A review of two Manitoba Hydro mega-projects concludes that construction of the $8.7-billion Keeyask Generating Station was rushed without adequate oversight by a former NDP government that viewed hydro exports as "Manitoba's oil."

A review of two Manitoba Hydro mega-projects concludes that construction of the $8.7-billion Keeyask Generating Station was rushed without adequate oversight by a former NDP government that viewed hydro exports as "Manitoba's oil."

The review, conducted by former Saskatchewan premier Brad Wall, recommends Manitoba Hydro remain a publicly owned utility but that it stick to its core business of supplying Manitobans with reliable and affordable power.

It also recommends the government establish formal measures to provide better oversight of its largest Crown corporation.

The review found that cabinet decisions to promote power export sales led to $1.2 billion being spent on the Keeyask project before it was formally approved by the Public Utilities Board.

"There wasn't a domestic need to justify Keeyask," Wall told a news conference Friday.

Brad Wall's review found cabinet decisions to promote power export sales led to $1.2 billion being spent on the Keeyask project before it was formally approved by the Public Utilities Board. (Mike Deal / Winnipeg Free Press)

Brad Wall's review found cabinet decisions to promote power export sales led to $1.2 billion being spent on the Keeyask project before it was formally approved by the Public Utilities Board. (Mike Deal / Winnipeg Free Press)

"What's new to this report, that hasn't been dealt with a lot, is that truly Keeyask was a merchant plant," he said. "It wasn't about domestic demand. That’s a choice government can make but they have to be transparent with Manitobans who then bear the risk."

There is no evidence the previous government carefully monitored U.S. political and regulatory volatility that could have eroded the case for exports, the report said. Neither was adequate consideration given to the effect of domestic programs designed to reduce power consumption, it said.

Key recommendations

• Manitoba Hydro should remain a Crown corporation and focus on providing reliable and low-cost electricity to Manitobans. Non-core divisions of the corporation "should be considered for wind down or dispersal."

• The corporation should be allowed to explore the option of considering public-private partnerships for major projects.

• Hydro should have flexibility when it comes to labour for construction projects. The report says project labour agreements constrained the corporation, requiring it to employ labour from select unions that may have resulted in higher project costs.

• Manitoba Hydro should remain a Crown corporation and focus on providing reliable and low-cost electricity to Manitobans. Non-core divisions of the corporation "should be considered for wind down or dispersal."

• The corporation should be allowed to explore the option of considering public-private partnerships for major projects.

• Hydro should have flexibility when it comes to labour for construction projects. The report says project labour agreements constrained the corporation, requiring it to employ labour from select unions that may have resulted in higher project costs.

• Ratepayers should not bear the risks associated with new power-generation projects that are intended to drive export sales, rather than serve domestic needs, for an extended period of time.

• The government should strengthen its oversight of Hydro to ensure the provincial cabinet is fully aware, on an ongoing basis, of the need, benefits and risks of Hydro capital projects.

• Manitoba Hydro should use the services of an external consultant on future major capital projects to help minimize its risks.

• The government should play an active role in evaluating the commercial risk associated with major capital projects undertaken by the Crown corporation.

• Hydro should plan capital projects so multiple projects are not considered simultaneously.

• Limits should be placed on the amount of money the corporation is allowed to spend in advance of final approval of a major capital project. Costs should be limited to activities required to assess the merits of the project.

• Members of the Public Utilities Board, which regulates consumer power rates, should be appointed for longer terms with limited ability for government to terminate them during their terms "to ensure that members are less sensitive to politics in making their decisions.

The total cost of the Keeyask and Bipole III projects grew to $13.4 billion from an initial estimate of $9.7 billion, creating a substantial debt burden for Manitoba Hydro.

The review found that Manitoba Hydro recognized the need for improved power transmission reliability decades ago, but the construction of a third transmission line from northern Manitoba was timed to accommodate new northern power dams (including Keeyask) and export sales.

The decision by the former NDP government to reroute Bipole III west of Lake Manitoba, instead of east of Lake Winnipeg, added $400 million to the project, the report said. There's evidence that up to $1 billion in additional costs could have been avoided had the eastern route, favoured by Manitoba Hydro, had been pursued, it added.

The six-volume report is 14,000 pages long and weights about 140 pounds. Only one copy was printed. (Mike Deal / Winnipeg Free Press)

The six-volume report is 14,000 pages long and weights about 140 pounds. Only one copy was printed. (Mike Deal / Winnipeg Free Press)

The NDP mandated the western Bipole route in 2007, ostensibly due to a lack of Indigenous community support, and concern over the possibility of losing the UNESCO heritage designation it was seeking for the boreal forest along the east side. However, Wall said he could find "no direct linkage that would support such a conclusion."

The Wall report is a massive document, consisting of more than 14,000 pages divided into six volumes. It contains copies of numerous past studies and reports, exhibits and newspaper articles relating to the Keeyask and Bipole III projects.

The findings are based on a review of the documents relating to the projects' approval and construction processes, including internal Hydro reports, cabinet documents and interviews or submissions from 68 organizations and individuals, including past and present Hydro executives and elected officials.

Two former NDP premiers, Gary Doer and Greg Selinger, were interviewed for the report.

The Pallister government commissioned the review in the fall of 2018 with a budget of $2.5 million. Former British Columbia premier Gordon Campbell was initially tasked with the job, but he withdrew after facing allegations of sexual assault (which he denied). Wall continued the work.

Wall's company was paid $999,071 for his work, while Campbell's firm earned $607,059. The government also covered office, legal and other expenses totalling $115,748. The commission's total cost came in under budget at $1.7 million.

