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Garbage in, garbage out: Regulatory Failures

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The curtain is falling on the Public Utilities Board’s (PUB) most expensive Hydro rate hearing. The hearing follows a series of external and internal reviews of the still-unfinished Hydro expansion. Since 2003, $100 million or more of ratepayer money has gone down the drain, wasted in hearings and reviews.

Wasted because those hearings relied on incredibly wrong forecasts – ‘garbage in’ ‘garbage out’ decisions resulting from a series of administrations trying to justify the unjustifiable.

The post-Limestone dam history of PUB and the Clean Environment Commission feature Hydro hearings littered with wasted costs and disappointments for ratepayers. The winners: lawyers, consultants, contractors, suppliers to Hydro, American utilities, northern First Nations and Hydro executives. The losers – ratepayers, taxpayers, farmers, the economy, and, above all, common sense.

In 2004, the CEC was commissioned by the-then NDP Doer government to review Hydro’s ‘already begun’ Wuskwatim project. Billed to be a model for First Nations as minority owners, Hydro blew past cost forecasts. Wuskwatim was to cost $900 million, with its electricity sold profitably to American utilities. The project ended up costing over $2 billion while export prices fell.

The First Nation ‘partnership’ was then reworked and reworked again, ensuring steady income for the First Nation despite ‘real’ large losses for ratepayers. (And $1 billion was spent just to bring First Nations into ‘no-lose’ minority shareholdings in money-losing Wuskwatim, Keeyask and the derailed Conawapa.)

At the bidding of the NDP Selinger government, PUB undertook an incredibly expensive NFAT review – Needs for and Alternatives to – of Hydro’s plans for Keeyask and Conawapa. Against advice, the hearing ignored options, Bipole III and money already spent on Keeyask and Conawapa. PUB then green-lighted Keeyask and billions more was then wagered and lost. Projections of costs and revenues again proved ridiculously faulty.

Fast forward to the Pallister PC government, which broke its promise to halt and review Bipole III and Keeyask. Instead, its newly-installed Hydro board of directors, and at a cost of $4 million plus, contracted Boston Consulting (BC) to again review Keeyask. Forecasts relied on by the American consultancy again proved wrong –  spending on Keeyask and Bipole III still continues.

PUB now considers how high rates should jump. PUB has no mandate to halt Keeyask nor to consider a halt and route diversion for Bipole III. And, the Pallister government provides no indication that it will help consumers by either shrinking its enormous annual levies on Hydro’s ratepayers or absorb Hydro’s debt to cut rate hikes. But, the government is ultimately responsible for the entire foolhardy boondoggle.

Pallister now hides behind PUB’s skirts, ignoring government’s moral responsibility to lessen the burden on ratepayers.

There are many lessons to be learned from this sorry history of a massive misadventure in trade undertaken by a monopoly Crown corporation and involving regulatory bodies reliant on bad data. One is that proponents should be careful not to employ faulty forecasts.

Massive projects risking the province’s economic well-being should neither proceed nor continue without at first thorough and after ongoing risk assessments and all options. Avoid ‘garbage in garbage out’ hearings which waste money and time, resulting in disastrous outcomes.

Above all, government should never hide behind the skirts of regulatory bodies.

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