We know, at last, why Manitoba Hydro launched its balls-to-the-wall, take-no-prisoners assault on Miss Whistle, their former consultant who filed a Whistleblower complaint over Hydro mismanagement.
The answer slipped out in the latest hearings of the Public Utilities Board into Hydro's risk management practices.
It turns out the Hydro Whistleblower...
* was standing up for the Manitoba ratepayer.
* said Manitobans were being overcharged
* said Hydro was deliberately overestimating the chance of a record drought in order to dupe the PUB into approving the higher-than-needed rates, and
*said Hydro could make more money with less risk without embarking on a decade-long spending orgy on new dams to fulfill long-term contracts to sell power to the U.S.
In short, she was saying everything Manitoba Hydro didn't want you to hear.
The PUB counsel was questioning Dr. Atif Kuburski, one of two economists from McMaster Unversity hired to look at Hydro's operations, including the allegations of the New York consultant.
DR. ATIF KUBURSI: I mean, she -- what she is really saying is that they are using the drought as a sort of a scare that would justify raising the rates and persuading the Board to acquiesce and pass higher rates to consumers. And that in the absence of the scare about the drought and the willingness to create a buffer zone or a buffer cushion against this, these rates might not be allowed. These rate increases may not be allowed. So this was their argument, is that they're using it a bit of a boogeyman and trying to scare the Board and the citizens of Manitoba to acquiesce to higher rates than would be necessary.
DR. ATIF KUBURSI: Actually, the largest share of questions NYC had are concentrated in the area of long-term contracts. And she felt that this is the area where probably where the risks are there. I mean, she had, as I argued yesterday, that she has discounted the cause of the drought and felt that the cause of the drought is exaggerated by MH to cover, in her view, the actual exposure to risk in the long-term contracts.
In peoplespeak, he said Manitoba Hydro conned the PUB by claiming they needed a huge kitty to cover a record-setting drought that could come any day now. But they're really hoovering up the cash to cover the risk of their unnecessary multi-billion dollar construction spree.
We also learned a lot more about Miss Whistle's qualifications. Hydro has sneeringly dismissed her as a nobody temporary contract consultant who didn't do much work and wasn't worth the money she was paid.
But here's what Dr. Kuburski said:
"I -- I would -- I would honestly say, and looking at her CV, this is a new basically theoretical physicist from Cambridge University; studied with Steven Hawking. I mean, thi -- this is not an average person; no question about it. Her education, her intelligence and things is without any -- any doubt."
Dr. Kubursi and his colleague, Dr. Lonnie Magee, are no fans of the New York Consultant, NYC, as she's called in the PUB hearings. ( Her identify is protected under the Whistleblower Act, despite the fact the Ombudsman, who is legally obliged to investigate complaints under the legislation, has done nothing with hers for going on 3 years.)
A meeting with her in New York was going swimmingly until Kubursi mentioned he was interested in Hydro's modeling methods. NYC stopped all communication with the McMaster profs, fearing they were trying to learn her proprietary modeling techniques to incorporate into Manitoba Hydro's models.
The economists, having spent their professional lives sucking at the public teat, couldn't understand the sensitivity of a professional consultant protecting her livelihood. So, Kuburski, his nose out of joint, took every opportunity he could to disparage her before the PUB no matter how childish he wound up sounding.
MS. ANITA SOUTHALL (PUB counsel):
11 ... There is -- there is the allegation by the
12 NYC that:
13 "Only one (1) to (2) select personnel
14 know the source code in HERMES, and
15 there is no documentation in the
16 system. It is known as a black box and
17 nobody knows what is going on in
19 Do you see those statements that I've
20 selected from the NYC public document assertion 232?
21 DR. ATIF KUBURSI: Yeah, I recognize she
22 made these things, but they're a contradiction because
23 she says two (2) people know, and then in the same
24 sentence says nobody knows.
Oooh. Snap! Nothing escapes an egghead economist, eh?
Then he acknowledged that NYC had raised a perfectly valid point.
DR. ATIF KUBURSI: But we -- we've argued
4 very strongly that we'd like documentation, formal
5 documentation of these models. That would be a good
6 idea. I mean, there is no question there is a tremendous
7 amount of knowledge. We've seen it demonstrated in every
8 model that we work with, and I'm sure you -- look, you
9 have Excel, you have Quattro, you have things. There is
10 always a very thick documentation that comes with it. It
11 would be nice, and this is something that's not beyond
12 the resources and the abilities at Manitoba Hydro to have
13 this formal documentation.
