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Muskrat Falls and Keeyask both in trouble Posted: 03/04/2018
By: Garland Laliberte

With a partially completed electricity generation plant running over budget and behind schedule, what are the residents of Newfoundland/Labrador doing about the troubled Muskrat Falls project?

Muskrat Falls, you may recall, is the controversial 824-MW hydroelectric facility being built by Nalcor Energy on the lower Churchill River in Labrador. Encumbered with environmental and public safety issues, Nalcor doesn’t even have certain access to the water it plans to harness. To bring its energy to consumers in Newfoundland and Nova Scotia, the facility requires 1600 kilometres of new transmission line built across an unforgiving landscape. Two stretches will employ expensive underwater cable, one beneath the Strait of Belle Isle and the other beneath the St..Lawrence River.

Before looking into how Newfoundland/Labrador is dealing with this challenging project, let’s make some comparisons with Manitoba’s eerily similar Keeyask, Bipole III and Minnesota transmission projects.

First, the similarities. The brainchild of politicians? Check. Better alternatives available? Check. Generation remotely located with an expensive transmission requirement? Check. Project planning and management the responsibility of a crown corporation? Check. Regulatory review processes flawed? Check. Projects partly complete and running behind schedule? Check. Projects over budget? Check. Contractor problems? Check. Unprofitable short-term export contracts? Check. Rates likely to double to pay for projects? Check. Province’s own finances stretched? Check.

What are the differences? The big one — the vocal residents of Newfoundland/Labrador are telling the world about Muskrat Falls. By contrast in Manitoba, we have essentially kept the Keeyask and Bipole III projects our deep dark secret well beneath the national radar. The residents of Newfoundland/Labrador have made enough noise that a public inquiry has been called. Here in Manitoba, a public inquiry for Bipole III led by the PUB was promised during the 2016 election campaign but never launched.

With a 2019 in-service date, construction at the beleaguered Muskrat Falls project in Labrador is in its wind-down stages. Here, with a 2021 completion date, it’s get ‘er done and damn the torpedoes.

In Newfoundland/Labrador, an equity write-down (for starters, $4 billion from provincial coffers) has been proposed. In Manitoba, a suggestion for an “equity injection” of $5 billion was dismissed out-of-hand.

In Newfoundland/Labrador, a doubling of rates is expected to cause a decrease of between 30% and 40% in domestic use with an accompanying decrease in domestic revenue. By contrast in Manitoba, Hydro is counting on domestic load actually increasing during the next six or seven years, despite planned 7.9% annual rate increases. The short-term load forecast has been offset by only a feeble downward adjustment for price elasticity effects. Beyond that time frame, Hydro is forecasting load growth at least twice that in neighbouring jurisdictions.

In Manitoba, we are compounding our problem with a badly timed conservation and efficiency plan. The cost to Hydro ratepayers of delivering the aggressive Efficiency Manitoba plan is unknown but will likely be in the hundreds of millions annually. Worse, Hydro will need to find an additional $5 billion in revenue over the next 20 years to replace domestic revenue displaced by the plan.

Garland Laliberte is a member of the Bipole III Coalition

By: Graham Lane

The curtain is falling on the Public Utilities Board’s (PUB) most expensive Hydro rate hearing. The hearing follows a series of external and internal reviews of the still-unfinished Hydro expansion. Since 2003, $100 million or more of ratepayer money has gone down the drain, wasted in hearings and reviews.

Wasted because those hearings relied on incredibly wrong forecasts – ‘garbage in’ ‘garbage out’ decisions resulting from a series of administrations trying to justify the unjustifiable.

The post-Limestone dam history of PUB and the Clean Environment Commission feature Hydro hearings littered with wasted costs and disappointments for ratepayers. The winners: lawyers, consultants, contractors, suppliers to Hydro, American utilities, northern First Nations and Hydro executives. The losers – ratepayers, taxpayers, farmers, the economy, and, above all, common sense.

In 2004, the CEC was commissioned by the-then NDP Doer government to review Hydro’s ‘already begun’ Wuskwatim project. Billed to be a model for First Nations as minority owners, Hydro blew past cost forecasts. Wuskwatim was to cost $900 million, with its electricity sold profitably to American utilities. The project ended up costing over $2 billion while export prices fell.

The First Nation ‘partnership’ was then reworked and reworked again, ensuring steady income for the First Nation despite ‘real’ large losses for ratepayers. (And $1 billion was spent just to bring First Nations into ‘no-lose’ minority shareholdings in money-losing Wuskwatim, Keeyask and the derailed Conawapa.)

At the bidding of the NDP Selinger government, PUB undertook an incredibly expensive NFAT review – Needs for and Alternatives to – of Hydro’s plans for Keeyask and Conawapa. Against advice, the hearing ignored options, Bipole III and money already spent on Keeyask and Conawapa. PUB then green-lighted Keeyask and billions more was then wagered and lost. Projections of costs and revenues again proved ridiculously faulty.

Fast forward to the Pallister PC government, which broke its promise to halt and review Bipole III and Keeyask. Instead, its newly-installed Hydro board of directors, and at a cost of $4 million plus, contracted Boston Consulting (BC) to again review Keeyask. Forecasts relied on by the American consultancy again proved wrong – spending on Keeyask and Bipole III still continues.

PUB now considers how high rates should jump. PUB has no mandate to halt Keeyask nor to consider a halt and route diversion for Bipole III. And, the Pallister government provides no indication that it will help consumers by either shrinking its enormous annual levies on Hydro’s ratepayers or absorb Hydro’s debt to cut rate hikes. But, the government is ultimately responsible for the entire foolhardy boondoggle.

Pallister now hides behind PUB’s skirts, ignoring government’s moral responsibility to lessen the burden on ratepayers.

There are many lessons to be learned from this sorry history of a massive misadventure in trade undertaken by a monopoly Crown corporation and involving regulatory bodies reliant on bad data. One is that proponents should be careful not to employ faulty forecasts.

Massive projects risking the province’s economic well-being should neither proceed nor continue without at first thorough and after ongoing risk assessments and all options. Avoid ‘garbage in garbage out’ hearings which waste money and time, resulting in disastrous outcomes.

Above all, government should never hide behind the skirts of regulatory bodies.

