By: Graham Lane
Published by: The Winnipeg Sun, June 22, 2017
Upon the election that put Brian Pallister’s PC party in power, Hydro’s board of directors was replaced by a group assembled by Sanford Riley – a well-known and respected Richardson-family affiliated businessman.
Pallister assured Riley that he would not interfere in the new board’s assessment and direction of Manitoba’s largest and most troubled Crown corporation. During the election campaign, Pallister promised to halt Hydro’s expansion and call a thorough public review, as sought by farmers (whose lands were to be disturbed), and critics questioning the economics of the gamble.
Assailed by strong and continuing criticism of Hydro’s ongoing massive expansion coming from knowledgeable critics, including: past Hydro executives, past premiers, Filmon (PC) and Schreyer (NDP), professional engineers, utility consultants, and a former PUB chair, me, Riley brought in an American consultancy with no prior knowledge of Hydro. Boston Consulting Group then relied on Hydro executives (under the third president in three years) and their ‘always-wrong’ forecasts, and did not engage with the critics. Pallister’s promise of a halt and review was not honoured. During the consultant’s assessment process, the expansion continued, perhaps at $10 million a day.
By the time the new Riley board was satisfied that the expansion was uneconomic and would place an enormous burden on Hydro’s ratepayers, a verdict coming roughly six months after the election, they decided too much had been spent by then to stop it. Worse yet, the forecast of the expansion’s cost soon grew again, now estimated at $14 billion for Keeyask and Bipole III alone.
If only Mr. Pallister had honoured his pre-election promise (halt and review) before so much more money went down the drain! He now shares responsibility for the biggest boondoggle in Manitoba’s history with the previous Selinger-NDP ‘masterminds’.
With Boston Consulting’s verdict in and, allegedly, too much spent to stop, Riley then sought ‘help’ for ratepayers from Pallister in the form of a ‘capital infusion’ from government. Riley’s idea was sound, despite unfortunately blowing a couple of billions in more spending before realizing its need. An infusion of cash from Broadway to Hydro would relieve rate pressure on ratepayers.
With no help coming from Pallister, Riley’s Hydro has filed a rate application with PUB, seeking two years of annual 7.9% rate hikes (while expecting 5 years of 7.9%). Rate shock following more than a decade of annual double inflation rate hikes. Hydro’s new President, Kelvin Shepherd, went one step further. He suggested that the annual rate hikes should really be doubled (15% a year). So much for Manitoba’s ‘advantage’. Good-bye low rates. Hello energy poverty and slowing economic growth.
Why didn’t Pallister come through for Riley and Manitoba’s captive ratepayers? Because his tinkering, go-slow approach to deficit control means he needs every cent he can get from Hydro (now approaching $400 million a year already included in rates, and still growing). If his government reduced its enormous levies on Hydro they expect Pallister would struggle to reduce the provincial deficit and meet his promise to cut 1% off the PST.
Better for him if he keeps the heavy levies, profits from the boondoggle, and pushes rates up enough to put Hydro results into the black, while helping balancing the province’s summary accounts.
So Pallister stumbles along with his essentially NDP model. Ratepayers, the innocents, be dammed.
Graham Lane leads Manitoba Forward (manitobaforward.ca).