On behalf of the newly-appointed Manitoba Hydro-Electric Board, Chair Sanford Riley provided Manitobans with the results September 21 of a review conducted at the request of the Government of Manitoba.
The review, which began in May, included a mandate to assess the current financial situation of Manitoba Hydro and determine whether the Bipole III project should proceed as planned or if the corporation's current fiscal situation warrants the delay, rerouting or cancellation of the project.
To assist with its review, the Board retained the Boston Consulting Group (BCG), an acknowledged world-class industry expert in utility operations, finance and major projects, to provide the Board with independent analysis and support.
"Our review began with a primary focus on the Bipole III project but quickly expanded in scope to include the Keeyask Generating Station, Manitoba Hydro's capital program, and ultimately, the overall financial situation and operation of the utility corporation," said Riley. "Manitoba Hydro's mounting and unprecedented levels of debt, the decision by the previous government to exclude Bipole III from the Public Utilities Board's NFAT (Needs For and Alternatives To) hearings and the direct connection drawn by Manitoba's credit rating agencies between Hydro's financial situation and the province of Manitoba's bottom line, were all cause for significant concern and a broader more intensive review."
Riley confirmed that the review showed 95 per cent of the contracts for the construction of Bipole III are in place, with $2.9 billion of project funding having been committed or expended to date.
The review further confirmed that rerouting the line down the east side of Lake Winnipeg is no longer an option. It also determined that any delay or cancellation of Bipole III would make it impossible to carry the power from the Keeyask Generating Station that is required to deliver upon committed export contracts. In total, a cancellation of Bipole III at this late stage of construction would result in a cost to Manitoba ratepayers of over $7 billion.
"Our review concluded that Manitoba Hydro's decision to pursue Bipole III while simultaneously advancing the construction of Keeyask, in the absence of domestic demand for new generation, placed significant financial strain on the corporation," said Riley. "However, it is also clear that Bipole III is essential to reducing the significant risk of blackouts and service disruptions should there be a failure of the existing Bipole I and Bipole II transmission lines which currently carry over 70 per cent of the electricity produced in the province."
"Rerouting the Bipole III transmission line down the west side of the province was obviously a wrong decision, one forced on Hydro by the previous government, and has cost Manitobans an additional $900 million. However, the review concluded that if construction is not completed, Keeyask's export contracts will not be filled, making the new generating station an asset incapable of generating revenues for many years. The Board has been left with no choice but to move forward."
See also the feature article, elsewhere this issue.