate increase for this year.

One can argue that a lot of what's come out to date is more a reflection of the current state of North American energy market. The lingering effects of the 2008 recession, the shale gas boom and onset of more renewable power from solar and wind has thrown a stick in the spokes of Hydro's plan to build more transmission line and dams to sell more power to the Americans, who are slowly moving away from burning coal to produce electricity to new sources.

Hydro has already revised its 2013 numbers to show that export prices for long-term electricity will be, on average, seven per cent lower over the period 2016-17 to 2035-36.

Over that same period on and off peak energy prices are forecast to be an average of three per cent lower with the value of capacity down 15 per cent compared to the crown utility's 2013 outlook. This decrease reflects continuing low natural gas prices.

So that's one thing out of the way.

Hydro has also said it faces steep losses in projected net income 2018-2024 as it builds the Bipole III transmission line, the Keeyask generation station and a new transmission line to Minnesota. The cost of the new lines and plants, and the cost of upgrading Hydro's aging power production and distribution system, will be more than $17 billion over the next several years.

Hydro profits and losses

Premier Greg Selinger has already said Hydro's capital spending is one reason why the government wants to move away from summary budget reporting back to core.

This why Opposition Leader Brian Pallister, right now anyway, plans to keep the legislative assembly sitting well into the summer and perhaps well beyond. The House is technically supposed to rise for the summer June 11, but in all likelihood will have to be recalled.

At roughly the same time the Public Utilities Board began to digest Hydro's revised numbers, the corporation released information that it was bumping up executive pay to keep qualified people from jumping ship to greener pastures.

Hydro pay

Lastly, there was this recent exchange at the PUB between board lawyer Bob Peters and Hydro President and CEO Scott Thomson.

It had to do with a recommendation from the PUB last year that Hydro get out of conservation or demand-side management (DSM) side of its business, essentially get someone else to run its Power Smart initiatives.

What’s interesting is that not much, at least publicly, appears to have happened on this recommendation despite the Selinger government agreeing to set up a new DSM entity arm’s length from Hydro.

The DSM exchange:

Bob Peters:  And in order, I suppose, recommendation 6 was: "The panel recommends that the Government of Manitoba divest Manitoba Hydro of its responsibilities for demand-side management." Can you tell the panel where that recommendation is at, at least as far as Manitoba Hydro is concerned?

Scott Thomson: Yeah, I'll give you a little bit of chronology. Shortly after the recommendations came out, the government indicated to us that they would strike a steering committee with a member that — that — member — a couple members of our board of directors and — and government employees and the minister. And they looked at models that —that might be utilized. They hired an outside consultant to give them some advice on that. We understand that — that he reported out in January.

Subsequent to that, the government advised that they were going to be getting some legal — outside legal counsel on looking at — at models, and making recommendations. As I understand it, there'd be a legislative change required in order to facilitate this.

The — that I have not — since that time, I haven't heard back. I — I suppose on — on a timeline if — if it doesn't get introduced in this spring legislative session, presumably it would go — go forward in the fall legislative session. And what I was told was that if it went through the spring legislative session, their goal would have been to get a government structure up and in place by the end of the year. And that would be a group that would then do final planning, more detailed planning, on — on how — how the organization and entity might evolve, and what— what it would — what it would deal with, and how it would go about conducting its — its business.

I expect that Manitoba Hydro would have some involvement in that because — for activities that would — would transfer out under that — under - the final model that's devised, we'd be working with them.

But right now that's all I know. So it wasn't in the throne speech, and I haven't heard of it being introduced in the spring session at this point.

Bob Peters: Is the information you referred to available for the public record, or is it a matter that's in confidence with Manitoba Hydro and the government? That is the consultant's report and the...

Scott Thomson: Well, the consultant's report was to the government, not to Manitoba Hydro, so I — I'm not — I'm not officially in possession of it.

Bob Peters: Are you at liberty to divulge who the consultant was?

Scott Thomson: I don't believe I am.

Bob Peters: All right. So what you're saying is Manitoba Hydro is waiting to see if it's introduced in the spring session, but you've had no indication it will be. And if not in the spring, you're — Manitoba Hydro is expecting legislation for the fall to start the process of divesting Manitoba Hydro of its responsibilities for demand-side management?

Scott Thomson: Yeah, the — the — I haven't gotten any additional information, so in the meantime we — we were — we've been conducting our —our affairs according to the other recommendations, which — and — and direction from government, which was to aggressively pursue the continued development of demand-side management within the — the utility.

Bob Peters: I'll take from that answer then that it's business as usual until it's no longer business as usual for Manitoba Hydro and - and DSM.

Scott Thomson: Yeah, that's a fair way to characterize it.

If there’s been any positive news out the PUB hearing, it’s that Hydro says that despite everything Manitobans will continue to pay some of the lowest rates for electricity in Canada.

It also says that other provinces are raising their rates, too.

 

Hydro rates

 

Hydro rates

 

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