Graham Lane in Winnipeg Sun on March 9, 2018

Bipole III Coalition Media Release Posted: 02/02/2018
By: Bipole III Coalition

In a presentation to the Public Utilities Board yesterday, the Bipole III Coalition called for a massive re-write of The Manitoba Hydro Act to allow for open access to its electric grid. The Coalition has stated that an open access grid would open up the generation of electricity by independent entities to solar, wind and other green energy sources. It would make Manitoba Hydro more competitive.

In a move to hold down electricity rate increases closer to inflation, the Coalition also called for the transfer of a portion of Manitoba Hydro’s debt to the provincial government. The Coalition pointed out that debt transfer would shift the impact of Hydro’s debt away from those less able to pay their electricity bills. Manitoba Hydro is the only electric crown corporation in Canada that does not transfer debt to its provincial government.

Earlier this year, the Coalition submitted a brief to the Public Utilities Board providing evidence that Manitoba Hydro is still forecasting growth in electricity use in Manitoba at unjustifiably high levels. It also demonstrated that Efficiency Manitoba’s savings targets, if they can be achieved, will create a need, over the next 20 years, for $5.1 billion of additional revenue not presently provided for in Manitoba Hydro’s financial plan.

The Bipole III Coalition is an organization of volunteers, mostly retired engineers, who enjoyed distinguished past careers, some of them in executive positions in Manitoba Hydro. The Coalition seeks to inform Manitobans with a view to ensuring that they continue to enjoy reliable and affordable electricity.

More information can be obtained from Bipole III Coalition Directors Dennis Woodford at (204) 488-1134 or Dr. Garland Laliberte at (727) 954-4504.

Winnipeg Free Press Posted: 02/16/2018
By: Nazim Cicek

Manitoba has a history of being a world leader in progressive use of electricity, and the province could be at that forefront again by focusing on green energy such as solar.

When Neil Armstrong announced the 20 greatest engineering achievements of the 20th century at a National Academy of Engineering luncheon in February 2000, the list was impressive. It included the automobile, radio and television, water supply and distribution, agricultural mechanization, spacecraft and computers and the internet.

Top of the list, however, was "electrification." It was deemed to have had the biggest impact on modern society through lighting, food production and processing, heating and air conditioning, refrigeration, communication, computing, health care and entertainment.

Electrification of households in North America began in the early 20th century and, along with rapid rural electrification in a span of 15 years (1935-1950), drove economic growth, productivity and vast improvements in quality of life. Transitioning away from kerosene as a lighting fuel and wood and coal as heating fuels improved indoor and outdoor air quality, enhanced respiratory health, drove economic activity through extending work hours and even enhanced education.

Although much of the western world might have forgotten this transition, electrification is currently taking place in many parts of the globe, where more than 1.3 billion people still lack access to electricity. At least a quarter of these people live in rural India, where kerosene is the only form of lighting.

Along with centralized infrastructure developments, such as extending the grid to more people, off-grid solutions are gaining momentum. An award-winning pilot program in the northern state of Uttar Pradesh is testing such a solution by bringing electric lighting and phone charging to 3,500 households through micro-grids powered by solar panels. One micro-grid uses a single rooftop panel and centralized batteries and services 30 homes (with four lights and a phone charger per home), at a total cost of US$1,000.

Villagers report they are able to save money on kerosene, work longer hours at home, prepare agricultural goods for market and their children can study later into the evening. By not having to walk to a central location for phone-charging services, they are able to access information more readily, transforming how they market their goods and use health care. Similar case studies can be found in parts of Africa, where 600 million people live without electricity, but substantial progress is being made.

The history of Winnipeg and Manitoba is rich with progressive movements around electrification. The first arc lamp was demonstrated in Winnipeg in 1887, four years before the first advertised record of such an event took place in another city. Street lighting and electric trolleys were adopted in Winnipeg much earlier than many other similar-sized cities in North America.

Rural electrification started in the early 1920s in Manitoba, and broad-based farm electrification in the 1940s greatly enhanced productivity and improved quality of life. By 1954, Manitoba was the most electrified province in Canada, driving innovation and progress in the power industry. The northern expansion of Manitoba Hydro in the 1960s, and subsequent growth, has made Manitoba one of the few places in the world that can boast of a near 100 per cent renewable grid and of being a clean-energy exporter.

The time has come for a second, deeper wave of electrification. Manitoba can yet again be a leader in this transformation, nationally and globally. As kerosene for lighting became a thing of the past, gasoline and diesel for transportation and natural gas for heating will have to follow suit. However, the barriers for transformation are not technological, but economic and social.

There are jurisdictions around the world demonstrating how the right regulatory and incentive structures can accelerate electrification. For example, even if electricity prices increase by 50 per cent in Manitoba, transportation using electricity (whether in an electric bus or car) would be five times cheaper per kilometre driven.

As return on investments (additional cost during purchase) now takes less than half the life span of the product, the ability to shoulder the upfront cost will be the main hurdle for a transit authority or individual family to electrify their transportation. Different levels of government can play a substantial role here by using revenue-neutral tools — such as eliminating sales taxes on products that transition away from fossil fuels by using carbon revenues — smart-loan programs that amortize the cost and benefits over the lifetime of the product and regulatory changes that drive product suppliers to reduce the upfront price and broaden product choice.

When thinking about home heating, ground-source (geothermal) and air-source heat pumps (backed up by traditional electric heating) are highly efficient, and if installed during the construction of the home, provide a clear economic benefit to the homeowner over the lifetime of the house. Combining this with advanced energy-saving building practices (better insulation, natural lighting, efficient windows, improved controls, passive heating and cooling, etc.) in a revised building code will drive electrification.

For existing homes, replacing an old water heater, stove, or furnace presents a clear opportunity to electrify heating. With the right incentives and loan structures, the choice should always lead to the use of homegrown green electricity over imported natural gas.

In February 2008, the NAE settled on a list of "Grand Challenges for Engineering" that would lead to marked improvements of quality of life in the 21st century. With inputs from thousands around the world and many subject experts, 14 grand challenges were announced. Making the list was lowering the cost of solar energy, demonstrating that the process of electrification is still ongoing.

Within the next decade, deep electrification can once again put Manitoba on the map and at the forefront of progress.

*Nazim Cicek is a professor and associate head of the department of biosystems engineering at the University of Manitoba.

