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The Wuskwatim White Elephant, Ed Schreyer's electric car and more

Dig deep, because very soon you'll be paying for Gary Doer's legacy.

By the end of the year the $1.6 billion Wuskwatim generating station will be sending its first power to the U.S.---with every kilowatt subsidized by you.

You read that right. It will cost more to produce the power than we'll get from selling it.

The Manitoba Public Utilities Board has been told that we'll be subsidizing all the Wuskwatim electricity (200 megawatts) we sell to American customers for the next 9 years---at least.

Wuskwatim is the first of three Hydro mega-projects that Doer was banking on to become sweet money machines for our poor have-not province. His vision was to turn Manitoba into an energy high-roller, using our hydro electricity the way Alberta uses its oil to bankroll government services and spending.

When it was first pitched to the Clean Environment Commission in 2004, Manitoba Hydro said Wuskwatim was being built for export. The power wasn't needed in Manitoba for 15 years, but sales of U.S. customers would bring an estimated return of 10 percent, money that would go to paying off the cost of the project and a little extra.

Then, in 2008, the PUB crunched the numbers and blanched
. Wuskwatim would be a lot less lucrative than expected, bringing only a 6.5 percent return. Or it would if everything worked out perfectly. Otherwise, the project would be lucky to break even.

We reported on the PUB's red flag at the time:
Today, almost three years later, the worst has come to pass. It will cost in the vicinity of 9 to 10 cents a kilowatt hour to produce power from Wuskwatim, and the best we can sell it for is 2 to 3 cents on the spot market.

And we have to sell it at bargain basement prices, because, according to Hydro, in about 3 years we'll almost run out of power for Manitoba customers and we'll have to tap into Wuskwatim's production. But once over that hump, we won't need the rest of Wuskwatim power for local use until 2019. So until then, Hydro can sell what we're not using at a higher price as "dependable energy" instead of on the "opportunity" market.

From the recent PUB hearings:

Mr. Bob Peters (PUB):...if we again assume Wuskwatim on a per energy basis comes in at about ten (10) cents a kilowatt hour. If there are no firm export sales we know that the opportunity sales this past year are in the two (2) to three (3) cent range, correct?

MR. VINCE WARDEN (Manitoba Hydro): Correct.

MR. BOB PETERS: And we know that if there was a dependable contract available for some or all of the Wuskwatim energy, the average dependable price was less than six (6) cents this past year.

MR. VINCE WARDEN: Yes.
Mr. Peters: What you're telling -- telling us all, Mr.Cormie, is that the difference to be made up between the ten (10) cent number that I used and whatever number you're able to sell the dependable energy for will narrow the more successful you are.

MR. DAVID CORMIE (Manitoba Hydro): Yes. I -- I'm not sure, Mr. Peters, that we can get ten (10) cents prior to 2020 but it will be pretty close.

Close is for Horseshoes. We're going to be stuck subsidizing power to the States for the next 9-10 years.

But Hydro says they're not expecting Manitobans to pay the whole shot.

Mr. Vince Warden (Hydro): So we're not asking ratepayers to make up that difference, otherwise we'd be asking for our debt equity ratio to be maintained where it is today. We're not asking for that. We are prepared to see the debt equity ratio deteriorate with the confidence that it will--- will rebound in the subsequent decade.

That's a high falutin way of saying that Hydro plans to use its profits to pay off some of the subsidy for Wuskwatim power.

We'll pay some and they'll pay some, except that they is us, too.

In the shuffle, Manitoba Hydro's credit rating will start heading south of Florida. Guess who will have to make that up eventually.

You can see why the PUB is holding hearings on Hydro's risk management. The first and smallest of Doer's megaprojects has turned into a white elephant; there's two more in the pipeline, which, if given the go-ahead, will cost us $17 billion over the next decade or so.

Hydro has a ready answer to detractors.

The American economy will turn around any day now and prices will go up. Shale oil is an illusion. Obama will impose a carbon tax to drive oil and gas out of the energy market. Trust us.

Other tidbits from Manitoba Hydro:
Electric cars of the future

MR. LLOYD KUCZEK: In terms of adoption of the hybrids, in 2010 there was twenty-three hundred (2,300) that were purchased or sold, and -- which represented .33 percent of the sales in Manitoba that year. And in terms of what we're forecasting over the next twenty (20) years, we're forecasting that about seventy-nine (79) -- I think it's seventy-nine thousand (79,000) vehicles will be purchased in the market.
Electric cars of the past

Believe it or not, The Black Rod tracked down Ed Schreyer's electric car from the Seventies in Nepean, Ontario.

Darryl McMahon's EVs, Present and Past
http://www.econogics.com/ev/myevs.htm

"This vehicle was one of seven purchased by the Province of Manitoba from EVA. This specific car was the personal use vehicle of Premier Ed Schreyer while he was Premier of Manitoba - he was later Governor-General of Canada. He confirmed this to me when I met him at a conference where I displayed the vehicle.

Due to problems with battery charging and maintenance, most of the vehicles in the Manitoba fleet fell into disuse and were auctioned off by the Province of Manitoba circa 1980.

This vehicle was purchased by a gentleman in Brantford, Ontario who did not return it to operation while he owned it. I purchased it from him in 1982, installed a new battery pack and repaired some minor mechanical items and put it back on the road in June of 1982. I have had it ever since, although it has not been in operating condition continuously during that time."
Windmills hate the cold as much as you do

They stop working when it gets too cold or too windy.

