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What's Manitoba Hydro hiding about its latest deal with Minnesota?

Manitoba Hydro is fighting tooth and nail to keep the Public Utilities Board from finding out the details of their latest contracts with American buyers.

They're going to court to keep the contracts secret and the PUB blind.

You can understand why the PUB is antsy about Hydro's deals. The last time Hydro signed on the bottom line, they wound up selling power to the U.S. at less than it costs to produce it, meaning that your rates have gone up to subsidize the Minnesota users of Manitoba electricity.

And the dam they built to provide the subsidized power (Wuskwatim) was partially privatized without the approval of the Legislature, with a third being sold off to a group of Indian reserves, who couldn't pay for their share and had to borrow the money to pay Manitoba Hydro -- from Manitoba Hydro. To top it off, Hydro agreed to pay the reserves profits from the power sale even in the years when there were no profits, which is the foreseeable future.

You know how they say there's two sides to every story...

The Manitoba government fed the press one side and they bought it hook, line and sinker.

Unelected Premier Greg Selinger, taking a break from raising the dead and walking on water in advance of the coming provincial election, took personal credit for an alleged $4 billion in sales to three U.S. power companies Minnesota Power, Wisconsin Public Service, and Northern States Power.

The real reason for the announcement was the signing of a deal with Minnesota Power for the sale of 250 megawatts a year for 15-years, from 2020 to 2035. The deal was bundled in with the others, in the government news release, to plump up the total value of the U.S. sales to garner bigger headlines.

That's how it was sold in Canada.

But when we dug up the same news in the American press, we found a totally different story.

Minn. and Canadian power companies to create storage system for excess energy
May 25, 2011 Minnesota Public Radio:
St. Paul, Minn. — Duluth-based Minnesota Power has made a deal with Manitoba Hydro that will create a storage system for excess wind energy in Canada.
Manitoba Hydro Deal Provides Wind ‘Storage’ To Minnesota Power
BY ERIC LINDEMAN Energy Daily
As part of a series of deals providing low-cost clean electricity to three northcental U.S. utilities, Manitoba Hydro announced a unique “virtual wind storage” arrangement with Minnesota Power under which the provincially owned power agency has...
Hydroelectric deal includes wind power storage provision
05/24/2011 Power Engineering Magazine
Minnesota Power and Manitoba Hydro signed a 15-year power purchase agreement that will introduce a way to “store” wind energy generated in North Dakota through hydroelectric reserves.

In the U.S., the monetary value of the Minnesota Power sale was a footnote. To the Americans, the real value lay in the ability to store power produced by wind farms which would otherwise be worthless if not used immediately.

Power companies hate wind farms. Windmills are the least efficient method of generating electricity next to hamster wheels.

You never know when the wind will blow so electricity from windmills isn't dependable. Windmills don't work well in winter, when the demand for electricity is highest, and in the summer when wind power is produced it's often in the hours when there's no market and it's literally given away for free.

And yet politicians insist power companies buy it at outrageously high prices to encourage more wind farms.

In fact, they've written it into law.

In Minnesota, power companies will have to provide 25 percent of their electricity from renewable energy sources by 2025. In Wisconsin, 10 percent of electricity must come from renewable sources by 2015.

Minnesota Power has two wind farms in North Dakota, and just announced its building a third. Altogether they'll have a capacity of 292 MW.

Now, thanks to Manitoba Hydro, that power has a place to go if Minnesota can't sell it.

Candace Renalls, writing in the Duluth News Tribune, explained to her readers how the Manitoba deal works:

"On days when wind production is high or electric loads are low, electricity produced by Minnesota Power's wind farms in North Dakota will be transmitted to Canada. Manitoba Hydro will absorb the energy into its system in the form of unused water and store it, similar to a rechargeable battery."

Another stab at explaining the exchange came from Minnesota Power Executive Vice President Dave McMillan.

"What will happen is we would transmit energy north, and Manitoba Hydro would simply stop transmitting energy to us."
"If they don't generate at a given time with a hydroelectric facility, then obviously they're storing water that they can later utilize to generate when we don't have wind available or when our loads are quite high and we need more from them."

Take that to its obvious conclusion.

On those days when Minnesota Power doesn't need the electricity from its North Dakota wind farms, that power will be sent to Manitoba. Manitoba Hydro customers will then use electricity from North Dakota as Manitoba Hydro cuts back on its own production.

The only twist in that scenario is that wind power is unreliable and, depending on the percentage of total power it's providing, when the wind stops blowing and the electricity cuts off, it makes a mess of the transmission system which has to make up for the sudden loss of power on its lines.

In other words, we take all the risk and Minnesota gets all the benefit.

And that's not all.

This is how one commenter on an energy forum characterized the Manitoba Hydro deal:

http://groups.yahoo.com/group/sustaindane/message/8266
"The ability to store wind power significantly increases the economic value of wind. At times, in Texas, wind generated electricity is sold for nothing on the spot market. Storage would allow that worthless power to come back at peak demand, and premium prices."

Note: "Storage would allow that worthless power to come back at peak demand and premium prices." And its not just Texas, but Ontario, Manitoba and Minnesota that put wind- generated electricity on the spot market for nothing.

North Dakota produces the power, we "store" their surplus power, and when Minnesota wants it, we return it.

In short, when Minnesota needs electricity, instead of selling it to them at "premium prices", we will happily give them for free the power they sent to us when we didn't need it and didn't want it.

Does Manitoba Hydro get paid for acting like a battery? The PUB wants to know.

Was Manitoba Hydro so desperate for a deal that they effectively agreed to cut their own throats and reduce their potential market?

If the North Dakota wind farms can produce 292 megawatts of power, that's more than the 250 megawatts we're selling to Minnesota Power. How will that affect prices? Will MISO, the Midwest Independent Transmission System Operator, see the MP/MH exchange as price fixing?

There are a lot of unanswered questions that Manitoba Hydro doesn't even want asked.

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