Winnipeg Free Press Posted: 12/30/2017
Manitoba Hydro needs plan for excess power production
By: Will Braun*
The Keeyask dam is springing leaks, and the possibility of further cost overruns and delays, as recently reported, is just the start.

The dam, now estimated to cost between $8.7 billion and $10.5 billion, was officially approved in 2014, based largely on Manitoba Hydro’s projection that demand for energy in Manitoba would grow by 1.5 per cent annually for 20 years, outstripping current supply.

Hydro’s mandate, and the basic justification for Keeyask, is to power the province, with exports helping to pay for the dam.

But now Hydro tells the Public Utilities Board that demand in Manitoba will instead shrink for several years and only rebound to current levels by 2035.

That flatly negates the fundamental justification for the most expensive infrastructure project in the history of our province. Manitoba does not need Keeyask, which is expected to be completed in 2021 or 2022.

A portion of the reduced demand is due to the cancellation of Energy East. Forty per cent of the dam’s output had been earmarked to pump oil across our province through three new pipeline projects. Two of the three projects are complete or proceeding, but Energy East, by far the largest, is dead, thus poking another big hole in an already leaky dam.

If Manitoba does not need Keeyask, who will buy the power?

Alberta is committed to 5,000 megawatts of new renewable energy by 2030, which could be good for us, except that the government-mandated initiative is open only to projects in the province.

Plus, the wholesale price for the first round of renewables in Alberta — 600 MW of wind — averaged 3.7 cents per kilowatt hour. The cost of producing power at Keeyask is estimated at roughly three times that.

Saskatchewan, which gets a third of its power from coal, has signed up for 18 per cent of Keeyask power until 2040, but, like Alberta, is unlikely to outsource any major additional shift to renewables.

Manitoba has long wished Ontario would buy from us, but the cost of building transmission lines to southern Ontario compounds our already serious competitiveness problem.

That leaves the U.S.

On July 11, Utility Dive, an industry news service, published an article based on an extended interview with Ben Fowke, CEO of Xcel Energy, the Minneapolis-based utility that has long been Hydro’s largest single customer.

Fowke talked about Xcel’s dramatic move to renewable energy sources. That should be good news for Manitoba, but he said nothing about hydro power. Nothing.

Two pie charts published with the interview include the only mention of hydro. One shows that in 2015 hydro power made up seven per cent of Xcel’s Upper Midwest energy mix, some of that from Manitoba, some from Xcel’s own dams. By 2030, hydro power drops to two per cent.

Xcel is moving aggressively to low-carbon energy, but we’re not invited to the party. Wind and solar are cheaper, and bring local jobs and investment.

Manitoba Hydro has signed four export contracts tied to Keeyask that are worth more than $4 billion. That is significant, and Hydro notes it has the option to sell more.

Still, the future is not on our side.

Hydro’s main contract with Xcel extends until 2025, just a few years into Keeyask’s productive years, and about the time Xcel’s charts show a drop off in hydro.

And while price provisions in the contracts are not public, we do know that in 2008 — about the time Hydro informally locked into the Keeyask plan — the company predicted that the average export price it would get for combined contract and spot sales in 2016 would be nearly 10 cents per kilowatt hour. The actual price was less than four cents.

In 2013-14, the Public Utilities Board spent $9.2 million scrutinizing Hydro’s expansion plan, including Keeyask. It concluded that Hydro’s bet on the pipeline projects was "prudent," that Hydro’s projection of 1.5 per cent increases in Manitoba demand was solid and that while the company’s export price predictions were "optimistic," they were not cause for alarm.

What happened? Has Hydro just hit some really bad luck? Does the company bend numbers depending on whether it wants to justify a major project or a major rate increase?

The bigger question is what to do with the excess electricity from Keeyask, assuming Premier Brian Pallister does not reverse his March decision to stick with the project.

Some energy thinkers talk about "deep electrification" — replacing as many fossil fuel-powered motors as possible with electric ones, whether in cars, factories or wherever. Electric motors are far more efficient than internal combustion engines, which lose much energy in the form of heat.

Becoming a leader in deep electrification would not solve all Hydro’s woes, but it would help make good use of a bad project.

Or perhaps our government and utility have better ideas, other than just plugging the holes in Keeyask with money from rate increases.

*Will Braun works for the Interchurch Council on Hydropower.

CBC News Posted: 12/22/2017
The wait is over. The battery revolution is here: Don Pittis
By: Don Pittis
On an industrial site in Toronto's Port Lands, not far from Google's planned new urban experiment, are two warehouse-sized boxes on stilts.

Built by the Ontario company Deltro, the structures are actually enormous lithium-ion batteries that, as of spring 2018, will be plugged in to the Canadian electricity grid.

Billed as the
first utility-scale Canadian energy storage project, the $30-million enterprise represents an example of the critical transition point where battery technology is becoming cheap enough, safe enough and reliable enough to replace older technologies.

Already indispensable

Lithium-ion technology is already indispensable in small portable devices such as phones and tablets, and the economic case for the technology is constantly improving for use in automobiles and for other energy storage purposes, according to Canadian battery pioneer Jeff Dahn.

"It's getting more energy dense, it's getting cheaper and the cells are becoming longer lifetime," Dahn said.

From his lab at Dalhousie University in Halifax, the award-winning scientist is working to help Tesla improve the quality of its lithium-ion batteries.

Only a few months ago, Tesla completed a grid-scale battery in Australia to store wind generated power until it's needed. The project would have been impossible just a few years ago when Dahn was working on his innovations in lithium-ion technology.

For a long time, commentators skeptical of the move toward electric cars and green power have lamented the failure of the industry to invent new technology that would make battery storage economically useful.

Media reports these days are full of examples of the kind of radical innovations that would double or even triple the amount of electricity batteries can save and then discharge — called energy density — thus
doubling or tripling the distance a vehicle could travel. All while keeping the size of the batteries the same.

Toyota, BMW and vacuum cleaner company Dyson are all reportedly working on new "solid state" battery technology to similarly increase energy density and speed up charging times.

Good enough now

But according to battery scientist Dean MacNeil at Canada's National Research Council, batteries are good enough and cheap enough now that industrial users are through waiting.