The total cost of the Keeyask (above) and Bipole III projects grew to $13.4 billion from an initial estimate of $9.7 billion, creating a substantial debt burden for Manitoba Hydro, a new report concluded. (Manitoba Hydro files)

The total cost of the Keeyask (above) and Bipole III projects grew to $13.4 billion from an initial estimate of $9.7 billion, creating a substantial debt burden for Manitoba Hydro, a new report concluded. (Manitoba Hydro files)

Wall said government policies at the time the mega-projects were conceived denied consideration of a public-private model for their construction. The P3 approach could have mitigated the risk of rising construction costs and provided greater cost certainty for the projects, he said in his report.

"My experience with P3s is that they can also involve simply the contracting of service and maintenance to the private partner while the ownership does not change," he told reporters.

Report gives cover to PCs to privatize, unions say

Critics say Brad Wall's probe of Manitoba Hydro is a political exercise by the Progressive Conservative government to pave the way for privatization of the public utility as demand for clean power sources grows.

Manitobans shouldn't be fooled by what's happening, critics and a number of unions representing Manitoba Hydro workers said Friday in response to Wall's report.

Critics say Brad Wall's probe of Manitoba Hydro is a political exercise by the Progressive Conservative government to pave the way for privatization of the public utility as demand for clean power sources grows.

Manitobans shouldn't be fooled by what's happening, critics and a number of unions representing Manitoba Hydro workers said Friday in response to Wall's report.

Changes in the U.S. and across Canada and a shift toward "green" initiatives pose a significant opportunity for Manitobans, Mike Espenell, business manager for the International Brotherhood of Electrical Workers Local 2035, said Friday. The mega-projects Wall reviewed in the report stand to benefit the owners of Manitoba Hydro now more than ever, he said.

“It has never been more evident that our surplus firm power and inter-connection to the U.S. and neighbouring provinces is likely to propel this province’s wealth and economy for generations," Espenell said in a news release

Many of Wall's recommendations — such as public-private partnerships (P3s) — would involve private businesses getting a cut, and cost the public more in the long run, critics say.

"Wall's recommendation to use P3s runs counter to reams of evidence on how much more expensive P3s are to the public purse," said Molly McCracken, Manitoba director of the Canadian Centre for Policy Alternatives.

"Wall’s Hydro report cites a mental health hospital constructed in North Battleford, Sask. as an example for Manitoba to follow. What Wall does not note is that constant repairs have rendered huge parts of the hospital unusable, with patients being moved constantly, affecting their care and these costs are absorbed by the taxpayer," McCracken said. "If Hydro used P3s, any changes in design or externalities would be still absorbed by the taxpayers," she said in an email.

The P3s are touted for shifting some of the risk inherent in a project from the public to a private partner, said Michelle Bergen with CUPE 998, which represents 900 clerical and technical staff at Hydro. But that also comes with a very high price tag, she said. Private firms get involved in P3s for profit, not the public good, Bergen said. “At the end of the day, no private company would ever take on risk associated with building hydroelectric dams in northern Manitoba without the expectation of significant private profit, and Manitobans will be the ones paying for that profit with even less accountability.”

The unions said the former NDP government enacted legislation that ensures thorough oversight, transparency, and accountability for any proposed P3 project in Manitoba and the Pallister government scrapped it after taking office in 2016.

The NDP called Wall's report a "smokescreen" to "distract" from privatization plans.

"This a political document meant to distract the people of Manitoba from the actual damage Mr. Pallister and his PCs are doing right now," said NDP Leader Wab Kinew, pointing to a rate increase in December that wasn't scrutinized by the Public Utilities Board, and the government meddling with the Crown corporation's business. He said Wall's support for Bill 35 — the Public Utilities Ratepayer Protection and Regulatory Reform Act — that shifts oversight of hydro rates from the PUB to the cabinet, at least temporarily, is contradictory.

"The PCs decided to hire a friend and a political ally... to write a report that would tell them exactly what they want to hear," said Adrien Sala, the NDP's critic. The report is a "smokescreen" the government is using to privatize Manitoba Hydro piece by piece, which Sala said has already begun with the winding down of the consulting arm of Manitoba Hydro International.

Both the PC government and the former NDP government meddled with Hydro to the detriment of the Crown corporation and Manitobans, said Liberal Leader Dougald Lamont. Wall's recommendation that the utility should have a more formalized "relationship" with the government — similar to a department — is a bad idea, Lamont said.

"We need less political interference in Manitoba Hydro and more transparency," Lamont told reporters.

"(P3s) should at least be on the table," he said. "We're not saying that they necessarily be used for major projects."

Neither Premier Brian Pallister nor Crown Services Minister Jeff Wharton made themselves available to the media for comment on Friday.

In a statement, Wharton said the government commissioned the review to determine why the projects went ahead "in spite of the economic and environmental evidence against them."

"This review confirms that Manitobans were deliberately left in the dark regarding Bipole III and Keeyask and provides clear recommendations to ensure that this can never happen again," the minister said.

Manitoba Hydro also issued a statement saying it was reviewing the report and looks forward to discussing the recommendations with the government.

larry.kusch@freepress.mb.ca

carol.sanders@freepress.mb.ca

Carol Sanders

Carol Sanders
Legislature reporter

After 20 years of reporting on the growing diversity of people calling Manitoba home, Carol moved to the legislature bureau in early 2020.

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Larry Kusch

Larry Kusch
Legislature reporter

Larry Kusch didn’t know what he wanted to do with his life until he attended a high school newspaper editor’s workshop in Regina in the summer of 1969 and listened to a university student speak glowingly about the journalism program at Carleton University in Ottawa.

   Read full biography