Independent review will probe cost overruns on Manitoba Hydro megaprojects

The provincial government is committing to an independent review of two Manitoba Hydro megaprojects that have been plagued by substantial cost overruns.

Gordon Campbell, the former Liberal premier of British Columbia, has been hired to conduct an economic review of the planning and decision-making processes related to the Keeyask Generating Station and the recently completed Bipole III.

Premier Brian Pallister suggested months ago a review may be necessary after the Public Utilities Board granted an electricity rate increase of 3.6 per cent — less than half of what the Crown corporation sought.

He also expressed concern for Hydro's current and projected debt levels.

"We're going to have to borrow billions of dollars over the next few years to complete Keeyask and the Bipole line," Pallister said in May. 

At the time, he said a review would be considered after the government looked into the approved rate increase.

The province has offered $2.5 million to conduct the external review, which is slated to begin immediately.

Permission for projects under scrutiny

The Bipole III transmission line was completed this summer. The cost for the project was originally pegged in 2007 at $2.2 billion, which was adjusted to $3.3. billion in 2011 and $4.6 billion in 2014. In its latest annual report, Hydro says the total estimated cost is $5.04 billion.

The Keeyask generating station project was originally estimated to cost $6.5 billion and expected to be in service by November 2019. In March 2017, Hydro revised the cost estimate to $8.7 billion.

A 2017 report written by Calgary consulting firm MGF Project Services, commissioned by the Public Utilities Board, found the dam could cost as much as $10.5 billion due to the "contractor's poor productivity and increased indirect costs" associated with the project.

Campbell has been tasked with investigating the direction provided by the former NDP government, the necessity of the projects and whether the estimated benefits exceeded any other options that would have satisfied the province's electrical needs, according to the scope of the investigation.

He will make recommendations on how the province should pursue similar projects in the future and whether an external review or further regulatory approvals should be in place. 

Campbell approved Site C dam, now billions over budget

Campbell, who was the premier of B.C. from 2001 to 2011, is now the CEO of Hawksmuir International Partners, but has his own experience with green-lighting hydro projects that eventually face massive cost overruns.

While premier in 2010, Campbell approved the Site C hydroelectric dam on the Peace River in B.C. It was originally expected to cost $6.6 billion. That number has now ballooned to $10 billion, with an extra $700 million set aside for contingency costs.

• Massive B.C. dam project approved
• B.C.'s Site C dam project behind schedule, plagued by problems, expert claims

Campbell was appointed this past summer by Ontario Premier Doug Ford to head an independent financial commission of inquiry to probe that province's past spending and accounting practices. 

Opposition parties pan review 

Manitoba Liberal Leader Dougald Lamont scoffed at the idea of reviewing whether Hydro decisions had been politicized, saying that issue has already been identified several times and the practice continues under the current government.

"We are going to be paying Gordon Campbell $2.5 million for something I can tell the premier for free," he said.

"Stop politicizing Hydro. Appoint a board that is reasonably independent that has experts on it and start to undo the things the NDP were doing."

Lamont says Manitoba's auditor general, the Public Utilities Board and external consultants paid by Hydro have examined both Bipole III and Keeyask.

He says instead of doing another review, the PC government could stabilize Hydro's finances by ending years of raiding the company's coffers through water fees and finance charges adding up to hundreds of millions of dollars every year.

"Stop treating it like an ATM. That's the fundamental thing that this government hasn't done, and it is the fundamental thing the NDP were doing this whole time," they were in power, Lamont told CBC News.

NDP MLA Andrew Swan had questions about what form Campbell's review would take, noting the former B.C. premier has been given powers under Manitoba's Evidence Act and has been named a commissioner.

"Does that mean this commissioner is going to have an inquiry? Is the commissioner going to interview witnesses?" Swan asked.

Hydro debt

Its most recent financial report shows it is more than $19 billion in debt as it works to complete various infrastructure projects. Billions more will end up on its books as Keeyask is completed and other work, such as the Manitoba-Minnesota Transmission Line, is started.

The Progressive Conservative government has accused the previous NDP government of mismanagement that left the Crown corporation in a precarious financial state — something Swan denied.

"Developing Hydro cost money. When you build Hydro capacity, the worst day is the day that capacity opens. You've invested the money and you haven't started earning any of the revenue from it," he said.

The PC government declined to make Crown Services Minister Colleen Mayer or any other spokesperson available to answer questions about the review.

With files from Ian Froese.