How Manitoba’s ‘green’ power dream became a nightmare of runaway costs

By: Graham Lane
Posted 4/15/2016

Since the early 2000s, Manitoba’s NDP government has committed the province’s power system to expand and profit from the fight against global warming. With the federal government now developing a national energy plan with the same objectives — and Manitoba’s NDP fighting for re-election on Tuesday — there’s no better time to take stock of the provincial government’s efforts over the last 15 years.

And the results so far are clear: power sold at a loss to U.S. buyers, calls for federal subsidies, new debts and losses for Manitoba Hydro, a less-diversified power supply, and expensive rate hikes forecast to keep rising for the next 20 years. The few winners have been contractors and construction unions and some northern First Nations.

It started with an experiment to replace the fossil-fuel-power that back-up Manitoba’s hydro-electricity with wind power in the province’s gusty south. After that ended up too costly, the government turned its attention to the Far North.

Its first big green initiative there was the 200-megawatt Wuskwatim dam built on the Burntwood Diversion near Thompson. Approved in 2004, the project was expected to cost $900 million and rake in profits from exported power to the U.S. When it was finished eight years later, the capital cost including necessary transmission, came in at $2 billion. After all that, the cost of generating and conveying power came in at roughly 13 cents per kilowatt-hour, but buyers are now willing to pay only around three cents per kilowatt-hour.

The rise of fracking and the collapse in natural gas and spot electricity prices, combined with American solar and wind subsidies and better U.S. energy efficiency all killed any hopes for the “green premium” that Manitoba had banked its renewable-power plan on. And yet Wuskwatim’s failure would not deter the NDP government from pursuing yet more costly additional northern hydro-electric and transmission projects.

After a review and a recommendation from Manitoba’s Public Utilities Board, the government did at least suspend immediate plans for the massive northern hydro dam, Conawapa, planned with about seven times the capacity of Wuskwatim. But it continues to barge ahead with the ongoing construction of the 695-megawatt Keeyask dam, and its massive new meandering transmission line, which runs through valuable farmland. The dam is currently estimated to cost $6.5 billion; the transmission line another $4.6 billion. Given recent experience, it’s possible they could end up costing almost twice as much.

Some First Nations have done well thanks to these projects. To win their backing, the government gave them hundreds of millions of dollars in pre-construction inducements, along with one-third equity interests in Wuskwatim and Keeyask, acquired through no-risk loans from Manitoba Hydro.

And the government, as Manitoba Hydro’s sole shareholder, will see a windfall from the levies it imposes on the utility, leaving ratepayers with decades of higher bills to cover those costs. The Public Utilities Board’s review revealed that the provincial government could expect at least $25 to $30 billion of additional levies over the next five decades if these, and various other parts of Manitoba Hydro’s expansion plans all go ahead. The provincial levies include capital taxes, debt-guarantee fees, and water rentals, in addition to normal payroll and income taxes on contractors and Hydro employees and provincial sales taxes levied on consumer and business bills.

But for Manitobans themselves, the green future is looking dark. Thirty per cent of provincial households are lower income and the province has seen no major new industry spring up in 15 years. Meanwhile, there is downward pressure on domestic demand due to rising prices; export prices and demand are in the doldrums; and Manitoba Hydro is already sitting on 30 per cent more generation and transmission capacity than the province’s power demands actually require.

Back when oil was over $100 a barrel, then Manitoba NDP Premier Gary Doer frequently asserted that hydro-generated electricity was Manitoba’s oil. His government crowed about the “Manitoba Advantage” of cheap, green hydro power. Even as export prices and volumes fell, his successor, Greg Selinger, ignored the changing economics and continued to accept massive over-budget construction costs. That “advantage” is now fading fast, while Manitoba Hydro’s debt becomes instead an albatross around the province’s financial neck.

Graham Lane was chair of the Manitoba Public Utilities Board from 2004 to 2012. Tom Adams is a Toronto-based energy consultant.

