November 2009 Volume 19 Issue 3
I want to assure all Manitobans that despite the highly-publicized allegations to the contrary, Manitoba Hydro's power system is secure, our finances are strong and the future is brighter than ever. I fully support the review into the allegations to be undertaken by the Auditor General of Manitoba or her designate. For added assurance, Manitoba Hydro has also engaged two highly-respected consulting firms, ICF International and KPMG, to provide independent assessments of Manitoba Hydro's risk management practices. In the meantime, I would like to provide you with my comments on some of the issues that have been raised over the past several weeks:
Security of energy supply is fundamental to the mandate of Manitoba Hydro and has always been one of our top priorities. Our record of system reliability ranks among the very best of all energy utilities in Canada. It's a record we're proud of and we will never, under any circumstances, allow the safety and reliability of our system to be compromised.
To further enhance system reliability, a major new high voltage direct current transmission line, Bipole III, is planned for construction with a 2017 in service date. Bipole III will provide for a separation from the existing high voltage transmission line from northern Manitoba and will reduce the risk of power outages due to major storms or other uncontrollable events. Bipole III will also provide additional capacity to transmit power from planned new generation facilities in the north.
There has also been some suggestion that Manitoba Hydro has oversold future energy supplies in export markets which will lead to energy shortages in Manitoba. In fact, export contracts put Manitoba load first and Manitoba Hydro has the right to curtail exports in the event of unforeseen circumstances in Manitoba. Furthermore, our planned export contracts will result in additional interconnections with our neighbouring utilities and will result in enhanced security of supply for all Manitoba Hydro customers.
In a recent report on long-term contracts prepared for Manitoba Hydro, ICF International commented that, "Manitoba Hydro has the lowest domestic electricity rates in Canada and North America in part because of exports. Export prices greatly exceed Manitoba Hydro's embedded generation costs, and the revenues are used to decrease domestic rates and/or to provide the financial wherewithal to withstand droughts without rate shocks." ICF further stated that, "It is appropriate for Manitoba Hydro to enter into long-term firm contracts for 20 to 30 years into the future in the manner in which the Corporation is proposing."
Manitoba Hydro is currently in the strongest financial position in the history of the Corporation. This is evidenced by the achievement last year of the Corporation's long-time target for the debt/equity ratio. The debt/equity ratio is recognized by rating agencies and financial institutions as one of the primary indicators of a Corporation's financial strength. In 2002, the Board of Manitoba Hydro set a target to achieve a debt/equity ratio of 75:25 by 2011/12. That target was achieved last year – three full years ahead of schedule.
While Manitoba Hydro, like any other business, is not immune from the financial impacts of the world economic downturn, we are especially well-positioned to prosper in the years ahead. Our financial forecasts clearly indicate that Manitoba Hydro's financial position will continue to be strong and that investments made in new generation and transmission today will pay huge dividends to future generations of Manitobans.
Suggestions have been made that Manitoba Hydro has somehow become a secretive organization. I can't think of any organization that comes under more scrutiny than does Manitoba Hydro. We hold three well-publicized Public Accountability meetings in different parts of the province each year, I appear before a Crown Corporations Committee of the Legislature each year, we are subject to regular mandate and performance reviews by the Crown Corporations Council, our financial records are scrutinized regularly by internal and external auditors, the Auditor General provides additional oversight on Manitoba Hydro's financial accountability, we review our financial status at least once annually with the three major credit rating agencies, we obtain Treasury Board approval on all capital and borrowing requirements, and our rates are subject to continuous review and approval by The Public Utilities Board (PUB).
With respect to PUB, there has been some suggestion that we are withholding information that the PUB needs to effectively do its job. Manitoba Hydro is more than willing to provide whatever information is necessary for the PUB to fulfill its important rates approval mandate. However, because Manitoba Hydro operates in a very competitive export power marketplace, it is necessary to provide the PUB with information in such a way that does not put Manitoba Hydro at a competitive disadvantage. Both Manitoba Hydro and the PUB are working hard to improve our currently cooperative relationship.
In fiscal year 2003/04, Manitoba Hydro incurred the largest financial loss in its history – a total loss of $436 million. Was this loss avoidable? Absolutely not. Because perfect foreknowledge is not possible (with respect to future precipitation and extreme weather), when low water conditions were experienced in 2003, Manitoba Hydro prepared for the worst drought on record and made certain that all Manitobans would be provided with sufficient power in a worst case scenario. Fortunately, the winter of 2003/04 ended up being warmer than normal and water supplies were slightly better than the worst case scenario (the drought ended up being the third worst on record as opposed to being equal to the worst on record). Had Manitoba Hydro known this in advance, which was not possible, the cost of the drought could have been reduced to some extent. However, because reservoirs were not fully drained in 2003/04, incremental revenue was generated in the following years through the deferred sale of electricity out of these reservoirs.
Following the drought, the PUB reviewed Manitoba Hydro's drought management operations. In Order 143/04 the PUB stated, "The Board is satisfied that MH took reasonable steps to mitigate its loss during the drought, including its actions in the futures market to reduce its export delivery obligations".
I am extremely proud of Manitoba Hydro's employees and their record of providing safe, reliable and low cost energy to Manitobans. No matter how adverse the conditions or how difficult the task, Hydro employees have a reputation for rising to the occasion and overcoming whatever obstacles they may encounter. I am very confident in the abilities of all Hydro employees to meet our current and future challenges with the same enthusiasm, professionalism and innovative spirit that has made Manitoba Hydro the great company that it is today.
