At least they’re thinking ahead

Russell
Russell Wangersky
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Friday, the Manitoba PUB was supposed to hand it over to the Manitoba government: a major review of that province’s plans to build expensive new hydro projects, called a Needs For and Alternatives To, or NFAT, review.

Here’s a sliver of the evidence Manitobans got to hear during the course of that review, from John Todd of the utility planners Elenchus Research Associates. He spoke on April 2.

One of the big things Todd pointed out? That utilities tend to take the methodology that they use for the general rate applications (GRA) and extrapolate forward without looking at broader, more fundamental and unexpected changes. It makes me think of the shale gas revolution, which wasn’t part of the Muskrat Falls analysis.

Here’s Todd:

“And therefore, one of the things that I’m trying to drive out of the evidence is to just take a simple load forecast that you do for GRA and extrapolate it out for 20, 30, then 40, 50 years and just assume business as usual is a naive assumption without looking at what things could dramatically change the marketplace, and what would the consequences of those be. Do the consequences of assumed change fundamentally alter the risks around the development plan? So it’s relevant for the NFAT, not for the GRA.

“So we come back to Manitoba Hydro’s load forecasting methodology, the topic I was looking at.

Fundamentally throughout the evidence you’ll see it says that the forecast incorporates the known knowns reasonably well. The known knowns are just if the world unfolds in a manner that is very similar to the past 10 to 20 years, just business as usual, we carry on. Economic growth is roughly in line, technology is no dramatic changes, no — nothing significant, in terms of disruptive innovation. And it’s a good forecast.

“It’s good methodologies, consistent with the way they’re generally done. … Unfortunately, in my view, it basically ignores what I’ve referred to here as the known unknowns. Price elasticity is not factored in. … It doesn’t look at structural changes, such as disruptive innovations. ‘If you can’t get your arms around it, let’s not deal with it,’ seems to be the approach in the load forecast. And essentially, I think that has come about because the standard load forecasting methodology which has been developed and is used in a GRA context has simply been adopted …”

Big change could come for power companies, Todd says, and they have to plan for that.

“I’ve gone through a number of different regulated industries, such as telecoms. When I started working in CRTC proceedings, we had monopoly telephone service. I went through, in the ’90s, the hearings that introduced long-distance competition. I went through one that didn’t allow it. I went through a second one that did allow it.

“I’ve been through local competition, introduction of cellphones

as alternatives. We went from a completely, you know, traditional monopoly scenario to a world today where telecom is essentially a competitive marketplace. There is a risk or a possibility that we could see a transformation in the electricity industry, which is similar. Think of low cost, declining cost, renewable power, people putting solar panels on their roofs. General Electric’s building a — a small wind powered generator you can build on the roof. The costs are not competitive right now with grid power, I know. I have a — a property in Northern Ontario where we’re off-grid, and I know that my cost per kilowatt hour when I installed that solar power 10 years ago was way above the cost of grid power. If I were to do it today, you’d be getting close. If I did it in 10 years from now, it might actually be more economic than full cost recovery on grid power.”

Interesting questions about the electrical future — primarily, about what happens when the ground changes under your feet and the forecasting does not.

In Manitoba, at least, they’re trying to answer them.

Here, the known unknowns are staying unknown. Let’s hope they don’t come back to bite us.

Russell Wangersky is The Telegram’s news editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: Elenchus Research Associates, CRTC, General Electric

Geographic location: Northern Ontario, Manitoba

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  • Maurice E. Adams
    June 24, 2014 - 06:40

    And hope alone is not very comforting.