Published in the Winnipeg Sun, August 24, 2018
The mass resignation of Manitoba Hydro’s Board in March likely surprised Brian Pallister, requiring the unplanned appointment of a new board for the financially troubled Crown Corporation. Pallister recently bolstered his inexperienced initial appointees by recruiting Vince Warden. Prior to retiring, Warden was Hydro’s Vice-President and Chief Financial Officer. His appointment could look positive, particularly now that Hydro’s latest President, Kelvin Shepherd, is retiring.
But Warden had a checkered record before the Public Utilities Board during my time as Chairman. Warden had key responsibility then for several twenty-year financial forecasts. Those rosy forecasts never matched reality. The best you can say for them is that they weakly supported the rate hikes Hydro then sought.
Forecasts of Hydro’s expansion costs, export prices and its personnel complement during Warden’s time were always way out. Actual costs for the Wuskwatim and Keeyask generating stations, the Bipole III transmission line, and major renovations to the Pointe du Bois dam routinely soared past initial and revised estimates – major projects undertaken just as Hydro began addressing growing requirements to make improvements to its aging existing system.
With Wuskwatim costing more than TWICE the estimate to gain the go-ahead, Warden relied on questionable logic to defend the supposed worthiness of the new dam. For example, he assigned a portion of Hydro’s so-called equity – none of it solid – to offset 30% of the total costs. This to get Wuskwatim’s operating results to look better. Better still if he that had acknowledged the economic disaster it remains.
That ‘whopper’ was outdone by crediting Wuskwatim with a share of an overly-generous forecast of average system revenue (instead of a share of opportunity-market export revenues) and not allocating it full costs. The plant was built for the export market. But, with the export market ‘in the toilet’ and the new dam’s costing twice that expected, a flawed revenue and cost sharing formula allows Wuskwatim to produce better operating results than registering large losses. The flawed revenue and cost sharing formula ascribed to the Wuskwatim partnership to keep the First Nation partner onside.
On another project, when forecasting the cost of Bipole III, Warden, sworn-in under oath as a witness in a Hydro rate hearing, claimed he had never seen a revised cost forecast that cast the project in a very negative light. Later, Warden had little option but to admit the truth – a document initialed by the executive, of which he belonged, contradicted his evidence. Past Hydro Board Chair Sandy Riley, supported then by President Shepherd and his executives, publicly recognized Hydro’s expansion as a financial blunder. Both pressured the government, suggesting that without a capital infusion by government massive rate hikes were required.
PUB’s latest rate decision ignored Riley’s warnings. But by again kicking the can down the road Pallister might get through the next provincial election without ‘wearing’ responsibility for a major electricity rate hike. It will allow the Government to continue raiding a debt-ridden Hydro to the tune of over $400 million a year, thus reducing the provincial deficit while punishing ratepayers.
But, with Riley and Shepherd gone and with Vince Warden incredibly chirping in that Hydro’s finances are much better than portrayed, Brian Pallister’s cover-up of the debacle continues.