MacNeil, who worked with Dahn back in 2001 when he was doing research for his doctorate, says radical lab-stage technology with new chemistries and new ideas can take a decade to come into popular use.

"They are much harder to introduce into a market, especially a market like electric vehicles where you're very dependent on hitting specific performance requirements and you're very risk averse," he said.

MacNeil, whose Ottawa lab tests existing battery technology, says he expects those radical innovations to hit the market eventually, but so far the great successes have come from gradual innovations in existing lithium technology, where capacity has increased by three times since the batteries came on the market more than a decade ago.

According to the business news service Bloomberg, prices have fallen 24 per cent in the last year.

Replacing old technology

The Deltro project is a step beyond experiment. When it completes testing and gets connected to the grid this spring, the giant batteries will be responsible for balancing the grid and keeping the power at the North American frequency standard of 60 hertz, preventing brownouts and surges when demand fluctuates.

In the past that balancing act has been accomplished by adjusting output at large hydro dams, far from where most power is used. Lower battery costs have now made it possible to move that capability closer to the places where it's needed.

Deltro Energy chief operating officer Andy Ganapathy says the price and the energy density of the newest lithium-ion batteries helped make the project feasible. If the company had used traditional lead acid batteries instead of lithium, he says, the footprint of the project would have been up to ten times bigger.

"As the developer-owner of energy storage projects, we're very technology agnostic," Ganapathy said. "Right now, we chose lithium, but in five years time we might choose something else."

With prices falling and technology improving, Ganapathy says Deltro is ready to move on to the next stage of battery storage, sometimes called power shifting. He says Deltro has begun working with large unnamed industrial companies to store power when it is at its cheapest for use when electricity is most costly.

According to Jack Simpson, director of generation and capacity planning at Toronto Hydro, battery power storage is just now getting cheap enough to make power shifting cost-effective as power authorities create pricing formulas that make cutting peak demand worthwhile for industrial users.

In Alberta this month, the price of wind-generated electricity plunged to 3.7 cents per kilowatt hour. As the price of storage falls further, it will become increasingly economic to scale back on traditional peak generator capacity such as coal or gas plants and store that cheap power until it's needed.

That's revolutionary. And the revolution is far from over.

Energy scientist Jeff Dahn says with continuing innovations in batteries, the smart grid, renewable energy and electrified transport, he can't help being optimistic. He says he can hardly wait for what the future brings.

"I think it's going to be really interesting to see where the world is going to be in 10 or 15 years."

Winnipeg Sun Posted: 12/22/2017
Why no Hydro inquiry?
By: Graham Lane
Also posted on Manitoba Forward, Why no Hydro inquiry?
Newfoundland Labrador’s government has announced an inquiry into its troubled Muskrat Falls hydroelectric project, $5 billion over budget and with dismal prospects.

Manitoba Hydro’s disastrous expansion tops Muskrat Falls. Despite the fact that Pallister’s government isn’t the worst actor in the play, Manitobans are still left in the dark about just how Hydro came off the rails.

Unless an inquiry is held, ratepayers and taxpayers will never know. There is a need to shine a light into why and how Manitoba’s most important crown corporation imploded. Why do we need to know? Without knowing, future governments and voters will not learn what not to do going forward, and what should be done now to mitigate the damage.

Why were massive projects started — money flowing — before and after the business case for making the investment had vanished? What options were available? Why were lower cost ones overlooked? Why was $1 billion spent encouraging northern First Nations to support building Wuskwatim, Keeyask, Conawapa and Bipole III?

Why were projects begun without firm construction contracts? Why without adequate volumes and prices having been first negotiated with export customers? Already the largest boondoggle of our province’s 147 years, Hydro’s problems are still unfolding. The latest: a report predicting Keeyask will cost 62% more than projected. When the full cost of the overall expansion is properly tabulated, it will likely exceed $5 billion.

Hydro’s rate application, now being heard by the Public Utilities Board (PUB), isn’t the inquiry that is needed. PUB cannot neither roll back the boondoggle nor order the government to do anything, let alone take responsibility for what Sandy Riley, Hydro’s board chair, has accurately named a mess.

Before the election, Pallister and his-then Hydro critic planned to halt the expansion and hold a real independent inquiry. Before the election, his Hydro critic had assembled a knowledgeable and experienced board-in-waiting, committed to both the promised quick halt and finding ways to keep the financial tab for ratepayers somewhat manageable.

However, immediately after the election, Pallister changed course by announcing a different board roster and continuing the expansion. An “independent” Boston Consulting report then took six months, while Hydro went on spending $10 million a day.

Boston Consulting relied on information from Hydro executives, many now long gone. While the original shadow board, embraced by the PCs before the election, were more than willing to share their knowledge and views about the expansion, they were shut out and ignored. The delay waiting for Boston Consulting’s report added at least $2 billion in unnecessary costs, leading to the decision that while the expansion was a mistake it was too late to halt.

To be clear, Bipole III was not, is not, needed, nor Wuskwatim, nor Keeyask, nor Conawapa. And, as to the new Manitoba-Minnesota transmission line, it wouldn’t have been required had Hydro built an efficient natural gas generation station in Brandon. Hydro will end up spending at least 15 times what was needed.

Pallister’s government has proved an “NDP lite” disappointment on several fronts, Hydro being the most glaring. Why is Pallister protecting the NDP and previous Hydro boards and executives? Why indeed!

Pallister can still do the right thing — call a proper public inquiry. What’s he hiding?

Winnipeg Free Press Posted: 12/18/2017
Keeyask generating station could cost more than $10 billion, consultant says
Report blames delays and cost overruns on contractor

By: Nick Martin
An independent review has warned the cost of Manitoba Hydro’s Keeyask hydro generating station could soar as high as $10.5 billion and not be ready until 2022, more than a year behind its original schedule.

The final cost could be 62 per cent above the budget set by the former provincial NDP government. The original cost estimate was $6.5 billion, but has already skyrocketed to $8.7 billion.

A redacted copy of the report prepared by Calgary-based construction-cost consultants MGF Project Services for the Public Utilities Board lays the blame on the contractor.

"Its performance is the largest single contributor to planned cost and schedule not being met," said the report, which cites the contractor’s "poor productivity."

Manitoba Hydro immediately rejected the consultant’s conclusions Monday and said the project will be ready in August of 2021 at a cost of $8.7 billion.

