A long-awaited report on a new Manitoba transmission line says the previous government’s own obstinance was a primary driver for billions in cost overruns.
The Economic Review of Bipole III and Keeyask Report, released Friday, points to the NDP’s insistence the transmission line run down the western side of the province as a major reason why the project went from $9.7 billion to $13.4 billion.
The two projects were built over the last 15 years and Manitoba Hydro’s debt has tripled in that time to more than $23 billion.
The Crown corporation has applied to increase customer rates by up to eight per cent in recent years to pay down some of the debt, but provincial regulators have approved much lower increases.
The review describes “the genesis of the Keeyask and Bipole III projects deriving from the vision of Government that hydroelectricity is ‘Manitoba’s oil’ and therefore a source of transformational economic development driven by exports,” reads a release.
“However, Government became ‘locked in’ on the projects, leading to direct Government action to place constraints on the regulatory and approval processes for them.”
The report shows that the routing of Bipole III down the western side added at least $400 million to the cost, while some evidence suggests had it run down the eastern side, it would have avoided $1 billion in costs.
At the time the government said the move was necessary to protect pristine boreal forest in the east, respect Indigenous land use, and to avoid raising environmental concerns among potential U.S. customers.
“Potential options were excluded and this – combined with Government action to constrain the regulatory and approval processes – drove the projects to approval and construction start dates on inflexible timelines and with incomplete analysis,” the report says.
This is far from the only problem found by the report author, former Saskatchewan premier Brad Wall.
Others included the government agreeing to energy export contracts that meant the Public Utilities Board, which sets rates and approves projects, effectively had no choice but to approve the project so that Hydro could meet its contractual obligations.
“Manitoba Hydro’s submissions during proceedings before the Public Utilities Board were characterized by rapidly shifting economic assumptions and emerging facts or options that were either ignored or explained away in the rush to approval,” writes Wall.
“Some of these core assumptions were abandoned just months after approval was granted for the projects.”
The report also says the former government did little to prevent costs from spiralling and was more focused on getting the projects completed.
“The commissioner saw no evidence of interest or proactive outreach on the part of the former elected Government of Manitoba to provide oversight, accountability, and overall leadership on the Keeyask and Bipole III projects,” Wall’s report states.
“As the costs of the projects grew and the potential impact on Manitoba Hydro became apparent, there is no evidence that the former government engaged with the (Manitoba Hydro board) or provided any direction.”
The report also says Manitoba Hydro officials and the former NDP government overestimated the potential for export sales.
When the government began pushing the projects, it said hydroelectricity could do for Manitoba what oil had done for Alberta. But energy prices softened as the use of natural gas and fracking expanded in the United States.
Domestic demand was also overstated, Wall said. Instead of Keeyask being needed as early as 2019, its energy may only have been needed a decade from now, Wall said. The generating station started operating earlier this month.
After the project was completed, the report found that there were no considerations made for the potential impact on Manitoba’s finances in the future.
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“The Review found no interaction, presentation, discussion, or document that showed that the input of the Treasury Board Secretariat or the Department of Finance was sought or heard in the planning or execution of the project plans.”
When the Opposition Tories raised issues about the western route in 2007, the government said export sales would pay for any extra costs.
Review done by ‘friend and political ally’: NDP
Attempts by The Canadian Press to reach Greg Selinger, who was the minister responsible for Manitoba Hydro at the time and would became premier in 2009, were unsuccessful Friday.
The current NDP Opposition said the report from Wall, a former Saskatchewan Party leader, was the work of a political operative.
“Typically these types of reports would be produced by a judge or an expert in their field,” hydro critic Adrien Sala said.
“Instead, the (Tories) have decided to hire their friend and political ally … to write a report that would tell them exactly what it was that they wanted to hear.”
In total, 85 findings and 69 recommendations were made to prevent such cost overruns in the future and to help Manitoba Hydro and the Public Utilities Board.
The recommendations include allowing for greater oversight by the provincial cabinet of major projects at Manitoba Hydro.
It also says some projects could be done in partnership with the private sector, although the report makes no mention of privatizing or selling Manitoba Hydro to achieve any of the recommendations.
Wall said the province would continue to own any infrastructure under such an arrangement, but the Canadian Union of Public Employees called the idea a step toward privatization.
“Private, for-profit corporations … aren’t participating in projects for the public good. They’re there to make a profit,” CUPE Local 998 president Michelle Bergen said in a news release.
Manitoba Hydro said it is reviewing the report and will discuss its findings with the government.
Wall was commissioned by the province’s current Progressive Conservative government to conduct the review, which cost just under $1 million.
–With files from Steve Lambert at The Canadian Press
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