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Note from Graham Lane

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21Jul

A note from Manitoba Forward’s Graham Lane on the recent exchange between Garland Laliberte and Andrea McLandress:

Garland Laliberte, Vice-President of Bipole Coalition and retired Dean of Engineering University of Manitoba, responded with the column “Hydro still reeling from NDP’s decisions” to an op-ed article by Andrea McLandress of the Mining Association of Manitoba Forward (both published in the Winnipeg Free Press). Her article was entitled, “Saving Hydro at Economy’s Expense.” In his response, Dr. Laliberte ‎correctly agrees that much blame is due to Manitoba’s past NDP government for the ongoing Hydro debacle, while providing some much needed and crucial information. Manitoba Forward would add the present government to the blame list. Premier Brian Pallister’s government’s failure to halt the project and subject it to an open and comprehensive review before continuing to spend perhaps $10 million per day on a project forecast to drive up rates is something beyond all reason and necessity. It is also worth pointing out Pallister’s intention to collect hundreds of millions of dollars expected to be withdrawn from Hydro directly from the levies on Hydro related to the debacle which will, of course, ultimately be paid for by ratepayers.


Here is Garland Laliberte’s column:

There are points to agree with in the article by Andrea McLandress (Saving Hydro at economy’s expense, July 10). But there is also a lot to question.

It is noteworthy that McLandress is the executive director of the Mining Association of Manitoba, an organization representing the interests of Manitoba’s mining industry, a heavy user of Hydro’s energy.

First, the points of agreement. She is correct when she states, “It is not easy to disentangle the business, finance and politics of Manitoba Hydro.” Former premier Greg Selinger understood this complexity would make it easy to fool the public when he forced the utility to spend way beyond its means in a market that had evaporated even before the build started.

McLandress also appropriately acknowledges that our relatively low and stable power prices have given a major competitive advantage to Manitoba industry, offsetting lower taxes and depreciation regimes for capital offered in other jurisdictions.

She also makes a valid point when she states, “There appears to have been no consideration or consultation about the impact a 7.9 per cent increase would have on Hydro’s major customers and how that impact would affect Hydro’s bottom line.” Hydro simply left the matter of price elasticity to a future application for a rate increase.

But McLandress is wrong when she states that the necessity for the Bipole III transmission line should not be disputed. Few Manitobans know that Hydro never tabled credible evidence of the need for the line. The gold standard for such evidence is a probability-based analysis of the financial, social and economic consequences with and without the line. If such an assessment was conducted, Hydro never made it available for scrutiny. In reality, Selinger prohibited any analysis at all on the strength of his untested word, and Hydro’s, that the line was needed for reliability.

And while McLandress accuses Hydro’s chair and vice-chair of using doomsday scenarios in their current round of meetings with business groups and chambers, she is guilty of the same offence when she speculates about a possible blackout and places the economic impact of such an occurrence at “north of $20 billion,” leaving “hundreds of thousands of Manitobans without power for months.”

Hydro already had a failure of its two existing bipoles in September 1996, now 21 years ago and the only unplanned outage in the more-than-40-year history of the lines. The cost to rehabilitate was only $11 million, including the cost of makeup power imported from the United States during the outage.

The down time for the two bipoles was less than two weeks. Both results were well short of the cost and the down time cited by McLandress.

She states that Hydro is forecast to remain profitable over the next decade even without the proposed 7.9 per cent rate increases. This is simply not factual. With the rate increases of 3.95 per cent (still twice inflation) contemplated until now, Hydro’s current application calculates that its cash flow would remain negative until 2023 and its cumulative net income would be essentially zero for three years beyond that.

The article states that, to this point, “downgrades (in Manitoba’s credit rating) have not been due to Hydro’s debt.” This statement is at odds with a Sept. 21, 2016, Government of Manitoba news release which quoted Finance Minister Cameron Friesen in reference to “the July 2016 decision by S&P Global Rating to downgrade Manitoba’s credit rating (from AA to AA-) and (which) cited Manitoba Hydro as no longer being considered self-supporting, thereby placing the province at risk for further credit rating downgrades.”

McLandress does a good job of arguing for her employer’s best interests. But to buttress those arguments with a mixture of fact and fiction is not in the best interests of anyone. The Hydro board is simply doing the best that it can in dealing with a mess left by the NDP.

That mess is a fact and the only option now is to deal with it. Until such a time as Hydro is able to find new markets for electricity produced by its overbuilt system, we should expect to be faced with rate increases of the magnitude being considered. Thank Selinger for poisoning the well before he left.

The board’s task now is to push Hydro to find those new markets (electric vehicles, conversion of electricity to other forms of transportable energy, export facilitated by an interprovincial grid, to name a few). Hydro’s challenge is to become much nimbler in responding to technological and market opportunities.

And yes, a continuation on the path already started but a long way from being finished — making Hydro a leaner organization.

Garland Laliberte is a director and vice-president of the Bipole III Coalition, an organization of citizens who believe a route for the Bipole III transmission line on the east side of Lake Winnipeg is superior to the west side because of greater economic, social and technical benefits.

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