Crown Services Minister Cliff Cullen told reporters the provincial government accepts the Hydro belief that MGF’s methodology is flawed.

The report on Hydro’s capital projects spending was commissioned by the PUB, currently hearing Hydro’s application for an annual 7.9 per cent rate increase through 2024. MGF found the Bipole III transmission line megaproject, Manitoba-Minnesota transmission line project and the Great Northern transmission line are all generally performing well on budgets and schedules.

In sharp contrast, Keeyask is anything but.

The MGF report says there was an amended agreement Feb. 28, but the contractor is "not meeting the revised productivity factors for concreting and earthworks." It notes Manitoba Hydro staff are competent and professional, but lack the skills and expertise to be construction managers.

The contractor is BBE Hydro Constructors LP, consisting of three companies: Bechtel Canada Co., Barnard Construction and Ellis-Don. A staff member at its Wellington Avenue office said Monday the company has already shut down for the holiday break, and no one responded to a request for an interview.

Poor productivity has resulted in far more man-hours being required to perform work, and once the contractor falls behind schedule, all the other services on the megaproject fall behind while adding to their costs, the report concluded.

The heavily redacted report says 1,030 separate activities are behind schedule, some by as many as 204 days, and 97 are critically behind schedule.

"This is unacceptable management, and more importantly, not in accordance with the contract," said MGF, which has calculated that Keeyask won’t be ready to go before Nov. 25, 2022, more than a year beyond the original completion date.

Catching up to the schedule would require longer working hours, more resources and more concrete work in winter, which the consultant did not recommend, given the project’s productivity issues.

The final cost will be in the $9.5- to $10.5-billion range, said the consultant. If Manitoba Hydro wants to hit the low end of the range, MGF recommends it needs to take over the project.

"There are many cost-saving and contract management exercises that Manitoba Hydro can implement, which can drive down the final cost. Our recommendation is to do this without delay."

The energy utility has worked with a management company for the past year to oversee Keeyask, Hydro spokesman Bruce Owen said Monday.

"We’ve always said there was risk inherent in these large projects. Certainly, there was a setback early in productivity," said Owen.

Hydro believes there is no reason the contractor cannot meet the current targets of $8.7 billion and August of 2021.

The government is concerned about additional delays and cost overruns, but the provincial Conservative government accepts Hydro’s position that won’t happen, Cullen said.

"This company may have a different methodology than Manitoba Hydro," Cullen said. "They’re (Hydro) not making any revisions. It’s not their first rodeo, they’ve been in dam construction before."

Cullen said he didn’t know what Hydro is questioning in MGF’s methods, and his own officials haven’t analyzed the report.

"We wouldn’t be having these discussions if there were appropriate oversight in 2013," Cullen said.

Power plans

The Keeyask hydro generating station is currently estimated to cost $8.7 billion and be in operation by August of 2021.

There are U.S. customers lined up to use some of the station's output, but Manitoba Hydro says it could be the 2040s before Manitoba needs power from Keeyask.

When the project broke ground in 2014, it was expected to cost $6.5 billion, be ready by the summer of 2020 and to supply energy to meet Manitobans' needs in about five years.

The megaproject is 725 kilometres northeast of Winnipeg on the lower Nelson River. It is 35 kilometres upstream of the existing Kettle Generating station where Gull Lake flows into Stephens Lake, 58 kilometres east of the community of Split Lake and 30 kilometres west of Gillam.

Construction on the 695-megawatt Keeyask generating station in northern Manitoba officially kicked off July 16, 2014. It is expected the Keeyask generating station will provide an average of 4.4-million kilowatt hours of energy each year.

The hydroelectric dam project is a joint effort between Manitoba Hydro, the Tataskweyak Cree Nation, War Lake First Nation, York Factory First Nation and Fox Lake Cree Nation. Planning for the joint agreement began in 2009.
Stacks Image 3375
The final cost of Keeyask hydro generating station could be 62 per cent above the budget set by the former provincial NDP government. (Manitoba Hydro Photo Credit)

Manitoba Forward Posted: 12/15/2017
Ontario’s help to utility ratepayers needs to be matched
By: Graham Lane
Published in the Winnipeg Sun 12/15/2017
Public Utilities Board’s legal counsel has asked Hydro whether the utility made a formal ask for financial assistance from the Pallister government. The question itself suggests that PUB sees government help as a feasible approach to lowering proposed massive rate hikes. Before answering, Brian Pallister needs to understand the risks involved in forcing ratepayers to shoulder a burden not of their making. He should also take into account recent Ontario developments.

Electricity is the lifeblood of economies. Understanding both that and the pain to be caused if Hydro was allowed to go ahead with annual 7.9% rate hikes through to 2024, Pallister should realize that if he doesn’t intervene and bring rate hikes down he will not only seriously damage Manitoba’s economy but also risk the second term he seeks.

The electricity pricing policies of Ontario’s political parties are a major factor ahead of Ontario’s 2018 provincial election. And, since Ontario competes for industries and jobs, with Manitoba, a major cut to Ontario’s electricity rates will affect Manitoba as well.

A misguided contest is on in Ontario over electricity rates. The struggle began when Liberal Premier Wynne, then with a voter approval level around 13%, foresaw electoral defeat coming in 2018. So, she attempted to buy another election victory with a subsidy scheme cutting electricity bills by 25%. After first condemning her plan, then upon recognizing that Wynne’s cuts enhanced her election prospects, Ontario’s PC party promptly upped the ante, conjuring up a 37% rate cut.

This is an unsavory contest. While rates will fall, the cost of electricity will not. A decade or so from now, rates will be even higher than they were before the cut. Ontario politicians will have borrowed billions of dollars to make up revenue lost through the 25% or 37% cut – leaving the next generation of Ontario ratepayers to repay the loans with interest.

Sky high electricity rates damaged Ontario’s economy for years. Past political meddling in utility affairs and a ridiculously expensive “Made in Ontario” green strategy brought about very high rates. Those rates not only proved a disincentive for new industry and potential expansions of existing plants, but drove firms out Ontario – together causing the loss of thousands upon thousands of good-paying private sector jobs.

