Hey there, time traveller!
This article was published 7/11/2014 (1320 days ago), so information in it may no longer be current.
Manitoba Hydro depends on sales to American utilities to hold down what may well be massive rate hikes for Manitoba consumers and industry. Those sales come from two sources, fixed-price firm contracts and sales of “excess” generation at spot-market prices which vary by the hour. Historically, fixed-price firm sales have represented 50 per cent or less of exports.
Scott Thomson, president and CEO of Manitoba Hydro, acknowledges that spot-market prices fluctuate. But, in a public statement in the summer of 2013, he said “in the most recent six-month period, spot-market prices rose 46 per cent compared to the same period the year before,” implying, at the time, that it was evidence of a trend.
Let’s look at more recent trends. A year after Thomson’s upbeat message, spot-market prices are on the ropes again. Data provided by the Public Utilities Board reveal that they have collapsed, bouncing along for the past three months at extremely low values. Lately, the price has averaged two cents per kWh after a period of one cent and less. Unless there is a complete reversal of this trend in the balance of Hydro’s 2014-15 fiscal year, the average spot-market price for the year will fall well below the average for last year and certainly nowhere near the 46 per cent increase optimistically highlighted by Thomson.
To put this in relative terms, the full cost of generating and transmitting power exported to the U.S. from Keeyask will exceed 12 cents when Bipole III is completed.
The spot market likely still accounts for about half of Manitoba’s exported electrical energy. It is a key contributor to extra-provincial revenue. The business plan submitted by Hydro to the recent PUB review requires much higher spot prices than are currently being achieved.
Overestimating export revenue isn’t good for Hydro’s bottom line and low export prices only increase the burden that will have to be borne by Manitoba ratepayers.
Annual export revenue, well documented in Hydro’s annual reports, has plummeted all the way from $827 million in 2005-06 to $439 million in 2013-14. Hydro’s spin department made a big deal out of the fact that export revenue increased from $353 million last year to $439 million this year, but it carefully avoided any reference to the long-term downward trend. It didn’t adequately acknowledge that the coldest winter in 116 years in Hydro’s export region was the major reason for the nominal year-to-year increase.
Hydro has already projected losses in at least the first two years after Bipole III comes into service.
If the recent trend in spot-market prices continues, those losses will be massive and Hydro will have to, once again, increase its estimate of the rates it will charge Manitobans as it continues to subsidize American utilities.
Vice-president, Bipole III