MR. BOB PETERS: And in cold weather, do the wind farms operate?

MS. HAROLD SURMINSKI: It has to be very extremely cold. We've found very few hours where the Manitoba turbines are actually shut down because of temperature.

MR. BOB PETERS: But it has happened for -- for cold reasons?
MS. HAROLD SURMINSKI: Yes.
MR. BOB PETERS: Has it happened because it's been too windy, as well?

MS. HAROLD SURMINSKI: Yes, that's --that's automatic. The shut down occurs automatically for excessive winds.

MR. DAVID CORMIE: Well, I'm -- I'm assuming -- I think it's a safe assumption that it -- that -- that -- on -- on one (1) particular day it was too windy. I know the shut down in -- in the wintertime occurs when the temperature drops below about minus 30.

Why Doesn't Hydro trust John Sauder?
MR. ROBERT MAYER: Just -- just as a matter of interest, CBC very lately has been arguing they probably have better equipment to forecast weather and whatever than Environment Canada. Do you get your forecast from Environment Canada or do you get them from John Sauder?

MR. DAVID CORMIE: I believe get our forecasts from Environment Canada as well as several other service providers. And then we have a cons -- we -- we use a consensus forecast in order to predict the load.

A change in the weather forecast of -- the temperature forecast of 1 degree means the demand for power will vary abou -- about 30 megawatts from what was forecast. So if a forecast is off by 2 degrees or 3 degrees we'll have to either -- we'll have extra 30 to 50 megawatts, or we'll have to buy an extra 30 or 50, and that's -- those adjustments can be made, you know, in the hour that it's actually happening, in the Real-Time Market.
Wind power insanity. Take my power, please.

The U.S.is subsidizing windmill operators so much that wind power producers can literally give electricity away for free and still make a profit on the subsidies. But that's driving Manitoba Hydro out of the market during those times when U.S. wind power floods the market so that we can't sell our electricity. And the problem is only going to get worse.

MR. BOB PETERS: Couple of points. When you said even if the price goes negative, help the Board understand that. That means that the counterparty will - - will be -- will pay others rather than put energy on the market?

DAVID CORMIE: Yes, because there are-- there are other companies who run wind facilities who are receiving a production tax credit of -- let's say they're getting ten dollars ($10) a megawatt hour for every megawatt hour they produce. So they can let the market go down as low as negative ten dollars ($10) before they lose money.

And so, they will bid in at -- at a -- at a negative amount, up to their production tax credit, and they can force the price of power to go negative. And in those situations Manitoba Hydro can't compete and we don't want to compete. We'd rather buy out of the market and -- and make money by being paid to purchase energy.

MR. ROBERT MAYER: Mr. Cormie, in all the years I've been on the Board I -- God, I can't remember how long since I've said that -- I have never heard this concept of getting paid by somebody's power before. I can't believe that this is something that happens daily. I mean, what kind of percentage are we talking about? Of your imports, what kind of percentage are you talking about where somebody pays you to actually take it off their hands?

MR. DAVID CORMIE: It's a -- it's a small percentage of time, Mr. Mayer. It usually occurs in the spring when there's not a lot -- a large demand for electricity, so demand is down. It occurs at a time of year when there's a lot of wind energy being produced and generally there's a lot of hydro being produced because most US utilities don't have storage so they have to generate the water that's being -- flowing down the rivers as a result of the snow melt runoff.

Your comment about not having heard about it, well, it's -- it is quite recent and in the time that you've been on the Board the market has changed several times and there's been quite a -- quite a large development of new wind generating stations being built in the United States. Tens of thousands of new megawatts of wind turbines are coming on market and -- and that's driving -- that's changing the cost structure of the... And then -- and then the US production tax credit makes it profitable for those companies to continue to make money even though the market clearing price goes negative. So if the price goes negative minus five dollars ($5) but they're being paid ten dollars ($10) by the government to produce they're still making five dollars ($5). So the market price can go negative and they're still make... So it's only when -- when the -- when the market price goes below ten dollars ($10), so now let's say it's fifteen dollars ($15), but the government is only paying them ten dollars ($10) now they're losing five dollars ($5). At that point they'll stop generating the wind. And -- and so it's the -- the wind generators who are receiving a production tax credit that -- that -- that cause those situations mostly to occur.

MR. BOB PETERS: Mr. Cormie, can you advise the Board as to whether those production tax credits continue or whether there is a -- they've been stopped or do you -- can you update the Board on that?
MR. DAVID CORMIE: The production tax credits are renewed -- have been renewed every year or every couple of years in -- in the US Congress. I'm not sure whether the existing program has been extended. I -- I understand that it's still up in the air whether those production tax credits will continue.

But once a project is eligible for them, they continue to receive them for the life of the project. But new projects, whether they will be eligible, will depend on what Congress does.

MR. BOB PETERS: Are there many new wind projects in the -- in the queue, Mr. Cormie? MR. DAVID CORMIE: In -- in -- in Manitoba's market in the United States in South Dakota and North Dakota and in Minnesota, there still remains tens of thousands of undeveloped megawatts of wind. What -- and those -- those will continue to be developed because the renewable portfolio standard that Minnesota has is one that grows with time. So by, for example, one (1) company needs to produce 30 percent of its -- supply 30 percent of its retail load by 2025 from renewables. And so that's a -- that's a -- a limit, Mr. Peters, that's increasing with time and they will need to continue to develop their -- their renewable resources to achieve that. They're -- they're not there already, so additional wind developments need to be brought online.

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