So far here in Manitoba, and give Pallister some credit, the extent of our electricity boondoggle is being revealed. Yet, he is wrong to want ratepayers, alone, to fund the mess. It is well known that internal expertise within Hydro opposed the NDP’s wildly risky expansion and that it was ultimately NDP politicians who pushed it through, jeopardizing not only Hydro’s health but Manitoba’s economy.

But, between Ontario’s massive electricity rate cuts and Manitoba Hydro’s plan for soaring rates (to pay for projects that should have been postponed and cancelled), Manitoba’s electricity rates could end up higher than Ontario’s. Such an outcome, combined with an ill-conceived new carbon tax, would seriously damage Manitoba’s prospects to attract industry and build its economy.

To avoid potential calamity, Pallister has but two choices. Either meet Riley’s ‘ask’ positively and provide a significant cash infusion, or stop raiding Hydro with massive annual levies. Otherwise, he will seriously damage the economy while reducing his prospect of winning Manitoba’s next election.

The Winnipeg Free Press Posted: 12/13/2017
Manitoba’s investment in solar power is paying dividends
By: Nazim Cicek*
Whenever I travel outside the province and mention I live in Manitoba, I get asked about the cold weather. My standard response is that one gets used to it, that the kids get to play hockey outdoors, and besides, it’s always sunny.

As a matter of fact, Winnipeg ranks among the sunniest cities in Canada, with around 2,350 hours of sun each year. Overall, southern Manitoba has some of the best solar resources in the country, alongside southern Alberta and Saskatchewan. Until very recently, however, solar-energy applications were almost non-existent here, largely due to low hydroelectricity prices, lack of meaningful incentives and high cost of solar technology. Things are quickly changing.

Solar energy has experienced explosive growth worldwide, with cumulative capacity exceeding 400 gigawatts (1 GW equals one billion watts) last year. The term "exponential growth" is at times overused, but in this case, it is appropriate. The installed cumulative capacity of solar energy has nearly doubled every two years over the last 20 years.

In 2016, the leading country for annual solar-electricity installations was China (35GW), followed by the U.S. (15GW), Japan (9GW) and India (4GW). One would not necessarily pick out these countries as stalwarts of environmental leadership, so it’s no surprise that the main driver for this growth has been economic.

The installed cost of solar power is dropping at an astonishing rate, surprising even the people that work in this area. A September 2017 report released by the U.S. Department of Energy (DOE) makes this point. The cost of utility-scale solar systems (large solar farms) dropped 30 per cent last year alone, now reaching cost-competitive levels to other means of electricity generation. Going further back, installed costs for utility-scale solar has fallen at an average of 20 per cent annually, from around $5 USD/Watt DC in 2010 to just above $1 USD/Watt DC (inflation adjusted) in 2017.

Can you think of any product dropping in price by 20 per cent year over year? It would be like gasoline prices going from $1 per litre to 20 cents per litre, or the price of a new car falling from $30,000 to $6,300 in the span of seven years.

The same DOE report puts the unsubsidized, levelized cost of electricity of residential solar systems (rooftop) at 12.9 to 16.7 cents/kWh, commercial solar systems (farms, businesses) at 9.0 to 12.0 cents/kWh and utility-scale solar systems (above 2 MW) at 4.4 to 6.6 cents/kWh. Changes are driven by lower costs of solar panels and inverters, better system design, higher system efficiency and market competitiveness.

According to an October 2017 report by the International Energy Agency, solar led all electricity-generating technologies in newly built annual capacity worldwide in 2016, surpassing the net growth in coal power. There is still substantial room to improve the economics of solar electricity, particularly in the area of non-hardware or "soft" costs (permits, installation, inspection, financing, etc.), which can make up more than half the overall lifetime costs of the system.

Job growth in the solar sector has also been robust, exceeding 20 per cent annually over the last four years in the U.S. The DOE reports that in 2016, the number of people in the U.S. directly employed by the solar industry (373,000) was comparable those in the natural gas sector (398,000) and more than double those in the coal sector (160,000). At this rate, solar jobs will surpass petroleum jobs by the end of 2018.

The solar energy incentive ($1/Watt DC installed for systems up to 200kW) introduced by Manitoba Hydro in April 2016 has come at the right time. When launched, this program was intended to cover up to 25 per cent of the installation cost. But with solar installation prices dropping, it can now cover more than a third of the cost, particularly for commercial applications that approach the program limit of 200kW.

The response has been stunning (reportedly more than 500 applications to Manitoba Hydro in the first 18 months), with substantial interest coming from farmers.

Having worked with agricultural producers in the past, I know they recognize value, are not afraid to take matters into their own hands and act swiftly. Innovation comes naturally, and making a living off the land through generations instils a core sense of stewardship and responsibility.

It should come as no surprise that many of the largest solar-energy installations in Manitoba are on farms, where land is available for on-ground installations, electricity bills are large and cost certainty is valued. Depending on future electricity prices, return on these investments is in the range of 10 years for systems that carry 25-year warranties.

The Manitoba Hydro incentive is due to expire in May 2018. Its renewal is essential for the momentum to continue. Also, streamlining the processes of permitting, inspection and financing will be important for continued sector growth. For those who are worried about the Manitoba Hydro bottom line, any avoidance of future northern Hydro generation and transmission projects through more renewables at the point of usage should be good news.

Electrification of transport and space heating in the future, along with providing baseline power for nearby states and provinces looking to back up their own wind and solar developments, should provide demand for Manitoba Hydro power. Diversification through solar and wind will also serve as insurance against variations in water levels and market uncertainties.

When asked about Manitoba in future travels, I would love to add that it is the most sustainable place on Earth, despite the weather. With a unique endowment of water, wind, biomass and sunshine, the only limit is our imagination.

*Nazim Cicek is a professor and associate head of the department of biosystems engineering at the University of Manitoba.

Winnipeg Sun Posted: 12/08/2017
Province needs to stop using Hydro as cash machine
By: Graham Lane
Manitoba Hydro has moved from being a major asset for Manitobans to being an albatross around our necks.

What was once the Manitoba Advantage, this before the 1999-2016 NDP government got its claws into it, has become a millstone — now on a path to bleed ratepayers dry.

