A scathing review by Manitoba Hydro failed to reveal details of two multi-billion dollar electricity sales to Saskatchewan that are fundamental to the financial future of the Crown utility, the Free Press has learned.
Former Saskatchewan Premier Brad Wall’s report on the Keeyask Generating Station and Bipole III transmission line concluded that the former NDP government rushed to build both projects before securing the proper regulatory approval and failed to provide adequate financial oversight once construction began.
Prime Minister Brian Pallister used the report to substantiate his claim that Keeyask and Bipole III were the worst examples of NDP mismanagement and incompetence.
However, Hydro sources said it was suspicious that the Wall report ignored the effect of two recent electricity sales to Saskatchewan that were closed last year – long before Wall’s report did. be finished.
“The utility (Manitoba Hydro) has always wanted to make this announcement,” a senior Hydro source said on condition of anonymity. “It was huge news for us. But we knew this didn’t fit with the current government’s attempts to portray the previous government badly about building Keeyask and Bipole. You can only assume that (the sale of electricity in Saskatchewan) was deliberately covered up. because it did not serve their political objectives.
Hydro rarely publishes specific details of export contracts, but current and former Hydro employees have confirmed that the utility has two firm export contracts with Saskatchewan – one for 100 megawatts and a second for 215 megawatts – which are expected to generate at least $ 5 billion in revenue over the next 30 years.
Wall’s 172-page report contained only one direct reference to Saskatchewan’s electricity deals, and only to acknowledge that they had been made. There were no details on the size of the transactions or the effect they might have on Hydro’s financial outlook.
Sources have confirmed, however, that the impact will be significant. The utility estimated that the electricity available to Saskatchewan under these two contracts is sufficient to provide all the electricity needed to 155,000 homes for one year.
For Hydro, the financial implications are significant. Saskatchewan’s two contracts represent more than half of the value of all export contracts held by Hydro, which sources say are valued at $ 9.4 billion. That’s almost double the predicted value of hydropower projects in 2014 ($ 4.9 billion) when the utility applied for Keeyask and Bipole III approval.
For those at Hydro, the lack of details on those sales proves that the policy was used to filter Wall’s report.
Gloria Desorcy, executive director of the Consumers’ Association of Canada (Manitoba), said that as a long-time speaker in the Public Utilities Commission hearings, the lack of details on Saskatchewan contracts is a major concern as it should have positive consequences for taxpayers.
“At a time when we face the specter of higher-than-inflation electricity rate increases, the sale to SaskPower should help alleviate the cost of Keeyask and Bipole and the Manitoba-Minnesota transmission line. She said.
Not only did Wall have access to many current and former Hydro employees and officials of the former NDP government, he has a personal connection to Saskatchewan electricity sales.
Wall was Premier of Saskatchewan when the first 100 megawatt condition sheet was signed between SaskPower and Manitoba Hydro. He retired from politics in 2018, a few months before the signing of his second term.
“The eventual sale of electricity to SaskPower was not part of the preferred development plan at the time and therefore was not relevant to our review. ” – Brad Wall wrote in his response
Wall declined to be interviewed. However, in his written responses, he said he did not request or provide details on electricity sales in Saskatchewan because they fell outside the mandate of the review. Wall said he was tasked by the Pallister government to limit his review to the preferred development plan of 2014, the detailed business case Hydro has released to justify its desire to build Keeyask and Bipole III, and the subsequent actions of the NDP government.
“The eventual sale of electricity to SaskPower was not part of the preferred development plan at the time and therefore was not relevant to our review,” Wall wrote in his response.
However, this claim runs counter to the description he provided in the introduction to his report, where he made it clear that his analysis goes beyond the preferred development plan. Wall wrote that his review “attempted to quantify the impact of the Bipole III and Keeyask projects on the financial health of Manitoba Hydro and, more importantly, on current and future customers of Manitoba Hydro.”
Consumer group demands hearing on electricity tariffs
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Posted: 7:30 p.m. March 23, 2021
The Consumers’ Association of Canada will become the second organization in as many weeks to request that the Utilities Board open a special hearing on Manitoba Hydro’s finances and rates.
Gloria Desorcy, executive director of CAC Manitoba, said it was essential for the regulator to hold a hearing to consider the significant financial issues that have arisen since 2018, which was the last time a full general rate has taken place.
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Throughout the report, Wall has often offered his analysis on what he thinks Keeyask and Bipole might do to future electricity rates. The introduction painted a grim picture of Manitoba Hydro’s future due to the debt accumulated with the construction of Keeyask.
“As a result, taxpayers will bear the long-term risk that Keeyask does not generate enough export revenue to cover its costs and that the project will not be needed for domestic demand for many years,” Wall wrote.
While the Wall report was cleaned up for meaningful reference to the Saskatchewan agreements, Pallister worked to minimize the finalization of the contracts and their effect on Hydro’s finances, sources said.
While it has been a tradition for Hydro to keep details of export deals confidential, the utility and government would normally announce new electricity sales with fanfare, especially if they were large.
In fact, the Pallister government made such an announcement in 2018 when it signed a preliminary contract with Saskatchewan for 215 megawatts of electricity. In addition to a 2016 term sheet, Manitoba would provide a total of 315 megawatts to its neighbor.
As part of the announcement, Pallister provided the only quote he has ever spoken on Saskatchewan’s electricity deals. “This is an important step forward for Manitoba Hydro, and it is something that shows Manitoba’s sincere commitment to… reduce carbon production, not only from our province, but also from our neighboring provinces,” he said. he said in a statement.
After that quote, the Pallister government put the lid on any future recognition of the size and scope of the agreements.
Last October, Manitoba and Saskatchewan issued a press release confirming that the federal government would contribute $ 18.7 million to complete an 80-kilometer transmission line between Birtle and Tantallon, Saskatchewan.
That press release, which did not include any comments from Pallister, included a brief mention that “the new line will allow Manitoba to meet a recent power purchase agreement with SaskPower.” He then declared that “the financial terms of the sale are confidential”.
Lynne Fernandez, an economist at the Canadian Center for Policy Alternatives, said she was concerned about a concerted effort to cover up details of the agreements with Saskatchewan.
“What the government is doing here is purely political,” Fernandez said. “The reason they don’t want that number is because it takes their teeth off what they’re trying to say about the costs of building the dam and the transmission line. ”
A spokesperson for Hydro denied that any effort had been made to play down the deals with Saskatchewan.
“What the government is doing here is purely political. The reason they don’t want that number is because it takes the teeth out of what they’re trying to say about the costs of building the dam and the transmission line. ” – Lynne Fernandez, economist at the Canadian Center for Policy Alternatives
A request to interview Pallister was refused. However, a spokeswoman for the Crown Services Department denied trying to cover up the impact of electricity sales in Saskatchewan.
As to their effect on Hydro’s long-term financial position, she would only say that was a positive development. “Suffice it to say that export revenues help both fund Manitoba Hydro’s capital projects and keep rates in Manitoba lower than they would otherwise be,” she said. declared.
The ultimate effect on Hydro’s long-term financial future is up for debate.
While the sale does not fully protect Manitobans from tariff hikes linked to increased debt from Keeyask and Bipole III, it is increasingly evident that it, with growing export revenues, is starting to consolidate the financial situation of the public service and, with it, the bottom of the province. line.
For example, in its most recent Quarterly Financial Report (for the nine months ending September 2020), Hydro noted that export revenues were $ 462 million, or $ 101 million, or 28% more than ‘at the same time in 2019.