Two things sent chills down our backs
this week.
First, was the magnificent performance of Winnipeg's own Samantha Hill at the Tony Awards, a show which was watched by 7.2 million people. She had the honour of singing the immortal showstopper 'Music of the Night' during a tribute to Andrew Lloyd Webber's 'The Phantom of the Opera', which, this January became the longest-running show in Broadway history.
This year Hill reached the top of the theatre mountain, taking the female lead of Christine Daee in the Broadway production, opposite Peter Joback as the Phantom. If you missed it, you can catch their performance at the Tony's here:
http://broadwayworld.com/article/VIDEO-PHANTOM-OF-THE-OPERA-Cast-Performs-at-Tony-Awards-20130610
At the other end of the scale, we read the full 30-page heart-stopping commentary by Graham Lane, former chairman of the Public Utilities Board, on Doer's Folly, the runaway train that's Manitoba Hydro and the wreck that's awaiting us at the end of the line.
Lane issued his paper concurrently with a speech to the Frontier Centre for Public Policy, the local think tank, which he's just joined. As head of the PUB, Lane watched Hydro careen from one disaster to another, from a crippling drought to meglomaniacal growth plans. Now, after a year-long "cooling off" period, he's free to talk about what he knows as an insider.
His speech and written commentary can be summarized in
two words:
Both barrels.
Lane demonstrates how Manitoba Hydro has become a puppet for the NDP government. Contrary to what people may believe, Hydro's main objective is NOT to provide power at the lowest rates possible for Manitobans.
Hydro has been subverted into becoming an arm of the New Democratic
Party which furthers the party's ideology regardless of the cost to
ratepayers.
For the uninitiated, Lane is talking about the series of Seventies-style mega projects that Hydro has announced and which are forecast to cost $33 billion over 20 years. This includes the BiPole III power line from power plants in northern Manitoba to the south, two new giant dams and power stations, and the rebuilding of a dilapidated dam on the Winnipeg River, a dam which was owned by Winnipeg Hydro and which was said to require only minor upgrading when Manitoba Hydro took it over.
"Recently, Manitoba’s NDP government has unleashed a barrage
of propaganda in support of the planned costly development, including the
repeating of an implausible claim originally made by former Manitoba Premier Doer that hydroelectric power is “Manitoba’s oil”...", wrote Lane.
Government
promises and commitments, he says, take advantage of the gullibility
of ratepayers and taxpayers who have no independent way to measure the
claims of either the government or the utility. As an example, he
said,"While the government regularly boasts of Manitoba Hydro’s low
rates, Hydro’s present rates are similar to two other provinces reliant
on hydro generation (British Columbia and Quebec), and are not due to
operational efficiency, far from it."
The cost
and revenue forecasts behind Hydro's massive expansion plans should be
taken with a grain of salt, except that they're not worth a grain of
salt, Lane said.
Every single assumption the NDP made in 2008 to justify Hydro construction to produce power for export has been wrong:
At that time, both Hydro and Government expected:
• Natural gas prices would stay high and increase (not $4 per GJ, but $10 or
more);
• There would be a price on carbon, providing for a premium price for hydro
power;
• Rather than industrial closures, new and expanded industry would develop to drive demand growth;
• Higher spot and fixed export prices would develop, not the three cents and
under for spot sales of recent years;
• Construction costs to increase with inflation—now, the initial forecasts are
recognized as being far too low;
• An eastern route for BiPole III would save a billion dollars and reduce troublesome engineering concerns;
• A lower Canadian dollar; and,
• A much higher rate would be in place for new or expanded energy intensive
industry.
Hydro
has no idea of the true cost of its plans and no idea how much, if
any, profits it will make. Does this sound familiar? Think the
Canadian Museum for Human Rights or the new football stadium to see
where this kind of planning leads. Straight to your wallet.
Hydro's
latest estimate of how much its going to spend on expansion ($33
million) is 60 percent higher than the forecast provided in 2011, and
that forecast "was up sharply from the forecast before that..." Lane
says.
Less
than two years ago, Hydro was saying it would collect $12 billion in
revenue from power exports. Now it's saying, maybe $6 billion.
"And,
not only export revenues can be lower, domestic demand can be lower
than projected—there have been no major new industries for Manitoba
since the 1990s, and none are on the horizon."
"Tembec has shut their pulp and paper mill. Hudson Bay Mining &
Smelting has closed its smelter. And, Vale plans to close its smelter and refinery."
Smelting has closed its smelter. And, Vale plans to close its smelter and refinery."
"As a result, almost fifteen years’ worth of forecasted industrial demand growth has evaporated."
Does this sound like a company that knows what it's doing?
There is no legitimate watchdog to question Manitoba Hydro's grandiose plans, Lane warns.
