Grading Miss Whistle. Plus...Manitoba Hydro Secrets Spilled.
It's TWO YEARS since the Manitoba Hydro Whistleblower made a complaint to the provincial Ombudsman.
Resolution? Hell, two years and no nothing.
Ombudsman Irene Hamilton has managed to botch the first complaint under the NDP's much vaunted Public Interest Disclosure Act so badly it will never be used again.
Now there's a legacy.
First Hamilton tried to pawn the complaint off to the Auditor General, who, oops, turned out to be a former member of the Manitoba Hydro board of directors, and who announced defiantly she was under no obligation in law to investigate anything.
When she eventually acknowledged that the perception of conflict of interest would render moot anything she did with Hydro, the complaint was returned to the Ombudsman's Office.
Hamilton then decided to wait to see the results of a report commissioned by the Public Utilities Board into Hydro's risk management, which was to include an examination of the whistleblower's concerns. That 350-page report was released in November.
Since the Ombudsman is now entering her third year of inaction on the file, we decided to see for ourselves how the Hydro Whistleblower, who we've affectionately dubbed Miss Whistle, fared in her latest review.
Yes, folks, we read the 350 page report over the Christmas break. (Yeah, yeah, we know---get a life.)
* Miss Whistle was hired by Manitoba Hydro as a risk consultant following the disastrous drought of 2004.
* Needless to say, this observation didn't sit well with the bosses who were responsible for running the utility. So she was shown the door.
* That's when she took her concerns to the Ombudsman under the Whistleblower Act.
* We're finally able to pinpoint many of the problems she saw within Manitoba Hydro operations. (All quotes, unless otherwise stated, are from Manitoba Hydro Risks: An Independent Review, by Dr. Atif Kubursi and Dr. Lonnie Magee, submitted to the Public Utilities Board of Manitoba, Nov. 15, 2010)
1) Topping the list are the "suite of models" that Hydro uses.
"Manitoba Hydro supports, uses and relies on three major models (HERMES, SPLASH and PRISM) in its planning of operations, investment planning, financial forecasting and budgeting."
Miss Whistle said the in-house models use outdated programming and stale numbers which lead to poor decisions on water levels, pricing, and the risks Hydro is taking.
She was specific in a 2009 letter to the editor of the Winnipeg Free Press (which they refused to run but which you can read in The Black Rod):
"To keep the lights on in the Province, Hydro’s computers rely on a complex formulae, which operates not just the reservoirs like Lake Winnipeg and Cedar Lake, but of course looks at the import tie-lines from the US, and Hydro’s ability to the run expensive gas units."
"While it may be shocking to learn these problems exist, what was uncovered was there were “systemic and massive” computer system flaws - with obsolete computers maintaining the calculations. Massive system errors and inadequate mathematics were found in the power calculation of “blackouts” or reliability conditions - which could lead to faulty results in keeping the lights on."
2) The McMaster profs said:
"It seems that both Quebec and BC have adopted more advanced systems than MH’s Hydro Electric Reservoir Management Evaluation System (HERMES) or Simulation Program for Long Term Analysis of System Hydraulics (SPLASH)."
"...MH models are serving their purposes and can be relied upon for operational planning and long term planning, but they need to be upgraded to include stochastic and dynamic modules. They also need to be reviewed and authenticated by external subject matter experts. It is desirable and beneficial to initiate formal documentation and integration of these models on a common platform."
" If it was learned, that the safety methods for keeping the lights on were programmed only by 1 or 2 persons (with source code and changes known only to them), on an outdated computer which hasn’t been changed since the 80’s, I think you too would be worried." she wrote.
Miss Whistle said the ICF consultants hired by Hydro to discredit her were told not to look at the computers. But the McMaster profs did.
A number of questions about MOST (Vista) and a number of recommendations emerge:
Notwithstanding the small dollar amount of discrepancy between the Generation Estimate and HERMES solutions, these discrepancies raise concern about the accuracy of the model and the reporting system.
But the real problem is more profound.
HERMES and SPLASH are static models and do not handle time in a manner consistent with dynamic programming. MH may wish to consider some of the existing dynamic programming systems in use at similar utilities in North America."
*** The profs also picked up on Miss Whistle's red flag over Hydro's risk management practices.
"The qualitative aspects of risk management are well in place at MH. Unfortunately, this is not the case when it comes to the quantitative areas of risk management. There is hardly a mention of the word “quantitative” in the CRMR. Risk management is ultimately about quantification of exposure and calculation of the magnitudes of losses and threats."
"...there are no grounds to believe that there exists a serious material risk for blackouts in Manitoba." they wrote.
Note the weasel words:
Grounds to believe.
That's not exactly saying there's no risk for blackouts, is it?
6) And seeing that the Whistleblower is basing her concern on proprietary software, which is more advanced than Hydro's "suite of models" you might expect the economist duo at least to reference the defects in her analysis. They don't, because they never got to examine how she reached her conclusions.
They instead depended on Manitoba Hydro's sweet spiel. Translation: keep your fingers crossed.
Hydro, said McMaster, needs to sign the Yanks up now or lose the sales to wind farms that are going to be built. (Honest. We're not making this up.)
And the deals require the American customers to build a transmission line to the border, giving us access to the U.S. market at no cost. We get it wholesale, see.
But one big reason to bless the long term contracts stood out for the profs.
But the major achievements in these contracts are the curtailment provisions in the new contracts that could effectively decrease MH’s firm export commitments by 29%... in times of adverse water conditions."
7) Our dedicated team of codebreakers brings you the following Manitoba Hydro secrets:
-- In its deal with Northern States Power (NSP) of Minneapolis, Manitoba Hydro can reduce guaranteed energy during winter (Nov. 1 to Apr. 30) in 50 Megawatt increments, provided we give them notice by mid September. Manitoba Hydro still has to pay a penalty of the difference between the contract price and a complicated-formula price for natural gas.
"... Long Term Contracts are now well structured and include many new and innovative curtailment provisions, reasonable escalators and upset heat rate based import prices. But these contracts need to be staggered over time and diversified over a larger group of counterparties."
The grade: B+.