Hey there, time traveller!
This article was published 6/2/2012 (2325 days ago), so information in it may no longer be current.
As Manitoba Hydro implements the NDP’s plan for building hydro dams and power lines over the next 12 years, its outstanding long-term debt, after some repayment, will still be $17.7 billion in 2029, rising from $7.8 billion in 2010.
Hydro’s long-term debt will rise from its present value at three times equity, maxing out at more than five times equity during a seven-year period from 2018 to 2024. This will happen notwithstanding Hydro’s stated intent that its debt should be maintained at about three times equity. The NDP solution is to call this the “decade of investment” while ignoring important financial targets adopted after careful prior consideration. A risky way to do business!
To meet Hydro’s own projections for financial viability, the average price per kilowatt-hour realized from exports has to increase from 3.26 cents in 2011 to 13.45 cents in 2029. Fact: cheaper shale gas alternatives and reduced demand in the U.S. have combined to drastically reduce the price of energy in the past five years. Kilowatt-hour prices have actually decreased from 6.02 cents in 2006 to 3.26 cents in 2011, so a reversal of this trend is needed. The more than 400 per cent increase in price projected by Hydro over the next 18 years is pie-in-the-sky and it will never happen. The reality is that debt repayment will take even longer than projected.
Domestic rates will increase by a minimum of 57 per cent by 2026 and by another 64 per cent if projected reductions in export revenue and the cost escalation of capital projects are properly taken into account, as they should be. Taking all factors into consideration, a kilowatt-hour that costs Manitobans five cents today will cost them more than 11 cents in 2026. To the extent that export prices and energy sales are not realized, these increases will not be enough and domestic rates will rise even more. Prediction: hydro rates for Manitobans will more than double, perhaps triple, in the next 15 years.
All figures used here are available from information submitted by Hydro to the Public Utilities Board. It will be interesting to watch how the NDP and Hydro try to spin this untenable business plan to make it sound viable in the upcoming independent review.
It’s not too late to delay building both Keeyask and additional conversion equipment until the market outlook improves and to build Bipole III on the east side immediately, using existing conversion equipment to fully address reliability concerns. What’s the rush? The next election’s four years away.
Dean Emeritus (Engineering)
University of Manitoba