Republished from the National Post – 4/15/2016

Expect to get results from government

By: Graham Lane
Posted 4/15/2016

For the insider connected elite, politics in Manitoba has been a ticket to a comfortable life. For some who worked in government and watched policy-making in action, politics is a force for high taxes, mediocre services and crumbling infrastructure. For the vast majority, however, politics is a black box seldom truly engaged or understood. Most are too immersed in the hurly burly of life in general to bother with it. Sure, they pay the bills for government services, but are given few clues as to whether they are getting good value.

Tuesday is election day in Manitoba, an opportunity to either stick with what we have, an obviously too long-in-tooth four-term NDP government, or try something different.

We can expect the organized minority, with the public sector unions, to stick with a Selinger government that has delivered to them unprecedented largesse. On the other side, informed skeptics will vote Conservative or Liberal — both parties at least talk about tax cuts and some new and non-deficit related ideas. But, what of the uninformed majority who will decide the next government?

It is a good question that mainstream media has not adequately answered. Most of their pundits continue to miss the forest for the trees, blithely pussy-footing around the accelerating fiscal train wreck that is Selinger’s NDP. Being unaware or ideologically-attuned to big-government thinking, they have mostly chosen to ignore these troubling facts:

Government spending during the NDP’s 17 years grew two and half times faster than growth in economy and population.

Manitoba has the most expensive health care per capita — almost a billion dollars costlier than the Canadian average, but with the longest waiting lists.

We score as the lowest performing public schools in Canada on international tests — but with the highest costs as a percent of GDP. Spending at the Canadian average would reduce education outlays, and perhaps taxes, by $660 million.

We have the largest public sector in Canada, measured by government employment as a percent of total workforce — 40% above the Canadian average.

Hydro’s transmission and generation expansion will triple Manitoba’s provincial debt and triple your power bill. All for nothing really but to serve a permanently changed and over-supplied American market paying only a fraction of the costs.

It’s not hard to connect the dots between Manitoba’s absurdly expensive and low-performing services; high taxes; rising deficits; lowest private investment per capita of any province; and, relatively lower family income (steadily slipping further behind other provinces).

So what should voters do based on this harsh reality?

Public policy should be about one thing — generating excellent results. On that score our province is at the bottom of the pack. As Brian Pallister states in a well-done campaign video, our next government should focus on making Manitoba the most improved province in Canada on metrics such as access to health care, educational results, and front-line services.

Note the magic word: results.

Not a word found in the NDP dictionary.

If you care about Manitoba’s future, it’s time to say good-bye to the spendthrift NDP and its failed and unsustainable operating model. Best to roll the dice on fresher options — who, one baby step at a time, are at least beginning to talk about results.

— Graham Lane chairs Manitoba Forward (www.manitobaforward.ca).

Inquiry needed into infrastructure waste

By: Graham Lane
Posted 04/8/2016

Premier Selinger isn’t being truthful when be boasts the floodway expansion was completed on time and on budget. The expensive part of the planned expansion involved rebuilding 10 bridges that crossed the floodway. The budget was passed in 2003; all 10 were to be re-built to the same proper standards. Some years later, when it became clear to the NDP that all 10 bridges could not be built within the budget, their “fix” was to cancel four and cut two lanes down to one on two others.

This is the same as contracting for a 1,200 square foot home and attached garage only to get an 800 square foot home with no garage, but for the same price. However, as no one lives in the floodway there is no one to see how much of the original design was dropped.

The floodway was a disaster contingency project designed to protect against the worst floods seen in 500 years. Now, we are left with only six bridges that can withstand that level of water and four that cannot. Selinger simply ignores the unfinished work while “proudly” claiming the project was done on time and budget.

When the project was approved in 2003, the targeted completion date was 2009. Instead, with several delays the floodway was still being “finished” in 2013. Continuing the house analogy, it is like the contractor who promised to build your house and garage in six months was actually still at it two years later. It seems because Selinger approved the time extension he falsely claims the work was completed on time.

So, how did only 60% of the bridges get built with the funds allocated? The NDP hired Ernie Gilroy, a former insurance salesman, in 2003 on a one-year contract to oversee the awarding of the floodway contracts. To appease the union bosses (always a key NDP requirement for any tendered work), all contractors bidding on the project had to agree to pay and follow union wages, union dues and union work guidelines. Gilroy’s one-year contract turned into a 13-year career. He now runs the East Side Road Authority, where he tries his best to impose the same floodway labour contract conditions on its contractors and workforce.

