Manitoba Consumers Pay More Than American Utilities

- A Closer Look At Manitoban Electrical Exports & Future Hydro Development

The construction of Bipole III is very much tied to the idea of building new dams in Manitoba's North. If the $5.5 billion 695 MW Keeyask dam and $7.7 billion 1485 MW Conawapa dam are built a Bipole IV and V will likely also be needed. So we as Manitobans need to ask ourselves do we need all this power? And do we need all this debt?

Most Manitobans seem to be under the false impression that Manitoba Hydro charges more per kilowatt hour (Kwh) for power exported to the U.S. than charged to local consumers.

Basic charges and rates vary among customer types in Manitoba: residential rates start at 6.38 cents per Kwh and ratchet up as demand increases, small and medium size general service customer rates start at 6.84 cents per Kwh and ratchet down as demand increases, large size general use customers pay less than 3 cents per Kwh but face additional demand charges.

In contrast Manitoba Hydro receives from 5.4 to 6 cents per Kwh for long-term fixed price contracts, and 2.4 to 4.5 cents per Kwh for power sold on the short-term spot markets. Manitoba Hydro's 59th Annual Report (pp. 100-101) shows: roughly 13.6 billion Kwh in annual sales to Manitoban general service customers grossed Hydro $669 million; nearly 7 billion Kwh in annual sales to Manitoban residential customers grossed Hydro $477 million; and of the nearly 10 billion Kwh in net exported electrcity Hydro grossed 427 million.

Now exports are bulk sales and the price to individual residents and businesses in Manitoba reflect the added costs of distribution lines, converter stations, maintenance costs, etc. Higher costs to Manitoban customers is therefore justified to a certain extent. Additionally revenue from export sales is used to subsidize domestic rates (not to mention helping spendtrhift governments balance the books from time to time).

But what about the risk of building these new dams in Manitoba's North?

There is obvious financial risk. The billions of dollars of debt being accrued to construct dams largely for export outside of Manitoba creates the risk that adverse fluctuations in currency and/or energy prices could threaten Hydro's profitability. Likewise, with a warming planet the threat of drought increases and lower water levels also threaten Hydro's profitability. Additionally if water levels or delays in dam construction result in Manitoba being unable to meet contractual power sale obligations, this could also harm Hydro financially. Since we the taxpayers underwrite Hydro's debt, we will be on the hook if Hydro defaults.

There is also the ecological and social costs of futher dam construction. Flooding, mercury poisoning, shoreline and river embankment destabilization, habitat disruption, introduction of new species in foreign water systems, and greenhouse gas emissions from reservoirs are some of the ecological costs of large-scale hydro-developments.

Socially, Manitoba Hydro certainly has a checkered past in regards to its relations with First Nations peoples. Construction of Dams in the 1960s and 1970 resulted in flooding, mercury poisoning, and the relocation of entire First Nation communities. The new model, set by the Wuskatim dam presently under construction, appears to be one of “engaging” First Nation communities in so-called “joint partnerships”. However observers, such as Peter Kulchyski of the University of Manitoba's Native Studies Department describe the Wuskatim agreements as “deeply flawed” and note how Nelson House band council came to power in a “deeply divided election.” Blocakdes of the Wuskatim Dam construction site in the summer of 2009 is further evidence of the continuing divisiveness of Hydro development in Manitoba's North.

These risks and external costs should be enough to give us pause, or atleast to argue for greater scrutiny of Hydro's risk management. Fortunately the Manitoba Public Utilities Board is presently undergoing a review of this very same issue. Manitobans would be wise to pay close attention to the hearings as they develop.

Getting serious about energy conservation in Manitoba, rather than patting ourselves on the back for a baseless A+ is a good place to start. Over the past ten years per customer electrcity demand in Manitoba has been relatively stable. Manitobans remain among the most wasteful users of electricity in the world. Hydro has some incentive to reduce energy use to free up additional electrical capacity which could then be exported. But it is the Government of Manitoba rather than Hydro which needs to take the lead on this. Helping consumeres to reduce electrical consumption is good government policy. It will help residents and businesses to save money, and it can avoid the financial, social and ecological costs of additional Hydro development.

Editors Note: I will return this issue again, but in the meantime I encourage your feedback on this issue. (jbeddome at yahoo.com)

Quick Update: Energy in Manitoba

Further to my last post "East, West, or Windtower", a couple of notworthy updates.

1. TRANSMISSION LOSS FROM NORTHERN DAMS -

“More than 10 per cent of the power generated by the next generation of mega-dams will vanish when it's shipped south down the three Bipole transmission lines, including the contentious west-side line.
... Once Keeyask and Conawapa are up and running in 2023, total line losses will grow by 254 megawatts to 479 megawatts,” according to Winnipeg Free Press (Jan. 18, '11) freedom of information requests.

http://www.winnipegfreepress.com/premium/mega-dams-to-lose-megawatts-line-loss-increases-with-distance-travelled-114079764.html (subcription required).

