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Russell Wangersky: Manitoba has a problem of Muskrat proportions

Photo courtesy of Nalcor Energy
The Muskrat Falls hydroelectric site in Labrador
Photo courtesy of Nalcor Energy The Muskrat Falls hydroelectric site in Labrador

It’s tempting to blame it on karma. But the truth is, Manitoba Hydro was already in a hydroelectric hole before one of their subsidiaries was brought in to tell us whether or not Muskrat Falls was the right choice for this province.

Russell Wangersky

And the hole — or the money pit — has just gotten bigger and bigger.

Manitoba Hydro International was one of the outside firms brought in to justify the development of Muskrat Falls. Its support pushed the project ahead, and was used as a key defence of Muskrat by this province’s government.

But as it turns out, Manitoba Hydro was no better at picking a winning strategy for itself than it was in picking a winner for us.

Now, Manitoba Hydro is facing cost overruns, rate increases and delays — and it’s about to have a tough talk with Manitoba’s public utilities regulator.

Some of the issues on the table? Even higher increased costs and scheduling delays for their ongoing major Keeyask hydroelectric project, cost increases for a new major power line bringing hydroelectricity long distances to market, a “deterioration in the forecast of domestic load growth” and low export prices — the utility calls it “reduced outlook for escalation in the pricing of extra-provincial sales” — which they’d been depending on to finance the project.

Sound familiar? It should. Muskrat Falls has all the same problems.

Heck, the Manitoba government has even appointed a new board of directors for the utility, and the utility is undertaking a review of its “operations, capital programs and finances.” Just like here.

One place they might be going further? With what they are calling a “substantial headcount and operating cost reduction” at the corporation, including laying off 900 staff.

And there’s one other major difference as well.

On April 5, the Manitoba cabinet made a direct order to Manitoba Hydro to supply a broad range of information to the PUB, information that had been kept from the board in the past.

It includes, “Capital Expenditure: existing records related to planned capital expenditures, such as details on new, current committed, and proposed, planned or forecast major capital expenditures and base/sustaining capital expenditures, including copies of contracts, current and previous cost estimates, cost overrun justifications, schedule change justifications, current and future scheduled capital expenditure commitments and forecasts.

And more: “existing records related to project justification, such as capital project justification forms, cost-benefit analyses, business case and other supporting information related to Manitoba Hydro capital expenditures identified by the PUB, including Asset Condition Assessments for previous, current and proposed major capital expenditures and base/sustaining capital expenditures.”

It’s a review from the ground up on how big the problems are, and why they keep growing.

Here’s the government’s explanation.

“Serious concerns have been raised in recent months about the debt of Manitoba Hydro and its impact on both the corporation and the province’s finances,” Manitoba Finance Minister Cameron Friesen said in a news release, adding that the PUB “has not been privy to all of the capital information related to potential cost overruns …”

It’s bad enough at Manitoba Hydro that the utility is looking for a government bailout to keep from having to get double-digit power rate increases this year alone. (That concern sound familiar?)

Meanwhile, in this province, the ongoing Muskrat fiasco doesn’t get reviewed by this province’s PUB at all. In fact, the only time the PUB was allowed to review the project, it came back with no conclusion, because it said too much information was missing. That sounds similar, too.

Manitoba Hydro and Muskrat Falls?

It’s tempting to say, “physician, heal thyself.” But the patients are far too sick.

 

Russell Wangersky writes from St. John’s, and his column appears in 29 Atlantic Canadian newspapers and websites. He can be reached at rwanger@thetelegram.com — Twitter: @wangersky.

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