Skip to main content

Hydro's own drought calculations prove whistleblowers' tune on-key

It was July 26, 2007 when Manitoba Hydro dropped the bombshell on the Public Utilities Board.

The drought of 2003-2004 had traumatized Hydro. It knocked the stuffing out of Hydro's finances-more damage in a single year than anyone ever imagined. The utility ramped up computer simulations to show the board what the cost would be of a multi-year drought like, say, the five that have happened since 1929.

It wasn't a pretty picture.

A five year drought would cost Manitoba Hydro $2.7 billion.

A seven-year drought would cost $3.5 billion.

The numbers may be gi-normous, but that's not what made the PUB blanche. It was the graphs.





A five year drought (starting in 2008 for demonstration purposes) would increase the debt-to-equity position of Hydro to 95-5. That's like making Manitoba Hydro a penny stock.

Ask the Aspers what that did for Canwest Global shares, if you can catch them between meetings with their bankruptcy lawyers.

Oh, and a seven year drought would wipe out all of Hydro's equity




Given the high stakes, the PUB has become obsessed with drought. At first glance, that might seem unwarranted.

A five-year drought is expected once in 50 years, and the last one was only 18 years ago, 1987-91.

A seven year drought is one in 100 year phenomenon and the last was 1936-42.

But…a drought like the one that ravaged Hydro in 2003-2004 happens once ever 15 years---and another one is expected in the coming decade.

The PUB is worried that Hydro's management is not taking enough precautions. A special concern is Hydro's $18 billion plan for new dams to supply American customers.

Here's how the PUB raised the issue in a recent order:

"The 2003-04 drought demonstrated that MH's generally "aggressive" approach to export energy marketing, while conducive to higher profits in median or above flow scenarios, carries the risk of increased losses during drought or low flow years. MH has acknowledged this risk, but believes its present strategy (that is, depending on median water flows) provides greater longer-term financial returns. The Board is not so certain and would prefer an independent assessment be conducted and filed."

The PUB cited one example of how this "aggressive" approach to selling power to the U.S. backfired on Manitoba customers. Hydro sold power it didn't have, then had to be bailed out by a rise in rates.

"Some of MH's exports involve three to four month advance sales of firm energy, without the certainty that the firm energy sold will be available (i.e., precipitation may not replenish water resources). Such practices lead to reasonable results in the absence of poor water conditions, but significant cost consequences when water flows fall and imports have to be purchased to fulfill contract obligations.
This situation occurred in the summer of 2006/07 and, in the Board's view, contributed to MH's request for a 2.25% interim rate increase (granted initially as an interim increase and finalized by Order 90/08)."

There's a pattern of mismanaging water resources, according to the PUB's examples. In the '03-'04 drought, Manitoba Hydro exacerbated the losses by selling off power at cheap prices, then buying it back at a higher cost to meet obligations to American customers.

"MH cannot prevent droughts from occurring, but, arguably, could do more than was done in 2003/04 to mitigate the consequences of a multi-year drought. In 2003/04, energy from water held in reserves was sold at low prices (off-peak pricing) to boost that year's annual income, only for the energy to be required to be "bought back" from the MISO market to meet MH's export commitments, and then at much higher prices than what the energy was sold for."

And the PUB warns that power shortages (the kind that lead to power brownouts) are a possibility if Hydro's dam building suffers any unpredicted delays.

"10.4 New Generation and Transmission
MH is proceeding with the Wuskwatim Generating Station with a targeted in-service date of 2012/13. An Agreement has been reached with WPLP for purchase of all output, estimated to be 1,515 GW.h on average. This arrangement is expected to provide a 1,220 GW.h increase in MH's dependable power (4%).

Bipole III is slated to be in-service in 2017/18, and is expected to add 442 GW.h/yr to MH's dependable generation, this by reducing transmission losses on the HVDC system. The loss reduction could be 1,000 GW.h under average flow conditions, based on the existing Upper Nelson generation plant.

MH's 2007/08 Power Resource Plan indicates that by 2017/18 total generation plant output under a dependable flow scenario will be 28,845 GW.h, equal to base domestic load. At that point, and until Conawapa and Keeyask G.S. are constructed, exports would have be supplied from domestic load reductions, through DSM (demand side management) and by imports or MH natural gas generation."

And….

"In the absence of Keeyask, MH's dependable domestically generated energy of, then forecast to be, about 30,000 GW.h would just cover forecast 2022/23 base domestic load. In such a case meeting the new export commitments would require further domestic load reductions through DSM savings and additional imports or MH natural gas generation.

If either space heating conversions from natural gas to electricity occurred or new large industry or large industry expansion drew power, the situation would be more problematic."

Bankruptcy? Impossible.
Brownouts and blackouts? Impossible.

Oh yeah?

