Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Opinion
Classified Sites

Brandon Sun - PRINT EDITION

Provincial Viewpoint -- Spinning electricity export sales

WINNIPEG — Premier Greg Selinger has announced more future export sales of Manitoba Hydro’s electricity to American utilities. His spin reminds me of the old adage: When something seems too good to be true, watch out!

With his latest announcement, the line between the NDP government and its captive utility has been erased. It must be embarrassing for the once-proud Hydro to find itself again playing second fiddle to a government full of self-praise.

An announcement is one thing, but we all know the devil is in the details.

First, are we talking about real bona fide sales or prospective sales? Without the construction of Bipole III and two new dams, Keeyask and Conawapa, the “sales” can’t happen. And to build those $20-billion megaprojects, billions of dollars must be borrowed and final approvals provided on both the environmental and economic elements.

And then the sales must be finalized by the National Energy Board. American regulators also have to give the green light. If the green lights are given, new transmission has to be financed and built on the American side. Gaining landowner and regulatory approval in America can be an expensive and long, fought-out exercise, with no guarantee of success.

In any case, the NDP government has made export sales announcements before, going back to 2008, that were never concluded. Those “sales” were not sales, as in enforceable agreements, just paper “term sheets.”

Premier Selinger boasts that the sales will bring in $9 billion. About 18 months ago, then-Hydro minister Dave Chomiak trumpeted export sales of $29 billion over 30 years. In 2005-06, Hydro reported export sales of close to $900 million. In recent years, export sales have fallen as low as $338 million. In trying to make sense of these dollar claims, it is important to realize the annual interest and plant amortization expenses associated with the planned $20-billion adventure alone will require almost $2 billion a year in additional revenue.

And construction costs can rise sharply higher than current estimates, as they have in the past. An increase in interest rates of two percentage points could add another $400 million to the revenue needed to break even on the expansion. Remember, more than 50 per cent of Hydro’s current export sales go at the spot price, not the price for “firm” sales. Selling electricity into the MISO market (American Midwest) is not difficult. What is problematic is the mix between firm dependable sales and opportunity sales, and the prices and terms. American utilities, no different than in Saskatchewan and Ontario, are happy to buy power from Hydro if the price is lower than it would cost them to produce it themselves. And they don’t have to renew the deals, while Hydro will still have the debts and costs.

Another important feature of any large sale is the ability to withdraw from the commitment in case of a drought or some other extraordinary event. In 2004, a Hydro official advised the Public Utilities Board that Hydro had honoured its firm sale commitments to its U.S. customers through the 2002-04 drought to keep its reputation as a dependable supplier. Doing so led to a $436-million loss in 2003-04, which led to a 9.5 per cent rate hike for consumers.

It was later determined that Hydro’s contracts did not provide the utility an out from delivering power during the drought — it had to do so.

The PUB’s hearing was doomed at the start by its terms of reference, with restrictions placed on what aspects of the NDP-Hydro plans can be reviewed. Nevertheless, it will be interesting to see what independent experts engaged by the PUB and interveners for the PUB NFAT hearing have to say about the latest export sales announcements.

I remain profoundly disappointed in this government, spinning one tale after another as if assertions are enough to support a gamble of unprecedented magnitude. The ratepayers of this province are the only backstop if things go wrong.

As of now, and despite Premier Selinger’s latest claims, there are no firm export sale commitments beyond those signed, committed to and having full regulatory approval. And none of those contracts requires building Bipole III, let alone it and two new massive dams that would mortgage the futures of following generations.

» Graham Lane is a retired chartered accountant and former chairman of the Public Utilities Board. This article also ran in the Winnipeg Free Press.

Republished from the Brandon Sun print edition March 4, 2014

  • Rate this Rate This Star Icon
  • This article is currently rated an average of 5 out of 5 (1 votes).
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

WINNIPEG — Premier Greg Selinger has announced more future export sales of Manitoba Hydro’s electricity to American utilities. His spin reminds me of the old adage: When something seems too good to be true, watch out!

With his latest announcement, the line between the NDP government and its captive utility has been erased. It must be embarrassing for the once-proud Hydro to find itself again playing second fiddle to a government full of self-praise.

Please subscribe to view full article.

Already subscribed? Login to view full article.

Not yet a subscriber? Click here to sign up

WINNIPEG — Premier Greg Selinger has announced more future export sales of Manitoba Hydro’s electricity to American utilities. His spin reminds me of the old adage: When something seems too good to be true, watch out!

With his latest announcement, the line between the NDP government and its captive utility has been erased. It must be embarrassing for the once-proud Hydro to find itself again playing second fiddle to a government full of self-praise.

Subscription required to view full article.

A subscription to the Brandon Sun Newspaper is required to view this article. Please update your user information if you are already a newspaper subscriber.

letters

Make text: Larger | Smaller

Brandon Sun Business Directory
Sudden Surge: Flood of 2014
Opportunity Magazine — The Bakken
Why Not Minot?
Welcome to Winnipeg

Social Media