Winnipeg Sun, March 27, 2018
Now that we’re done with the he-said-she-said squabble between the former board of Manitoba Hydro and the premier of Manitoba, maybe the Crown corporation could explain to ratepayers why it’s still going ahead with the Keeyask Generating Station, which could cost $4 billion more than expected and drive up rates even further than a proposed 7.9% annual increase.
And if Hydro is going ahead with the project – and it is – what steps is it taking to mitigate those cost overruns?
Despite a scathing consultant’s report commissioned by the Public Utilities Board last year, which strongly urged Hydro take immediate action to provide oversight of a project that has gone completely off the rails, we’ve heard nothing from Hydro about what they’re doing about it.
Former Hydro board chair Sandy Riley continued his war of words with Premier Brian Pallister over the weekend about why he and the Hydro board quit after learning Riley was about to get fired by government. Riley is complaining he didn’t get the kind of access to the premier he thought he should and decided to quit suddenly last week after he was told he was being replaced.
Riley did meet with Pallister many times in 2016 and admits he had a telephone conversation with him in early 2017. Riley also acknowledges he had many meeting with former Crown Services minister Ron Schuler and the current minister responsible for the file, Cliff Cullen. And he spoke regularly with senior government staff to discuss issues and get direction. Riley also made a presentation to the powerful planning and priorities committee of cabinet in August 2016, which Pallister attended.
So claims of not getting access to government are a bit far-fetched. In reality, the conflict was more about the future direction of the Crown corporation, including the controversial $67.5-million proposed payout to the Manitoba Metis Federation, than about access.
One of the things the board had been asking for was a bail-out from the province, which they didn’t get. Hydro was told instead to work out its own financial problems because the province had fiscal challenges of its own.
The truth is, Riley, a prominent figure among Winnipeg’s business elite, isn’t used to having his proposals rejected or being turned down for meetings. And his ego was probably a little bruised.
Either way, it’s highly doubtful most Manitobans care how many meetings Riley got or didn’t get with the premier. What they do care about is why their rates may be going up 7.9% a year for the next six years.
One of the key drivers behind those rate increases was a decision by the former NDP government to build Keeyask when there was little to no market to support it. Hydro now admits the electricity export market has collapsed and the province doesn’t have sufficient domestic demand to support the increased supply that Keeyask will generate.
Despite that, Hydro is proceeding with Keeyask, which has already faced a $2.2-billion cost overrun. It’s an amount the consulting firm MGF Project Services Inc., retained by the PUB, says could climb to $10.7 billion. The original price tag was $6.5 billion.
MGF says project costs are out of control, including massive overtime expenditures and a contract model that fails to properly scrutinize ongoing costs.
“The Keeyask Generating Station project presents the greatest threat to Manitoba Hydro,” MGF wrote in its report released in December.
Unfortunately, Hydro, under Riley’s leadership, has largely dismissed the findings and insisted they will meet their $8.7-billion target. MGF recommended Hydro hire an outside firm to oversee the work of BBE Hydro Constructors LP, the company retained to build the dam. But so far, we’ve heard nothing from Hydro on the issue.
In his resignation letter, Riley admits electricity from Keeyask will not be needed in Manitoba “for decades” and Hydro’s “over-investment in capital projects” will “not generate acceptable returns.” I doubt Riley in his role as a corporate finance executive would continue to pour good money after bad into an “over-investment” that is not expected to generate acceptable returns. So why is Hydro doing it? Manitobans have never been given an adequate explanation on that.
Those are the real concerns Manitobans want answers to, not how many meetings Sandy Riley didn’t get with Brian Pallister.