As almost all Manitoba heavy earth moving contractors are open shop (not unionized), this means they had to either comply with the floodway bidding requirements or refuse to bid. Out of a belief that the NDP would not enforce their unionized will onto local industry, most local contractors, expecting that the onerous conditions would be removed, refused to bid. But it wasn’t.

So, the heavy earth moving work was awarded to out-of-province unionized contractors, and at much higher costs. Local industry experts estimate that this added about $60 million to 80 million extra over what it would have cost if the NDP and Gilroy had allowed local open shop contractors to bid without having to add forced union dues and productivity-draining terms. For the NDP, sticking with union bosses were more important than saving taxpayers millions and building what was needed.

An inquiry into all major infrastructure projects controlled by the NDP is needed.

— Graham Lane leads Manitoba Forward (www.manitobaforward.ca); coauthor Doug Petrick P.Eng. is senior VP of FWS Construction.

Republished from the Winnipeg Sun online edition April 7, 2016.

Environmental reboot, not more posturing

By: Graham Lane
Posted 04/1/2016

Winter was mild thanks to El Niño — a cyclical weather pattern caused by the movement of warm water in the eastern Pacific Ocean. El Niño is but one of many complex natural phenomena that influence our constantly changing climate besides the Earth’s irregular orbit, sunspots, volcanoes, etc. As John Mackey, founder of organic foods conglomerate Whole Foods, has said: “climate change is perfectly natural and not necessarily bad.”

Most people don’t lose sleep over “climate change,” an IPSOS Reid poll found only 15% of Canadians consider it to be an important concern, miles behind jobs, the economy and taxes. This despite the activities of the highly-organized and massively-funded man-made climate change lobby. It religiously promotes the theory that human activity, particularly the use of fossil fuels, causes climate change/Armageddon.

This lobby has captured our governments, empowering politicians and massive bureaucracies with activist solutions that boil down to the idea, preposterous to many, that governments can change the weather by increasing taxes and imposing a “clean energy” agenda on the economy. Tune in to the CBC, for example, and hear breathless prattle connecting routine weather events to a need for carbon taxes, cap and trade, subsidies for green energy, etc.

It is central planning nirvana and bank account gold for the elites of the rapidly mushrooming green regulatory and subsidized clean energy sectors. They selflessly proffer to guide us little people with a subtly anti-human philosophy that dislikes growth, development, cars, suburbs, and the conventional energy and resource industries. Their lack of enthusiasm for needed pipelines undermines industries that ultimately help pay their salaries, provide good jobs, and fund equalization payments and public services. Policies imposing regressive energy taxes and other policies artificially raise heating and transportation costs in a big, cold country, disproportionately harming the poor and middle class.

Which brings us to Manitoba and the need for clear-eyed practical environmental policy — a smarter green policy shifting the focus towards more significant environmental problems that do not unnecessarily damage our economy and our children’s prospects. Frankly, in a world where environmental indicators are trending mostly positive, a smarter green policy would focus less on process and easy symbolism by zeroing in on real pollution issues and shifting away from climate change related policy over-reach.

Assuming the NDP is defeated April 19th, a door will open to allow smarter green policies that have real environmental, economic and social benefits.

First move away from environmental laws and regulations that foster huge government bureaucracies better known for waste and failure than for innovation and success. There is room to aggressively reduce the ineffectual regulatory/planning overkill that now suffocates vast areas of policy like housing and the management of provincial parks. Cancel plans for so-called Cap and Trade. European experience demonstrated fraud and waste as based on seamy backroom deal-making and politics.

Next, put real money into improving water quality — spend big to separate storm drainage from sewer lines. Last, halt Manitoba Hydro’s disastrous big-build of uneconomic dams and transmission lines. Prevent job-killing, extremely regressive and unnecessary electricity price increases for Manitobans subsidizing more prosperous American power consumers.

Smart green means focusing on improving environmental outcomes, not just religious posturing.

Graham Lane, retired chartered accountant and former PUB Chair, leads Manitoba Forward (www.manitobaforward.ca).

– Republished from Winnipeg Sun, April 1, 2016