Frontier Center for Public Policy

Publius attended a Frontier Centre Winnipeg luncheon address by Graham Lane, a former Chair of Manitoba’s Public Utilities Board.

In an address of about three quarters of an hour, Mr. Lane shared serious concerns about the provincial government’s determination to have Manitoba Hydro (a Crown corporation with a monopoly over electricity and natural gas supply in Manitoba) enter into long-term electricity export contracts with American utilities and partnerships with northern First Nations, requiring, at great cost, the building of two new hydro-electric generation stations and Bipole III.

Noting the projected costs of Hydro’s overall capital expenditure plan, that now being $33 billion, apparently three times Hydro’s current balance sheet, Lane forecast the potential for very major rate increases lying ahead for Manitoba ratepayers, rate increases high enough to bring about energy poverty for lower income households and risk general economic disruption.

He also criticized the absence of Auditor General reviews of both Hydro’s expenditures (and contract terms) to attract the Utility’s First Nation partners and allegations of a ‘whistleblower’ (previously an advisor to Hydro). It has been reported that the Auditor General, who has recently indicated her intention to retire ahead of the end of her contract term, was, previously, a member of the Board of Directors of Hydro.

Lane cited a lack of openness and transparency by both the provincial government and Hydro, and derided the planned involvement of the agency he previously led, PUB, in what he called a sham review of government’s plans. He noted the changed economic environment that have developed since the plans were developed, and criticized government and Hydro resistance to reconsider their development plans, despite evident risks for ratepayers.

Following Lane’s address, a vocal defence of the plans emanated from the Minister Responsible for Hydro (Mr. Chomiak) and the Premier (Mr. Selinger), a defence while loud in ‘anger’ devoid of substance. A similar, devoid of substance but calmer, written defence of the questionable plans has now been provided by Hydro’s President (by way of an article published in the Winnipeg Free Press).

Neither Chomiak, Selinger, nor Thompson have addressed many of Lane’s concerns, and the ones they did address they have failed to do so in adequate detail or with evidential support.

None of the three respondents answered Lane’s criticism of needed audits not being undertaken because of the recusal of the Auditor General from reviewing Hydro actions and plans, the ongoing spending ahead of the planned review. Nor did they respond to the specific rate forecasts offered by Lane.

None of the respondents questioned Lane’s rendition of Hydro’s previous poor forecasting of construction costs, export sale prices and industrial demand forecasts. None addressed Lane’s concern about the lack of diversified supply, and the risks that thus lie with future droughts. None addressed the risk for existing ratepayers of new or expanded ‘power hog’ industries being allowed large industry rates that are one-third, if not less, of the marginal cost of new supply.

None spoke of the restrictions placed on the apparently upcoming PUB review of Hydro’s already well-underway plans – PUB apparently cannot consider the disaster that is the Wuskwatim experience, or review the expenses incurred and contracts entered into with First Nations, or even question the necessity and implications of Bipole III (and the route laid out for it).

None acknowledged Lane’s concerns about the non-competitive and secret processes surrounding the appointment of Hydro directors and PUB members, raising the risk of conflicts of interest. Nor did any of them counter Lane’s assertion that during the planned ‘build phase’ of Hydro’s plans, government will reap hundreds of millions of dollars from capital tax and debt guarantee fees, the aggregate likely accumulating into the billions before the build is complete, costs that Hydro will not expense but defer.

(If Hydro was a private company owned by another private company, if cost transfers occurred between the subsidiary and its parent, Publius understands that neither revenue nor expense would be recorded until the receipt and expense events were in synch.)

And, none of the respondents backing the development plans have disputed Lane’s assertion that ratepayers are the only party at direct risk, that government hasn’t a dollar invested in Hydro’s capital, and that ratepayers will be called upon to meet whatever net costs the present plans end up generating.

For Publius, it seems clear public responsibilities are not being upheld. Officials and agencies are not fulfilling their obligations to the public interest.

The importance of Hydro’s plans, with potential major negative implications for domestic ratepayers, require an immediate opening up of the books and plans, the involvement of truly independent and expert parties, the involvement of an all-party committee of the Legislature, and a slow-down of plan expenditures and further commitments until that is done, and done properly.

If things ‘go bad’, a possibility that Lane raised in his very open address, not only will ratepayers be called upon to deal with it, Publius suspects ratepayers will only know of it, and its dimensions, after another election or two.

By then, all those complicit in the current ‘hiding show’ are likely to be long gone from the public scene.

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