Key themes and consistencies emerge from the findings and recommendations.

Government Driven The Government of Manitoba directed that these projects proceed and actively intervened to ensure they were approved in a manner consistent with the government’s wishes, including the route of Bipole III.

  • The oft repeated vision statement by senior elected Manitoba officials that hydroelectricity should be considered as “Manitoba’s oil” was the driver for the Keeyask project, which was more about electricity export development than domestic need. This vision statement would have been a positive affirmation for the projects for Manitoba Hydro officials and stakeholders and offered early tacit approval for the development of the projects.

  • The government environmental policy effectively precluded base power other than hydroelectricity.

  • Senior Manitoba Hydro officials indicated that Keeyask was not their priority at the time.

  • In 2007, the Minister responsible for Manitoba Hydro mandated a west side Bipole III route ostensibly due to a lack of Indigenous community support and out of concern for possibly losing the UNESCO heritage designation for the boreal forest along the east side. The review could find no direct linkage that would support such a conclusion. The Commission heard from First Nation leaders that there was no effective engagement with respect to the eastern Bipole routing in terms of potential equity participation or other compensation, which very well could have garnered the support of affected communities along the eastern route.

  • Government policy denied consideration of a P3 approach for the projects. The P3 model could have mitigated the risk of rising construction costs and any post-construction issues to the P3 partner and away from Manitoba Hydro and its rate payers, providing greater certainty of the cost of the projects.

  • Government excluded assessment of Bipole III from the NFAT, which caused the review to be incomplete and skewed the results. Expert witnesses were prevented from considering Bipole III as anything other than a sunk cost, thus skewing the economic analysis of Keeyask.

  • The Manitoba Hydro-Electric Board (MHEB) was contemplating delaying plans to move forward with the Keeyask Infrastructure Project (KIP) in 2010. Government documents from the time indicate that the MHEB should be approached to avoid delay. The KIP proceeded, an indication that government intervened. Government approval for elements of the project prior to the NFAT led to $1.2 billion in spending on the Keeyask project prior to any official approval of the generating station itself.

  • The approval of export contracts in 2011 for delivery in 2020 created an imperative and provided tacit approval for new generation and transmission to service them.

  • The deadline given to the NFAT of June 20, 2014 led the panel to conclude its deliberations and make its recommendation based on only partially updated March 2014 information.

  • Inclusion of socio-economic analysis in the NFAT terms of reference favoured Keeyask and the preferred development plan (PDP), giving additional justification for proceeding as the government desired.

Government Oversight - Despite the fact that government directed these projects to their ultimate approval, the review could find no documentary evidence, including any Cabinet and Cabinet committee minute evidence, that the government was providing oversight and stewardship in respect of the construction of the projects once they were approved.

  • $1.2 billion was spent on the Keeyask Infrastructure Project (KIP) before final approval of the Keeyask generating station and without any request for review by the Minister or Cabinet.

  • There was no Treasury Board or Cabinet Secretariat approval stage required for the Keeyask project.

  • Government did not provide impetus or oversight that would have led to a more ambitious DSM (demand side management) plan, which would have significantly reduced the load forecast and delayed the need-date for Keeyask during the NFAT.

  • The case for the projects centred on the export case and the “Manitoba’s oil” narrative; however, there is no evidence that the government was intentional about monitoring the U.S. market or political and regulatory volatility that could erode the export case. The assumption of a U.S. carbon tax and regulations that might favour Manitoba Hydro electricity exports to the U.S. carried risk, as did the clear trend emerging toward low-cost natural gas generation.

Manitoba Hydro

  • Manitoba Hydro officials had been advising governments for decades to ensure the reliability of the system with a Bipole III (east side route).

  • Manitoba Hydro did not employ a robust Integrated Resource Plan to assess the need for and timing of major projects.

  • Manitoba Hydro presented an unreasonably high pipeline demand load estimate of 1700 GWh at the end of the NFAT process. By August 2014, two months after Keeyask was approved, the estimate was drastically reduced without revisiting the conclusions of the NFAT process after a fundamental assumption changed.

  • Manitoba Hydro did not consider the impact of more aggressive DSM (demand side management) on its PDP and only during the NFAT was this considered in any material manner. The full implications of aggressive DSM were not available to the Public Utilities Board (PUB) prior to the end of the NFAT.

  • Manitoba Hydro placed too much weight on the successful Limestone project, rather than the more recent Wuskwatim project which was much less successful. The review heard often about the confidence-assuring success of Limestone and little about the latter.

  • Manitoba Hydro evaluated projects using an unreliable long study period of 78 years.