The
Auditor General recused herself from examining the risks associated
with Hydro's expansion plans. "Thus, the Province’s largest economic
gamble in history is taking place with the Auditor General on the
sidelines."
[ Lane
thinks she stepped aside because she sat on Hydro's board before
taking the government job, but he's wrong. For nine months she declared
there was no problem with conflict of interest;
she only recused herself, and abruptly at that, after The Black Rod
revealed that she had been sending someone to sit in on Hydro board
meetings and secretly keep her briefed ever since she allegedly severed
ties with Hydro.
"As
for Hydro’s Board of Directors, a review of the roster will likely
conclude that industry expertise and experience, independence and the
avoidance of conflicts of interest, are now missing. Each member of
Hydro’s Board of Directors was appointed by the government, without
competition, with no relevant experience required, and all Board
members serve at the pleasure of the Government. When has the Chair of
Hydro’s Board of Directors even spoken in public on Hydro’s
development plans? Never."
The
Public Utilities Board now rubberstamps rate increases without asking
for proof that they're legitimately needed. The coming NFAT review
(Need For and Alternatives To) of the next two dams to be built "is a
sham", said Lane; the government has forbidden the PUB from examining
the need for BiPole III, a vital element of the dams projects, and from
scrutinizing the deals the government is making with Indian reserves
to own parts of the dams being built at public expense.
How
can anyone compare alternatives if they're not allowed to consider the
billions to be spent on BiPole III or the hundreds of millions tied up
in the Indian "partnerships"?
The
first of these partnerships, the Wuskwatim power station, is an
unmitigated disaster that's losing $100 million a year. The
"partnership" guarantees the Indian bands involved a share of the
"profits" even when there are no profits. This is supposed to be the
model on which other "partnerships" are based.
BiPole III, alone, will mean Hydro rates will rise 30 percent unless there are offsetting revenues, says Lane.
And
if the PUB tries to prop up the debt-to-equity ratio of Hydro, which
bond raters look at as a measure of a utility's financial health,
electricity users in Manitoba could find
themselves facing annual rate hikes of 8 percent, instead of the 4
percent now contemplated. Yes, 8 percent PER YEAR.
Do you feel those chills yet?
Lane says Manitoba Hydro has been losing money on power exports since 2008!
Less
than half of Manitoba Hydro's export sales are at fixed prices. The
rest is sold at cut-rate and spot prices which range from one cent to
four cents a kilowatt hour when it costs us 10 cents to produce power
from new dams.
The
PUB under Lane ordered Hydro to tell them how rates would be affected
if losses on exports didn't stop. Hydro ignored the directive.
The bad news comes so fast we don't know where to file it.
Hydro
has 35 percent more employees than in 2001. Accounting tricks let
them hide $200 million in operating expenses a year, and this lets them
embellish their annual net income.
Hydro
"massively overpaid" for Winnipeg Hydro. To fix the City's Pointe de
Bois generating station will cost $2.4 billion " when at the time of the
acquisition there were no major expenses anticipated for the plant’s
refurbishment."
"And, while the terms of the purchase required Hydro to build a new head office
downtown, it didn’t require a $283-million ‘palace’."
"...Hydro
has undertaken a media campaign indicating its capital assets are old
and need refurbishing, yet it has failed to provide the PUB with an
Asset Condition Report, one that would likely highlight the poor
condition of generators and transmission and distribution assets it
purchased from Winnipeg Hydro."
On and on it goes, with one red thread running through all the bad news---the government.
The
government, you see, wins regardless if Hydro fails.
The government
collects hundreds of millions of dollars from Hydro in annual fees,
including a fee for whenever Hydro
borrows money.
So when Hydro borrows $33 billion to build new power
plants, the government collects $300 million a year. Hydro includes
that in its costs and uses that to ask for higher rates.
There's a term for that chicanery---hidden taxes.
Lane says the annual fees are more than the expected export revenue. The result -- even higher rates.
Manitoba
citizens are screwed coming and going.
The government takes money
from Hydro, which Hydro has to recoup from ratepayers. And the
government orders Hydro to undertake money-losing but politically
correct megaprojects which end up costing us higher rates.
In the
event
of a shortfall, say with the drought that's due any year now, Hydro
depends on the government to bail it out and the only way they can do
that is to take money from taxpayers.
There's
a clear conclusion to reach from Lane's 30-page essay---Manitoba Hydro
is bleeding Manitoba dry. They're doing it on the orders of the NDP
government. He's not exaggerating when he says there's an urgency to
confront the disaster in the making.
Hydro
refuses to address how ratepayers are expected to keep up with the
never-ending increases in their electricity bills. The government
refuses to contemplate what will happen when Hydro's debt is added to
provincial debt and interest rates rise.
It's a Broadway story of a whole different kind.