LANE: Resurrecting Hydro from the walking dead – Winnipeg Sun

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With the completion of the Limestone Dam in 1990, with its large and low-cost generation capacity, the future outlook for meeting Manitobas electricity needs at low cost looked very positive. But, 30 years later, instead of Manitoba Hydros finances strong and ratepayers comfortably enjoying advantageous electricity costs, Hydro is deeply in the red (on course towards a loss of $200 million in this financial year).

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If Hydro was a private sector company, its board would be calling in a bankruptcy advisor and beginning the hard journey of liquidating assets. Hydros equally-wounded government owner (its new premier, at risk of being dethroned through a current court action), proposes that the Public Utilities Board (PUB) up Hydros rates by 5%. As the situation remains, even if PUB follows through with the governments request, Hydro will have to move up rates by a yearly succession of inflation plus increases, eventually to end Manitobas comparatively cheap power cost advantage which attracts industry, investment and jobs.

It all gets back to Hydros recent utility boondoggle of the century the over-budget expansions of the Bipole III transmission line, the Wuskwatim and Keeyask generating stations, the ongoing write-off of expenses from the cancelled Conawapa Dam project, the incredibly expensive repair of the Pointe du Bois Dam, new transmission capacity to the U.S., and, of course, the questionable agreements related to minority interests on Wuskwatim and Keeyask, etc. This cacophony of poor business decisions should lead to major structural changes, including:

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1. Separate the stranded debt from these fiascoes, shift it to the provincial ledger. Pay it off over 30 years.

2. Cap annual rate hikes at the CPI index of inflation, at least until the dust settles.

3. Sell off Centra Gas and use proceeds to reduce Hydros consolidated debt.

4. Structurally separate Hydros generation and transmission assets into separate companies.

5. Sell off the export business to long-term investors, perhaps in the pension and insurance industry sectors.

6. Convert the transmission line business into a municipally or consumer-owned company or cooperative, which would manage distribution assets as efficiently as possible

7. Rework the Wuskwatim and Keeyask partnerships with involved First Nations.

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Without such major structural changes, Hydro is bankrupt , propped up by a barely solvent provincial government.

NDP governments (Doer and Selinger) launched Hydros folly of investing in new northern dams and export transmission lines: without both adequate cost control over the build budgets and adequately priced long-term export contracts. A hapless PC Pallister government stumbled deeper into the mess: both political parties have their fingerprints on the looming insolvency of a multibillion-dollar enterprise .

There still is a need for a real public inquiry to determine why all the checks and balances of the governance system failed. The quiet insider review by a former Saskatchewan premier didnt do it. Knowledgeable observers saw the slow-motion Hydro disaster coming as early as a decade and more before it was poured into recklessly expensive concrete. Hard questions remain, needing to be answered in full public review.

Ask the hard questions about governance, political oversight, the influence of engineering contractors, the competence of executive managers, the advice provided by consultants, and the role of labour unions in this train wreck.

Special attention also needs to be placed on examining the lack of action by successive governments, both NDP and PC, to grasp the immensity of the developing disaster.

Graham Lane is a retired CPA CA. He was the Chair of the Public Utilities Board between 2004 and 2012.

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LANE: Resurrecting Hydro from the walking dead - Winnipeg Sun

Reviewed and Recommended by Erik Baquero