  • Manitoba Hydro did not use effective ‘stage-gating’ that would have allowed for suspensions or delays of the project and could have mitigated the risk of $1.2 billion being spent prior to NFAT.

  • Manitoba Hydro utilized a cost recoverable general construction contract option (GCC) that transferred the risk of cost overruns and problems to the Crown corporation, to the benefit of the contractor.

  • Manitoba Hydro’s assessment of the benefits of the Keeyask to Keeyask Cree Nation (KCN) partners was overly optimistic. Projected levels of economic benefits for KCN have declined significantly from levels that the partners expected when they signed the Joint Keeyask Development Agreement.

  • Notwithstanding route change implications and cost estimation errors prior to 2014, Bipole III appears to have been well managed by Manitoba Hydro thereafter.

  • MHEB and senior leadership at Manitoba Hydro reacted promptly and took steps to mitigate schedule issues and productivity in 2016 and 2017.

  • After years of delays and costs overruns, Manitoba Hydro was ultimately able to work with the contractor to achieve revised productivity targets for Keeyask in 2018.

Future Considerations for Manitoba Hydro

  • Manitoba Hydro should be mandated to focus on core functions of providing electricity to Manitoba reliably and cost effectively. If there are divisions of the Crown corporation that are counterproductive to its core mandate, they should be considered for wind down or dispersal.

  • Manitoba Hydro should remain a Crown corporation and prioritize the continuation of the advantage it provides all Manitobans and Manitoba’s economy with reliable, affordable power.

  • Manitoba Hydro should ensure greater caution and conservatism than was the case on these projects in its future forecasting related to all major projects.

  • Manitoba Hydro should be allowed to explore the option of considering P3’s for major projects in the future that can transfer risk to a private sector partner.

  • Manitoba Hydro should have flexibility of construction labour options for large projects.

  • Manitoba Hydro should implement a robust and regularly updated IRP for timeline and resource planning and major project management.

  • Manitoba Hydro is to be commended for the establishment of an internal team mandated to specialize in, manage and marshal major projects (the Major Projects Executive Committee, or MPEC).

  • Manitoba Hydro should be open to Indigenous equity partnerships in major electricity infrastructure projects.

  • Manitoba Hydro and its customers should not have to bear the risk of government’s export and economic development plans that add greatly to the risks taken by the Crown corporation. If government directs ‘merchant’ dams as it did with Keeyask, it must be willing to waive some or all of its debt guarantee fee and charges to Manitoba Hydro such as water fees, in the event of cost overruns or lower than forecasted sales or revenues.

The PUB and Bill 35

  • Manitoba Hydro’s IRP should be developed through a public process before the PUB.

  • Moreover, the review concurs with the PUB’s call for a comprehensive and regularly occurring IRP process in which DSM will be evaluated as a standalone resource on equal footing with other energy resources.

  • The PUB should not approve a large project in the future based on a need-date advanced by multiple years to serve last-minute load forecasted for a small number of customers, such as the 1700 GWh load forecasted for pipelines near the end of the NFAT.

  • In its analysis of these projects, the PUB was constrained by such things as short and seemingly inflexible timelines, pre-approval of the KIP and associated costs ($1.2 billion) and the government exclusion of Bipole III from the NFAT.

  • Members of the PUB should be appointed for longer terms with limited ability for government to terminate them during their terms. An amendment to the Public Utilities Board Act for minimum terms should be considered.

  • The procurement contract type (such as the GCC in the case of Keeyask) should be part of the mandatory public review process with respect to major capital projects that is contemplated in Bill 35.

  • Under Bill 35, the required NFAT of a major new facility should also include a full assessment of risk and fiscal implications for the Provincial financial circumstances.

  • The review supports the thresholds set out in Bill 35 for mandatory PUB review of new facilities.

  • The review supports changes in Bill 35 that would require Treasury Board approval for Manitoba Hydro’s capital expenditure programs.

The Relationship Between Manitoba Hydro and the Government

  • Manitoba Hydro is a very large player within the Manitoba public sector. It should have a relationship with the Government of Manitoba at least as robust as a major line department of government.

  • A regular reporting relationship should exist between the Crown corporation, the Minister responsible, the Crown Services Secretariat and its Minister, and the Legislative Assembly, through the appropriate standing committee.

This review notes the importance and essential nature of a strong, publicly owned Manitoba Hydro and the reliable and affordable electrical system it operates for its customers and shareholders, the people of Manitoba. These findings and recommendations are respectfully offered in hopes that lessons might be learned from mistakes and successes alike, and for the strengthening of Manitoba Hydro in the future.