Sanford Riley is an experienced business executive. His worries need to be taken seriously, particularly when he, given his position as Hydro’s board chairman, suggests that a yet-to-be new carbon tax be used to assist lower-income ratepayers. After Riley spoke at a Manitoba Chambers of Commerce breakfast last week a spokesperson for the Pallister government said Riley’s suggestion would be considered. This signal confirms that Hydro is the “mess” Riley has called it.

This is not good news for either taxpayers or ratepayers. Riley has underscored Hydro’s case before the Public Utilities Board — the publicly “owned” monopoly energy corporation is in deep, deep trouble. Riley and his colleagues have been directing and assessing Hydro for a year and a half. Their review has been assisted by an international consultancy, the Boston Consulting Group, along with analysis and suggestions from interveners to PUB’s hearing and local knowledgeable critics.

And, despite that lengthy, extended time of analysis, Riley and his board have not found any way to bring prospective annual 7.9% rate hikes (expected to continue through to the year 2024) down to a reasonable level (i.e. the annual rate of inflation).

Hydro suffers from three major maladies. First, we have an unnecessary expansion. Second, we have successive provincial governments bleeding Hydro ratepayers dry through annual levies of (now) $400 million on Hydro — invisible levies embedded in our monthly bills. Third, we have a timid Pallister government that clearly hasn’t a clue what to do.

There was a fourth malady, but, fortunately for both ratepayers and taxpayers, Riley and his crew are addressing it. It was a swollen personnel complement, one accumulated through Hydro’s expansion phase. Riley and his board should be congratulated for reducing employees by 15% overall — including 30% of senior and 25% of middle management.

As to the first three maladies, it seems there is not much to do but to take it on the chin. The expansion has likely wasted $5 to $7 billion. That expected loss is represented in annual rate requests four times higher than would have been needed had the expansion not happened. As to the second malady, the annual “rip off” of $400 million (and growing) from Hydro by its provincial government, it seems nothing can be done there either. The Pallister bunch plans to pocket that annual rip off, just as the NDP did. As to the third malady, the government having no clue as what to do, I have two suggestions.

Don’t further complicate the mess by building another bureaucracy to use a damaging carbon dioxide tax to provide bill rebates to lower-income households. Address the ridiculous proposed annual rate hikes directly. Bring down the rate hikes to the level of inflation for all ratepayers, and use the Consolidated Fund to do it. Either move debt from Hydro’s ledger to the government’s, but not the way Ontario has, or stop the annual invisible levies of $400 million.

In our household, we're wondering how to afford the Manitoba Hydro bill increases.

Premier Brian Pallister's Progressive Conservative government has frozen one of our salaries. Our other bills are also rising: property taxes, water and insurance.

We save money by being energy efficient. We shut off the lights when leaving a room. We wear sweaters and turn down the heat.

Hydro bills will go up anyway because Manitoba Hydro decided to go ahead with the Bipole III transmission line and the Keeyask Generating Station to increase electricity supply. These efforts (like many public works projects) are over budget and behind schedule.

Manitoba gambled that it could export this energy and earn back the costs. It doesn't look like we'll win this roll of the dice. The predicted electricity demands beyond our province's borders didn't materialize.

The Manitoba Hydro board plans to resolve the problem by raising rates for all of our households by 7.9 per cent a year for five years, far beyond the rate of inflation.

As a province, our average salaries aren't going up 7.9 per cent a year. We certainly won't be able to sustain the suggested increases over the long term.

Stuck with it

As individuals, we didn't choose this large-scale energy production project. Now we're stuck with it.

The average working-class or middle-class household will figure out ways to reduce energy use and utility bills. However, reducing our electric bills won't help resolve the larger provincial financial crisis.

We all have to pitch in to pay for this bet that Manitoba Hydro lost.

When Hydro finishes building the dam, the costs of running it remain about the same whether it's generating electricity or not. If there's insufficient demand, we shoulder the costs across fewer kilowatt-hours. Then the price of producing each unit of electric power goes up.

So the solution to the crisis is counterintuitive: to keep hydro rates low, we have to use more electricity, not less.

We need to use this increased supply without wrecking our household budgets.

We could shift our energy budgets so that more of that energy is electric. Then less comes from other sources, like fossil fuels.

We can afford more electricity if we don't pay for natural gas, gasoline, or the $25 per tonne carbon tax. Using hydroelectric power also helps meet Manitoba's carbon reduction targets.

How can we rethink provincial energy use policies to turn this into a net positive for Manitoba?

Electric Cars: If the government encourages purchasing and using electric cars, we spend less money on fossil fuels (gas) and more on renewable energy like electricity.

We're lucky. Most of Manitoba's cars have a spot to plug in at home anyway.

If the government incentivizes purchasing electric cars, we also reduce our carbon taxes and increase electricity demand.

The province and municipal governments could require that new car and truck purchases, including its own fleet of vehicles, be electric or plug-in hybrids. Next, we create a network of rapid recharging stations. Finally, the province prioritizes this environmental effort through incentives. Families purchasing new vehicles would see clear financial benefits for choosing electric cars.

Electric power for public transport: The current provincial government plans to use part of the carbon tax proceeds to buy electric buses. This is a logical short-term choice. It uses some of our oversupply of electricity.

That plan could go further. Many cities' transit systems run on electricity, with light rail, for example. Winnipeg's downtown infrastructure was designed with tramway use in mind. When my family walks down Stafford Street, we admire a mural that shows the neighbourhood trolley in use long ago. This mode of transportation would use our electricity supply and reduce the need to drive cars downtown.

Incentivize geothermal heating systems: Geothermal heating systems are expensive, but once installed, they use substantially less energy than other options.

What are the benefits? Geothermal heating uses energy from the earth. It doesn't rely on fossil fuels, so we would pay less carbon taxes. It also depends on electric pumps to function, so it uses clean energy from hydro.

The government could provide subsidies or tax breaks to those who install geothermal systems. What about requiring new homes to use this heating system? Where geothermal is impractical, we could consider electric furnaces for fossil-free central heating systems.

Freeze or eliminate incentives for solar power: Solar and wind power are wonderful clean energy sources. On the Prairies, we have plenty of sunshine and wind. At present, Manitoba Hydro offers incentives to those who install solar panels.

This reduces carbon fuel dependence while diversifying the province's energy-generating capacity (important, particularly during prolonged drought).

Unfortunately, subsidizing wind and solar power boosts supply, which we don't need.

