Brandon Sun - PRINT EDITION
Re: “Hydro Rates Go Up By Two Per Cent, (Brandon Sun, April 3, from the Winnipeg Free Press)
Manitoba Hydro can perhaps be forgiven for not foreseeing the advent of shale gas technology (the biggest energy development in a generation) and how it would trash its plans for profitable exports. But is Hydro ready to address its new energy world? Consider this:
1. Hydro wanted a rate increase of 3.5 per cent, not two per cent. In fact, they want 3.5 per cent every year for the next 10 years. At least, that’s what their financial projections are based on. That’s about double the current rate of inflation. No doubt, they need the revenue with the challenges they face, at least some of which are their own creation.
2. Hydro still plans to spend approximately $20 billion on new infrastructure, including two more generating stations, over the next 10 years or so. This seems like a lot compared to its current long-term debt of $7.9 billion and especially when there are major concerns about the electricity market.
3. Hydro has been selling power to the U.S., some through contracts and some through spot prices. The average price for its exports by all methods is well below four cents/KWh.
4. Projects advanced by Hydro for export purposes are expected to produce annual profits at an acceptable rate of return. Clearly this doesn’t happen when you sell power below cost.
5. The power from the new Wuskwutim generating station will eventually be needed in Manitoba, but not until 2019 or even later. In the meantime, it represents surplus capacity — its power can only be sold in the U.S. spot market for a fraction of the cost of production.
6. How much does it cost to produce hydro power in Manitoba? In 2009, the average cost of construction and operation of the proposed Conawapa generating station was said to be seven cents/KWh. But the capital cost of that project rose 56 per cent between 2009 and 2011, so on that basis, the cost per KWh would be much higher.
7. Any profitability that there may have been from export sales would have been wiped out by the much lower value of the product and the escalating capital cost.
8. Here in Manitoba, growth prospects for the industrial sector, which accounts for about one-third of domestic demand, appears to be very limited. In fact, planned plant closures at Flin Flon and Thompson in 2015 are forewarnings of a shrinking domestic market.
9. The price of shale gas, which drives the price of hydro in the U.S., will be cheap for a long time to come, as more supplies come on stream.
10. The U.S. energy market has changed a lot in recent years where the focus has moved from “climate change” to pressing economic and budgetary challenges. None of this bodes well for Hydro’s export ambitions. They have discovered an inability to achieve significant (if any) premiums for “clean energy” in its pending export contracts.
What a can of worms! We have a need to subsidize all power we export for the foreseeable future. By “we” that means Hydro, and ultimately you-know-who. Besides, the domestic demand for power is flat. Meanwhile, the plans proceed to build more generating capacity and take on many more billions of debt. It is a bad situation, made only worse by Hydro’s frequent unwillingness to share information with its own watchdog, the Public Utilities Board, and its apparent unwillingness to agree to an independent review of its development plans, as proposed by the Public Utilities Board and various other parties.
Where do I get these opinions? Unfortunately they are not opinions. Most of this can be found in the record of meetings held by Hydro with the Public Utilities Board in July 2011. It is accessible to the general public at pub.gov.mb. ca/pdf/hydro/99-11.pdf.
If Hydro wished to demonstrate that they “get it,” they could:
1. Stop talking gibberish about how the problem with shale gas may be short-lived. Shale gas is apparently clean enough for cash-strapped U.S. jurisdictions and there is no end of it.
2. Save $1 billion closer to home by putting the Bipole III transmission line down the east side of Lake Winnipeg instead of through the west side of the province or perhaps delaying it until market conditions warrant expansion.
3. Find alternatives to meet reliability and security of supply challenges.
4. Agree to an independent review of their development plans.
BILL ANDERSON
Forrest
Republished from the Brandon Sun print edition April 27, 2012
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.
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.
Re: “Hydro Rates Go Up By Two Per Cent, (Brandon Sun, April 3, from the Winnipeg Free Press)
Manitoba Hydro can perhaps be forgiven for not foreseeing the advent of shale gas technology (the biggest energy development in a generation) and how it would trash its plans for profitable exports. But is Hydro ready to address its new energy world? Consider this:
Already subscribed? Login to view full article.
Not yet a subscriber? Click Here to Signup
Re: “Hydro Rates Go Up By Two Per Cent, (Brandon Sun, April 3, from the Winnipeg Free Press)
Manitoba Hydro can perhaps be forgiven for not foreseeing the advent of shale gas technology (the biggest energy development in a generation) and how it would trash its plans for profitable exports. But is Hydro ready to address its new energy world? Consider this:
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.
Most Popular
Sort by: Newest to Oldest | Oldest to Newest | Most Popular 1 Comments
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.
Posted by:Bill the Needle
April 28, 2012 at 7:03 PM
It's scary that, with the writing on the wall, Hydro and the NDP take this "damn the torpedos" approach and head full speed toward the iceberg. Great article! Too bad they refuse to listen to the concerns of a growing number of Manitobans.