14 Maybe they are there, but we did not see
15 that formal, exactly commercial-like type of
16 documentation, what we call technical manuals, user
17 manuals. That would be great -- great help in one sense
18 or the other. Again, this goes to the institutional
19 memory. You would codify something that, if there is a
20 turnover or somebody goes, there is something codified,
21 formal exists there for others to use.
And yet he couldn't let go without taking another run at Miss Whistle.
22 MS. ANITA SOUTHALL: Did you specifically
23 ask how many people know the source code of HERMES?
24 DR. ATIF KUBURSI: We argued too, and we
25 -- one (1) time I know we -- we got them all in one (1)
1 room, and everybody was, What on earth are you doing. I
2 said, I would like to really see the number of people who
3 are familiar with these models (Note, NOT how many know the source code...ed). And some of them have
4 worked on this model, went into another one. No, there
5 are people, and there is a good community. We want it to
6 be more formal, we want it to be more explicit, more
7 overt, and that they could work and learn from each
8 other. This is something that we have recommended.
9 MR. ROBERT MAYER: How many people were
10 in the room, Doctor?
11 DR. ATIF KUBURSI: Yeah, yeah. I don't
12 know. I didn't count heads, but I would say, you know --
13 how much would you say? Like twelve (12)?
14 DR. LONNIE MAGEE: I'd guess ten (10) or
15 twelve (12).
16 DR. ATIF KUBURSI: Yeah.
19 DR. ATIF KUBURSI: Definitely more than
20 two (2).
In plain language, only about 10 of Hydro's 6000 employees, at best, knows anything at all about one of the three key modelling systems that keep the power flowing. And nobody has a manual on hand in case there's a problem and one of the fixers isn't available.
But the most egregious conclusions by Kuburskia and Magee involve NYC's concerns about the risks of long-term contracts to the U.S.
They scoffed at her suggestion that selling power at spot prices would be safer and more lucrative than locking in sales with long contracts.
DR. ATIF KUBURSI: We found that the
19 contract prices, the historic contract prices, with the
20 exception maybe of a year or two (2), 2007, maybe a
21 little bit at the edge of 2006, that the contract prices
22 were sufficiently higher than MISO opportunity prices.
DR. ATIF KUBURSI:
11 .... I
12 mean, the claims of NYC was that Manitoba Hydro should
13 stop immediately any long-term contracts. That the terms
14 of the contracts, the prices that were negotiated are all
15 defective, they are far below what the spot prices were.
16 I mean, she was right on one (1) thing, in
17 2006/2007, the spot off-peak prices were really higher
18 than some of the con -- but in every other year if you
19 look at them in the whole sweep over the contract, the
20 average price of the contracts were higher than the spot
21 peak or off-peak prices for most of them.
22 So the -- the way the things came out is
23 that her recommendations and assessment of the long-term
24 contracts were a bit on the exaggerated side. And her
25 recommendations were, to some extent, a -- a bit farreaching. They're not reasonable. I mean, completely
2 stop any long-term contracts, cut out all the long-term
Except...is there any significance to when spot prices fell below contract prices? 2008? Did something happen?
JUST THE BIGGEST STOCK MARKET COLLAPSE SINCE THE GREAT DEPRESSION.
The world dipped into recession in 2008, drowned in red ink for two years and still can barely keep its head out of the mire.
Do you think that had anything to do with keeping demand for electricity low in the U.S.?
These guys are professors and they can't figure that out?
Maybe they should have picked up on the hint that Manitoba Hydro can't sign a contract to justify Keeyasak, the next big dam, because the price they want is stratospheric and what the customer wants to pay is not. The contract was supposed to be signed, sealed and delivered this past January. Instead, negotiations have been postponed for a year until everyone sees where the economy will wind up.
Sure we're making money on old contracts and almost giving power away for free on the spot market, now. But we're also subsidizing the electricity we're selling Americans from the Wuskwatim dam because costs exceed revenue, and we will for years to come.
With construction costs doubling every time we look at them (Bipole III anyone?) and interest rates about to start zooming upward, the PUB has a hard decision to make about the rates you pay.
Kuburski and Magee says they should be higher still.
The New York Consultant says they're too high already.
Labels: boondoggle, Hydro, Public Utilities Board, whistleblower