If we cancel the solar power incentives, the money saved could purchase electric cars or install geothermal heating systems. This would address some of Manitoba Hydro's problems, while also reducing the carbon footprint.

Use the carbon tax to offset rate hikes: Manitoba Hydro board chair Sandy Riley has it right. We should use carbon tax proceeds to protect vulnerable Manitobans from big rate hikes.

Pallister's government plans for this money to buy electric buses (good idea), upgrade diesel vehicles (why not buy electric vehicles instead?) and shut a coal-fired electricity plant (fair enough).

We might have a better chance of paying off our lost bet if the province invests in our oversupply. Boost support of electric cars, buses and light rail and encourage geothermal heat production so we share the burden and stop burning fossil fuels.

I'm worried about rate increases. I'd like the province to think ahead and create long-term strategies that are better for the environment and our health.

Let's improve and grow city transit, not cut it. This forces us to drive our cars, use fossil fuels, create pollution and pay more carbon tax.

Let's redistribute our demand needs to enjoy the electricity oversupply we will receive — whether we like it or not.

CBC Posted: 12/04/2017
Manitoba Hydro at a crossroad
By: Sean Kavanagh
The stakes are enormous and the diversity of opinion on the proper course of action is broad as Manitoba Hydro once again asks Manitobans to pay more for electricity. 

On Monday the Public Utilities Board (PUB) begins hearings into a rate application by Manitoba Hydro that would see electricity rates rise by 7.9 per cent through to 2019 with the intention for those increases to continue for another three years before easing back.

The request takes rate hikes well past the cost of inflation and higher than the PUB has historically given to the Crown corporation.

The submissions to the board run to the thousands of pages. Consultants, economists, construction analysts and lawyers have weighed in with reams of data.

Known knowns

While there is a diversity of opinion, some things are fairly irrefutable.

Manitoba Hydro's finances are not in good shape. The big projects it has on the go (Keeyask generating station and the BiPole III transmission line) are behind schedule and way over budget.

The accumulation of debt for these and other projects and maintenance will push the company's debt close to $25 billion in the next few years.

Another reality is this is not some private company's burden that shareholders have to bear. Manitoba owns it. Citizens are on the hook for this money and if you combine it (which bond-ratings agencies are now doing) with the Manitoba government's debt (approximately $24 billion and counting) the numbers are eye-watering.

A further conclusion that can be drawn is steep rate increases will impact Manitoba's lowest income earners the hardest and some of the province's industries that use a lot of power could also take a hit.

The company is also shedding 800 jobs, which has an impact on Manitoba's economy and will cost Hydro millions in the short term.

Course correction

Flush with a whopping election victory in 2016, Brian Pallister, who had flayed the previous government with accusations of mismanagement at Hydro, set a new course.

He dumped both the Crown corporation's board and the leadership of the PUB and installed a new roster.

If pundits thought the new appointees would march to the beat of the premier's drum, the new head of the Hydro board likely surprised them. 

From the start Hydro Board Chair Sandy Riley, a well-known Winnipeg businessman, wasn't afraid to make his opinions known.

He gently poked at the Pallister government last year for an "equity injection" to right-size the balance sheet of the utility, and when that went no-where, settled on the course of rate increases to fix Hydro's books and sooth the money lenders who are feeding the furnace of debt the company has accumulated.

As late as last Friday Riley used words such as "mess" and an "existential threat to the well being of Manitoba," to describe Hydro's fiscal position. 

When Keeyask and BiPole III move from projects to operating units of Hydro, Riley says, hundreds of millions of dollars in interest costs will be charged on the company's financial statements and that will wipe out a profit last year of $33 million and turn it in to huge losses.

The consumers' perspective

Among those with intervenor status in front of the PUB for the rate application sits the Consumers Coalition. Made up of the Consumers Association of Canada (Manitoba) Inc. and Winnipeg Harvest and spearheaded by lawyers from the Public Interest Law Centre. 

Their thrust is that hikes as large as 7.9 per cent constitute "rate shock," will have a harsh impact on consumers and a chilling effect on Manitoba's economy.

Lead lawyer Byron Williams and his team have assembled data suggesting Hydro is too conservative in estimating its potential revenue from exports, and isn't calculating long enough timelines to recover from the intensive capital spending the company has done and is doing currently.

"Hydro hyperbole," says Williams. "Their doomsday scenario just isn't borne out."

Further to that, Williams thinks Sandy Riley and the board are too focused on the bond rating agencies who monitor Hydro's debt and not enough on the bond markets that are willing to put up the cash.

But there is common ground between the two perspectives: Keeyask and BiPole III.

"The new board (of Hydro) and our clients would agree we wouldn't have done these [projects] and there will be pressure on Hydro's finances … we are just not seeing the apprehended catastrophe," Williams says.

The Consumers Coalition says it would likely support a rate increase of between three and four per cent.

Carbon tax to soften the blow

Last Friday Sandy Riley spoke for nearly a full hour about the financial woes of Hydro, but the headline to his speech came in the last few minutes and he lobbed an idea at the government.

To an observer it could appear cheeky or almost humorous, were stakes not so high, but he declared — as "a private citizen" and not "chair of the board" — an idea.

Use carbon tax revenue from the PC government's "made-in-Manitoba" climate change strategy to offset rate hikes for vulnerable Manitobans.

Nowhere in the Tory climate change plan is there a recommendation like this. 

On Friday, Crown Services Minister Cliff Cullen was obligated to react and his response was mostly noncommittal. 

His government, he said, was still gathering submissions from Manitobans — likely to conclude in late December. However previously Pallister's government has indicated its desire to use carbon tax revenue to purchase electric busses, upgrade other diesel vehicles, and shut a coal-fired electricity plant — not to prop up Hydro. 

What is known now is the PUB must make a decision over the next few months and can only deliberate with what they know. And without a signal from the Pallister government on Riley's carbon tax proposal, it's an option they're not likely to consider. 

Hydro says they need the rate increase to stay afloat, something opponents argue could bankrupt vulnerable Manitobans.The consumers' Coalition wants rates to rise more slowly, something Hydro's board says could bankrupt Manitoba's Crown power utility. 

It's a complex decision before the PUB, and once again, the stakes of getting it wrong are enormous.

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