From Jan 6, 2016 Winnipeg Free Press
Hydro’s outlook still unsettled
By Will Braun
Winnipeg Free Press, Jan 6, 2016
The provincial government has weathered the major storms of scrutiny created by its Manitoba Hydro-related decisions in recent years, but it still faces three awkward dilemmas in 2016.
First, a survey of the current situation. Despite sustained opposition to the $4.6-billion Bipole III transmission project, the government wavered not. And by the time the April election is done, Hydro will have spent about $2 billion on the project, so even if there is a change in government, a change in the Bipole route is improbable.
The other heavily criticized project — the $6.5-billion Keeyask dam — has also cleared the point of no return. It is supposed to start producing power in 2019.
Wuskwatim, the $1.8-billion dam that initiated Hydro’s current wave of expansion, has lost more than $100 million since it went into service in 2012, largely because construction costs soared while export prices tanked. Hydro’s annual report says the losses are “consistent with the expectations for the early years of operation,” but the company’s prediction prior to construction was the dam would make between $5 million and $25 million annually in its initial years.
Hydro now expects export prices to be 20 per cent lower in 2015-16 and 34 per cent lower the following year, compared to the predictions a year earlier. The dam is not expected to post positive numbers until 2022.
Officially, Conawapa, the proposed $10-billion dam, is on hold, but it’s no secret Hydro wants Conawapa to be in line to replace the power from two nuclear plants in Minnesota that may be retired by 2034. It is not clear Minnesota feels the same.
Manitobans will have to wait years to see if Hydro’s high-stakes expansion pays off. In the meantime, the utility and province face more immediate predicaments.
In order to appease lawmakers in Wisconsin in 2011, the province committed to grant final licences for Lake Winnipeg Regulation and Churchill River Diversion by Dec. 31, 2015. That commitment is written into state law, but Manitoba’s related consultations with First Nations are not complete. There has been no news from the government on this. The two projects operate under interim licences issued in the 1970s.
The second dilemma is the province has ramped up its commitment to fight climate change — it signed David Suzuki’s Blue Dot declaration, and promised an environmental bill of rights — but it is also locked into supporting two massive not-so-green pipeline projects linked to Keeyask.
Partway through the Public Utilities Board hearing into Hydro’s expansion plan, the public learned 40 per cent of the output from Keeyask is earmarked for pumping stations on new pipeline projects in the province — TransCanada’s Energy East project and Enbridge’s Line 3 replacement and Alberta Clipper expansion, the latter of which is complete. The financial plan for the dam depends on these pipelines.
Sorry Mr. Suzuki, but expect Manitoba to fall squarely in line with the oil sector on pipeline development. One of the province’s contributions to a warming world will be cheap electricity to pump diluted bitumen east and south, if the lines go ahead.
Manitoba ratepayers will gamble $6.5 billion in part so Calgary-based pipeline giants can have cheap power while bringing minimal long-term jobs to the province.
Third dilemma: Hydro has ramped up investment in energy-efficiency measures, after the PUB shamed it into doing so, and the province recently announced a new efficiency agency, but Keeyask was justified based on unending growth in energy demand within Manitoba.
Studies have long shown efficiency measures are the most cost-effective means of addressing energy needs. It is cheaper, faster and less risky to reduce demand than to build evermore supply. Manitoba chose more dams instead.
Now, if Manitoba truly becomes a world leader in efficiency it won’t need much of the power from Keeyask.
Who will use it? Sales to the U.S. are not guaranteed, especially not profitable sales. In the past, Hydro wanted Manitobans to save electricity because it could make more by selling it in the United States. By 2012, that had reversed as export prices dropped. If Hydro’s latest predictions are accurate, export spot sales will again be more profitable than domestic sales over the next 10 years, but that depends on exchange rates and export prices.
Hydro reports $5 billion in contracted sales of Keeyask power, but that still leaves a lot of energy to sell on the spot market. Hydro’s latest projections for long-term export prices are “three to seven per cent lower” than last year’s forecast. Successful energy-efficiency measures could potentially undercut the financial performance of Keeyask.
While Manitobans can’t do much about export markets, Bipole III or Keeyask, they can try to ensure pipeline projects — both existing and potential future ones — pay their fair share, plus an additional amount to cover efficiency programs and northern reconciliation initiatives. We as Manitobans can also show the same resolve in opposing Conawapa that our government showed in pursuing Bipole III and Keeyask.
Will Braun works for the Interchurch Council on Hydro power.