Public Utilities Board should allow hydro rate hike

The Public Utilities Board (PUB) recently denied Manitoba Hydro’s request for a rate hike.

The PUB states a rate hike is unnecessary and criticizes Manitoba Hydro for taking on too much debt to fund ambitious new projects such as the Keeyask and Conawapa generating projects and Bipole III.

Interestingly, the PUB echoes the Manitoba Green Party by questioning why Manitoba Hydro continues capital projects despite having enough capacity to meet Manitoba’s electricity needs.

Currently, Manitoba Hydro has a capability of 5489 megawatts (MW) with a peak demand in Manitoba of 4261MW. An additional 200MW is expected to be added this year when the new Wuskwatim dam becomes operational.

Further, Manitoba electricity consumption has dropped in the past two years.

The PUB is right that the construction of these projects is not for domestic consumption, but a response to three exports deals signed between MB Hydro, Wisconsin Public Service, Xcel Energy and Minnesota Power.

Wisconsin Public Service is buying 100MW from 2021-2029, Minnesota Power is buying 250MW from 2020-2035 and Xcel is buying between 375-500MW from 2015-2025.

Hydro is also in negotiations to sell another 500MW to Wisconsin Power, which, if signed, will spur the construction of Conawapa.

The Keeyask capacity is 695MW, costs $5 billion with construction finishing in 2019 while Conawapa is 1485MW, costs $5.6 billion, and will be built in 2024.

However, when the new capacity is added minus the confirmed and potential sales, by my estimates, Hydro will still be producing an excess of 1000MW.

Hydro mentions that it is planning for growth in Manitoba but relying on domestic consumption grossly discounts the ability to meet future growth with conservation.

Without a sizable domestic demand, Hydro will need to find more export markets.

Conversely, the PUB argues that the current abundance of natural gas and a prolonged economic recovery will dry up further American export sales.

The PUB’s pessimism invokes a negative scenario where Manitobans are building more environmentally destructive and expensive dams while demand dries up.

However, the utilities that are buying Manitoba’s power tell a largely different story, even when considering low natural gas prices and stagnant economic growth.

To my surprise and despair, but to Hydro’s gain, many purchasers of Hydro continue to be largely dependent on coal.

Wisconsin Public Service uses 65 per cent coal, Minnesota Power uses 1451MW of coal, and Xcel energy relies on coal for 51 per cent of its generation, which amounts to a staggering 8000MW.

Basin Electric Power Cooperative, which does not currently buy from Hydro but serves the northern states, uses 3000MW of coal power.

So despite my environmental concerns over new mega-dams, there is an environmental argument in favour of dams if they replace coal.

Furthermore, carbon pricing and tougher Environmental Protection Agency air quality standards will make hydro from Manitoba even more attractive.

An excellent example is the situation the small utility company Montana-Dakota finds itself in.

They are operating at capacity and provide 500MW of which 58 per cent is coal and 24 per cent is purchased from other utilities (some of which is purchased from the same companies that Manitoba Hydro sells to).

Montana-Dakota wants to eliminate their purchases through conservation, wind, new gas plants and an upgrade to their coal plant. Even with these changes coal will still make up 53 per cent of their generation in 2015.

In a 2011 report they admit stricter environmental regulations will likely lead to more purchases.

Therefore, barring a tragic American retreat from carbon regulation, buying Manitoba Hydro is a favourable option for American utilities.

So I understand the PUB’s role in protecting customers from being gouged. However, from an environmental standpoint, higher prices could be beneficial when hydro replaces coal.

This is not to say that Manitoba Hydro should not follow Ontario and be more aggressive in conservation and renewables, but their new projects seem reasonable under the current circumstances.

And a final side benefit in allowing a price hike is that a higher price often leads to more conservation.

Lucas Redekop is a mature student at the University of Winnipeg with an interest in civic discourse. He lives in West Broadway.

Published in Volume 66, Number 19 of The Uniter (February 8, 2012)

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