August 6, 2020

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Give Hydro’s new boss elbow room

The Manitoba Hydro building in downtown Winnipeg.


The Manitoba Hydro building in downtown Winnipeg.

Hey there, time traveller!
This article was published 1/7/2015 (1862 days ago), so information in it may no longer be current.

Manitoba Hydro’s boss, Scott Thomson, is leaving, going back to British Columbia, where his family returned to last year. The commute was too much, Mr. Thomson said. But the executive had lots of reasons to want to be someplace else.

It’s a tough time to be captain of Manitoba’s hydroelectric mother ship. And the Selinger government makes the job doubly hard, pushing a massive development project that has seen its business plan undermined each time it has gone to the Public Utilities Board for approval.

This was the case, yet again, in June when Mr. Thomson and his executive team asked the PUB to confirm one temporary rate increase and approve another hike of 3.95 per cent this year.

And think about this as you’re cranking the AC this month: Hydro needs 3.95 per cent hikes each year, over the next two decades. That will double (or more) the cost of power.

If that’s putting a chill on the summer, here’s the latest out of Hydro’s business plan, presented to the PUB in May and June: the Crown corporation said "from strictly a financial point of view," it really needs rate hikes of 5.5 to six per cent, each year. (But it wanted to keep rates more affordable.)

Manitobans should get ready to finance unforeseen costs, sooner or later, that will flow from Hydro’s planned decade of spending — latest figure: $17.3 billion — to build dams and transmission lines and repair aging equipment and facilities. It has consistently missed on its financial forecasts of construction costs and export revenues in its business plan, which has been called risky and speculative.

The biggest miss was the push to build Conawapa, a $10.5-billion dam that would churn out 1,485 megawatts of power. It was shelved when Hydro went to the PUB last year to get approval for its capital plans.

But that was after $397 million had already been spent on its planning. Now ratepayers are shouldering that bill, estimated at $13 million a year over 30 years.

Why, though, if Conawapa’s off the development plans, does Hydro still need 3.95 per cent more each year?

The quick answer is this corporation knows, from experience, its forecasts of construction costs will continue to rise, and its projections of export revenues will fall.

But Manitoba Hydro also must plan for something it has no control over, no matter how hard it tries. Ultimately, the Crown utility marches to the beat of the government, and the NDP government has insisted Hydro proceed with an ambitious capital plan, despite the fact many experts in the energy field warn hydroelectricity is getting stiff competition from alternative forms of energy.

What’s more, even after the PUB put Conawapa on ice (and effectively held its nose to approve the construction of the Keeyask dam), the Selinger government insisted Conawapa remains part of the future of energy development in Manitoba.

What’s a corporate boss supposed to do, when he is being led not by the market, not by the best business plan, but by a political pipe dream?

Mr. Thomson was Hydro’s president for little more than three years. Understandably, he wants to live with his family full time. That’s proof having a commuting president is a poor fit for a major Crown corporation.

His premature departure, however, is a signal Hydro’s board may have a tough time filling the post. Hydro needs a first-rate, experienced executive who believes a corporation should be run on sound business principles, while respecting the role of a Crown entity.

The Selinger government needs to step back and let the next CEO do that job.


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