-30-

Popular posts from this blog

The unreported bombshell conspiracy evidence in the Trudeau/SNC-Lavelin scandal

Wow. No, double-wow. A game-changing bombshell lies buried in the supplementary evidence provided to the House of Commons Judiciary Committee by former Attorney General Jody Wilson-Raybould. It has gone virtually unreported since she submitted the material almost a week ago. As far as we can find, only one journalist-- Andrew Coyne, columnist for the National Post--- has even mentioned it and even then he badly missed what it meant, burying it in paragraph 10 of a 14 paragraph story. The gist of the greatest political scandal in modern Canadian history is well-known by now. It's bigger than Adscam, the revelation 15 years ago that prominent members of the Liberal Party of Canada and the party itself funneled tens of millions of dollars in kickbacks into their own pockets from federal spending in Quebec sponsoring ads promoting Canadian unity. That was just venal politicians and a crooked political party helping themselves to public money. The Trudeau-Snc-Lavalin scandal is

Crips and Bloodz true cultural anchors of Winnipeg's aboriginal gangs

(Bebo tribute page to Aaron Nabess on the right, his handgun-toting friend on the left) At least six murder victims in Winnipeg in the past year are linked to a network of thuglife, gangster rap-styled, mainly aboriginal street gangs calling themselves Crips and Bloods after the major black gangs of L.A. The Black Rod has been monitoring these gangs for several months ever since discovering memorial tributes to victim Josh Prince on numerous pages on Bebo.com, a social networking website like Myspace and Facebook. Josh Prince , a student of Kildonan East Collegiate, was stabbed to death the night of May 26 allegedly while breaking up a fight. His family said at the time he had once been associated with an unidentified gang, but had since broken away. But the devotion to Prince on sites like Watt Street Bloodz and Kingk Notorious Bloodz (King-K-BLOODZ4Life) shows that at the time of his death he was still accepted as one of their own. Our searches of Bebo have turned up another five ga

Manitoba Hydro is on its deathbed. There, we said it.

Manitoba Hydro is on its deathbed. Oh, you won't find anyone official to say it. Yet . Like relatives trying to appear cheery and optimistic around a loved one that's been diagnosed with terminal cancer, the people in power are in the first stage of grief -- denial. The prognosis for Hydro was delivered three weeks ago at hearings before the Public Utilities Board where the utility was seeking punishingly higher rates for customers in Manitoba. It took us this long to read through the hundred-plus pages of transcript, to decipher the coded language of the witnesses, to interpret what they were getting at, and, finally, to understand the terrible conclusion.  We couldn't believe it, just as, we're sure, you can't--- so we did it all again, to get a second opinion, so to speak.  Hydro conceded to the PUB that it undertook a massive expansion program--- involving three (it was once four) new dams and two new major powerlines (one in the United States)---whi

Nahanni Fontaine, the NDP's Christian-bashing, cop-smearing, other star candidate

As the vultures of the press circle over the wounded Liberal Party of Manitoba, one NDP star candidate must be laughing up her sleeve at how her extremist past has escaped the scrutiny of reporters and pundits. Parachuted into a safe NDP seat in Winnipeg's North End, she nonetheless feared a bruising campaign against a well-heeled Liberal opponent.  Ha ha.  Instead, the sleepy newspeeps have turned a blind eye to her years of vitriolic attacks on Christianity, white people, and police. * She's spent years  bashing Christianity  as the root cause of all the problems of native people in Canada. * She's called for  a boycott of white businesses . * And with her  Marxist research partner, she's  smeared city police as intransigent racists . Step up Nahanni Fontaine, running for election in St. John's riding as successor to the retiring Gord Macintosh. While her male counterpart in the NDP's galaxy of stars, Wab Kinew, has responded to the controversy over

Exposing the CBC/WFP double-team smear of a hero cop

Published since 2006 on territory ceded, released, surrendered and yielded up in 1871 to Her Majesty the Queen and successors forever. Exposing the CBC/FP double-team smear of a hero cop Some of the shoddiest journalism in recent times appeared this long August weekend when the CBC and Winnipeg Free Press doubled teamed on a blatant smear of a veteran city police officer. In the latest example of narrative journalism these media outlets spun stories with total disregard for facts that contradicted the central message of the reports which, simplified, is: police are bad and the system is covering up. Let's start with the story on the taxpayer funded CBC by Sarah Petz that can be summed up in the lead. "A February incident where an off-duty Winnipeg officer allegedly knocked a suspect unconscious wasn't reported to the province's police watchdog, and one criminologist says it shows how flawed oversight of law enforcement can be." There you have it. A policeman, not

Winnipeg needs a new police chief - ASAP

When did the magic die? A week ago the Winnipeg police department delivered the bad news---crime in the city is out of control. The picture painted by the numbers (for 2018) was appalling. Robberies up ten percent in  a single year.  (And that was the good news.) Property crimes were up almost 20 percent.  Total crime was 33 percent higher than the five year average. The measure of violent crime in Winnipeg had soared to a rating of 161.  Only four years earlier it stood at 116. That's a 38 percent deterioration in safety. How did it happen? How, when in 2015 the police and Winnipeg's police board announced they had discovered the magic solution to crime? "Smart Policing" they called it.    A team of crime analysts would pore through data to spot crime hot-spots and as soon as they identified a trend (car thefts, muggings, liquor store robberies) they could call in police resources to descend on the problem and nip it. The police