Today Manitoba Hydro asked for a 3.95% rate increase to buy power for Americans. Here’s how: the various American markets that Manitoba Hydro exports power at a spot rate of 3 cents per kilowatt hour. The problem is the cost of production and transmission is higher than the revenue generated, sometimes as high as 13 cents per kilowatt hour . The annual losses per contract are staggering, some as high as $120 million. This is the singular reason why Manitoba Hydro has applied for a 3.95% rate increase from the public utilities board: so they can try and recover losses from subsidizing power for Americans.
The reason for these significant losses is because of massive overruns in Manitoba Hydro megaprojects like the Wuskwatim Generating Station which is creating electricity for export markets that do not meet its demand requirements.
Wuskwatim was initially presented to the Clean Environment Commission, the Public Utilities Board, legislators, lenders and the public as a ‘merchant plant’. Its full annual output would be sold, all were told, on the export market at a profit. That objective never materialized.
Construction started in 2006, CEC had given its stamp of approval two years earlier. Construction was completed in 2012. The cost of the station and the necessary transmission links, including negotiation, legal and community liaison, has reached $2 billion. The original estimate was for about $800 million. As for the annual financial results of Wuskwatim, they are nothing but an economic disaster.
The all-in costs per kilowatt hour of produced and transmitted power from Wuskwarim is in the range of 13 cents. Compare that to the average price of exported power, a bit over 4 cents. Most Manitobans pay 8 cents.
Furthermore, export prices collapsed as abundant shale gas drove down the cost of natural gas for electricity generation by more than half. Also, demand flattened in the States; energy efficiency, wind and even solar energy came to market.
So if the 3.95% rate increase is accepted by the Public Utilities Board, I hope you receive a thank-you card from an American friend for all the power you’re buying them.