Manitoba politicians’ appetite for costly mega projects may be turning the province on a path towards ruin.
Earlier this month, Tom Adams, an independent energy and environmental advisor, completed a report for the Frontier Centre for Public Policy, highlighting how economic realities may prove the undoing of major projects such as the Wuskwatim hydroelectric project near Thompson.
Premier Greg Selinger opened the dam July 5th.
The problem is while it was once expected that electricity exports were going to subsidize Manitoba’s power consumption, the opposite is coming to pass.
Enormous cost overruns are also a significant problem. Forecast originally as costing $900 million, the project is now estimated to be, according to Manitoba Hydro, around $1.67 billion.
According to Adams, Manitoba electricity ratepayers are now subsidizing the export sales from the province’s new generators, including Wuskwatim and new wind farms. Subsidies to exports will grow in the near term and persist for the foreseeable future.
Adams said that where a kilowatt-hour of electricity earned Manitoba Hydro 6.422 cents in 2003, last year it was worth only 3.09 cents.
Once lucrative for exports, the U.S. electricity market is suffering the combined effects of a slower Midwestern economy, the rising Canadian currency and the new shale gas bounty that is transforming the energy mix of the future. Furthermore, Manitoba’s official assumption the U.S. would implement carbon pricing has not proven to be true.
What is unfortunate is Wuskwatim was a model for First Nations involvement in the northern economy. Nisichawayasihk Cree Nation is an equity partner on the project with Manitoba Hydro, but recently the federal government accused the First Nation of misappropriating job training funds to the tune of $4.6 million. Ottawa says the Cree community only needed $3.8 million to operate an Aboriginal training centre. The rest, they allege, went to paying down the band’s line of credit and buying guaranteed investment certificates for the First Nation.
A couple hundred thousand, they claim, was funneled into the band’s general accounts.
All of these allegations have not been proven in court, but they are serious.
There is little doubt equity partnerships are the wave of the future for Manitoba’s indigenous communities, but these irregularities need to be sorted out. These resource projects are the hope for renewed First Nation economic development, so it’s important to ensure they are done right.
Despite all of this, the NDP government is committed to proceeding with Keeyask, Manitoba Hydro’s next mega project. The government is also clear in pursuing the Conawapa generating station, which is coming in at $7.8 billion. And we can’t forget of course the mega-controversial BiPole III hydro transmission line.
All of the projects highlight the problem identified by Adams: “Every uneconomic project Manitoba Hydro takes on inflates power rates and squanders Manitoba’s one historic undisputed advantage — rock-bottom electricity prices.” Clearly the province needs to re-think its energy strategy.