2. IS CHEAP ENERGY A GOOD THING? OR WOULD A LOW INCOME PROGRAM BE MORE EFFICIENT?

A November 2010 report submitted to the Public Utilities Board (PUB) by Green Action Centre and TREE (Time to Respect Earth’s Ecosystems) argues for:
-A maximum affordability level for energy bills set at six percent of income.
-Subsidies to low-income households to offset energy bills above this amount, based the customer’s previous average energy bills
-Low income households would have the incentive and opportunity to increase conservation as the benefit is fixed for a period of time based on previous usage rates.
-Manitoba Hydro and all its customers would benefit as the subsidy could be reduced over time, taking into account reduced consumption as a result of conservation measures already taken.

I commend this report for challenging the conventional wisdom that cheap energy is always a good thing, while at the same time being mindful of the tenets of social justice.

“Revenue from these exports is currently used to keep rates as low as possible for all Manitoba consumers, including residential, commercial, and industrial power users. Our cheap energy undermines our province’s commitments to conservation, while doing a poor job at meeting equity goals. In fact, to the extent that higher energy bills often correlate to larger home sizes and higher incomes, these subsidies are regressive and benefit wealthier Manitoba families. (Emphasis added.)

Green Action Centre argues instead that at least some of the proceeds from our exports could be used to support a low-income energy affordability program that would give all Manitoba families, regardless of income, the opportunity to keep their energy bills affordable.”

http://greenactioncentre.ca/content/electricity-how-affordable-is-cheap/

http://greenactioncentre.ca/wp-content/uploads/2011/01/Home-Energy-Affordability-in-Manitoba-A-Low-Income-Affordability-Program-for-Manitoba-Hydro.pdf (Full Report)

East, West, or Wind Tower? -Green Leader Exposes Manitoba Energy Myths-

Manitoba Hydro (Hydro), and more specifically the issue of where to route Bipole III, is likely to be one of the major issues in the upcoming 2011 Manitoba General Election. It is unfortunate this binary “east side” vs. “west side” has dominated the public discourse, because the larger questions about how we use, produce, distribute, and sell energy within and beyond Manitoba remain largely unasked.

Hydro's $8.5 billion debt is the single largest debt obligation of Manitoba – accounting for just under 37% of provincial debt obligations. To be fair Hydro is at present successfully managing its debt, but the taxpayers of Manitoba will be on the hook if Hydro failed to meet debt obligations. Over the next decade this debt could easily soar above $20 billion as Hydro anticipates spending an additional $18 billion, largely on the construction of new dams in Manitoba's North.

Hydro already produces enough electricity for Manitoba's needs – although we do at times import fossil fuel based energy. This means that new energy sources are largely being developed in Manitoba for the purpose of increasing electrical exports. Now this is not necessarily a bad thing, but this does mean that we as Manitoba taxpayers bear the risk if these export markets become unprofitable for whatever reason.

By far the cheapest way to free up more energy for export – or to prevent the need to import dirty energy – is to use energy more efficiently. Manitoba's per capita consumption of electricity is among the highest in the World! For all the NDP and Hydro rhetoric about getting an A+ in energy efficiency, if you look at Hydro's financial returns you can see that for the most part energy demand per customer (for both elecctricity and natural gas) has remained more or less stable in Manitoba over the past ten years. So what exactly did we get the A+ for?

On January 10, 2010 the Manitoba Government announced that the St. Joseph Wind Farm (St. Joseph) was operational. The 138 megawatt (MW) wind farm was built in ten months at a cost of of $345 million ($260 million in financing was provided by Hydro which will be repaid in energy).

A comparison of St. Joseph with the $1.6 billion 200MW Wuskwatim dam reveals that that wind-generation is cheaper than hydro-electric energy. Yes it is true that Hydro operates at an average efficiency of 65-75%, while wind operates at an average efficiency of 40%. But even after this is taken into account St. Joseph cost $6.25 million per megawatt (MW) of average deliverable capacity – only costing to Hydro $4.7 million per MW – whereas in contrast Wuskwatim cost $10.666 million per MW of average deliverable capacity.

Now granted there is also a need to create the infrastructure to connect the wind energy to the grid, and wind energy has intermittency issues. There is however also lower transmission losses when the energy is produced in Southern Manitoba, which is both closer to export markets and where most energy is consumed in Manitoba, rather than hydro dams located in Manitoba's North.

Manitobans are smart innovative people! We are constrined not by the technological capacity of better energy efficiency, or the feasibility of non-fossil fuel based alternative energy such as wind and solar, but by the limits of our own creativity. It starts with having an open, honest, and frank public discourse about energy. The point here isn't to provide all the answers, but to point out that a more thorough debate on energy use, production, and distribution is drastically needed in Manitoba.

Unfortunately this debate is impeded by the political rhetoric, and energy myths propagated by Manitoba's three other political parties.

James Beddome, Leader
Green Party of Manitoba

Calculations:
Wuskwatim - $1,600 million/(200MW *75%) = $10.666 million/MW
St. Joseph - $345 million/(138MW * 40%)= $6.25 million/MW
(When the $95 million Pattern Energy contribution is added into the equation the cost to Hydro for St. Joseph reduces to $4.7 million per MW)