First published in the Winnipeg Free Press April 9, 2021.
By Lynne Fernandez
It’s not surprising that 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 Conservatives accuse the NDP of, while making it easier to covertly privatize parts of MH.
Mr. 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.
Mr. 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 Texan 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 Wall is so critical of 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, Mr. 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 (Lett, March 23, 2021) Hydro’s firm export sales reached $9.4B, representing 70% of the $13.4B cost of Keeyask and Bipole III.
Undeterred, he concludes that the utility will be ‘power heavy’ for the next ten years when in fact, locked-in export sales will use much of the surplus power available from Keeyask and the inter-connection to the US for the next two decades. The $5B Saskatchewan contracts are for 30 years, yet he claims that “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 that Hydro took on, understanding that the long lifespan of the infrastructure and increased export revenues would allow for repayment without over-burdening rate payers. Since then, interest rates have bottomed out, allowing the government to issue two 100 year low interest (< 3%) bonds for MH worth $300M each (Broadbeck, January 22, 2021).
Mr. Wall also concluded that $1.2B in sunk costs were presented so as to mislead the PUB to approve a project that he presents as untenable. He recommends that 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 that the sunk costs did not cover such expenses.
A reliable source with firsthand knowledge of Keeyask’s planning process advises that the majority of the sunk costs did exactly what Mr. 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.
Mr. Wall’s arguments do not stand up to scrutiny and will not convince the public that rate increases are required to shore up MH’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 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 Mr. 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 MH ball: it’s definitely in play.