Manitoba Hydro is entering an exciting new decade of investment in the future of our province. Major projects such as Keeyask, Conawapa and Bipole III transmission will require large capital investments but the returns to Manitobans are many times greater and will endure for generations to come. It is essential that we approach this decade of investment with confidence and that Manitoba retains its rightful status as the province with the most environmentally sustainable, lowest-cost and most reliable supply of energy in the world.
Bob Brennan, FCA
President & CEO
Manitoba Hydro
Over 300 people attended the grand opening of Manitoba Hydro Place. |
Manitoba Hydro Place pulsed with excitement the morning of September 29 as Manitoba Hydro staff and guests gathered to celebrate the official opening of the corporation's new head office in downtown Winnipeg.
Premier Gary Doer and Bob Brennan, Manitoba Hydro President & CEO cut the ribbon at Manitoba Hydro Place's 360 Portage Ave. entrance to open the building. Also at the ribbon cutting were Sam Katz, Mayor of the City of Winnipeg, Manitoba Hydro Board Chairman Vic Schroeder, and the project's lead design architect, Bruce Kuwabara.
The event then moved inside to the ground floor gallery where the audience was treated to performances by the Fubuki Daiko drummers, the Royal Winnipeg Ballet, and the Gillam School Fiddle Band, accompanied by Wanipigow School students.
"This is truly a building that we at Manitoba Hydro are proud of," said Brennan. "Certainly, the project team should be thanked for what they've achieved. I think we've been able to enhance downtown Winnipeg with a striking and award-winning new building that also provides a healthy and vibrant work environment for our employees."
"This is a great addition to the skyline of Winnipeg, isn't it?" said Doer. "Manitoba Hydro is a leader in energy efficiency and clean energy, and now with this building it has the most energy efficient office building anywhere in Canada."
Katz added, "I only have one word – wow!" He then went on to thank Doer and Brennan for their commitment to downtown. "Everyone knows what moving 1,800 or 1,900 people downtown can do for this city. Thank you for your belief in our downtown."
Acknowledging the building's achievements, all of the speakers alluded to the many features that have contributed to its success. These include careful siting of the new building to take maximum advantage of southern sunlight while minimizing northern exposure; geothermal heating and cooling; ultra-clear, low-iron windows for the double-curtain wall exterior; high efficiency lighting; constant fresh-air; humidifying water features and the building's striking but practical solar chimney on the north side.
Manitoba Hydro Place occupies an entire city block in downtown Winnipeg and is bordered by Portage Avenue, Carlton Street, Graham Avenue, and Edmonton Street. It currently holds approximately 1,700 employees from previous corporate locations, adding to improved efficiencies and synergies for both staff and customers alike.
If you're unfamiliar with the term lean manufacturing it may initially evoke an image of a low-fat production line. Food connotations aside, the application of lean manufacturing principles to a business's operations can make it into a more efficient – and healthier – version of itself.
"Lean manufacturing focuses on the continuous elimination of non-value added activities in a manufacturing process," said Michael Stocki, an engineer in Manitoba Hydro's Customer Engineering Services who is helping Manitoba manufacturers implement Power Smart Lean Services. "These wastes include practices that customers are not willing to pay for, such as overproduction, inventory, motion, waiting, transportation, over-processing and defects.
"Facility energy is directly or indirectly imbedded in most of these forms of waste," added Stocki. "The overuse of energy can be independently viewed as a waste if it is not directly adding value to a process. Many lean manufacturing tools have been developed that can also assist in the identification and elimination of these energy wastes."
About a year ago, the Canadian Manufacturers & Exporters (CME) of Manitoba provided lean manufacturing training and opportunities to collaborate with Manitoba Hydro customers.
"CME was interested in working with us and has been essential to this process," said Stocki.
Through Hydro's Performance Optimization Program, Stocki provides each participating company with a Power Smart energy efficiency screening study. This identifies both electric and natural gas energy wastes, prioritizes energy efficiency opportunities and directs the client to performance optimization incentives. Following this study, clients can take advantage of additional opportunities.
"We can leverage lean principles by capitalizing on the synergies between lean manufacturing and energy management to increase the incorporation of energy efficiency," said Stocki. "One of the services I would like to develop more through Power Smart Lean is the Kaizen Blitz. This looks at a very specific product line or processing stage and how to improve it. Kaizen is analogous to continuous improvement."
This past spring, Stocki worked with Winpak, a Winnipeg-based company which manufactures plastic packaging primarily for the food industry as well as health-care applications.
"We did a Kaizen Blitz focused on turning off equipment when it's not needed," said Stocki. "It's basically trying to do things right and then realizing savings often without any capital."
Winpak managers and operators spent a day identifying energy saving opportunities in one work centre in their plant and then had follow-up meetings.
"We've been using some lean tools for several years," said David Bornn, Winpak's manager of operational excellence. "It was interesting to look at the energy saving aspect."
During the blitz, several action items were identified that would allow Winpak to realize the energy savings at the work centre.
"For the most part, everything was completed in two to three months and then we rolled it out to other areas," said Bornn. "It's definitely something we would do again."
Lean manufacturing is a continually evolving process.
"It's a different way of thinking," said Stocki. "Manufacturers I've worked with don't say they are lean, rather they recognize they are on this journey of continuous improvement."
View more information on Power Smart Lean Services. This service is offered at no cost.
Suggestions and comments regarding articles are always welcome. Address to:
Insights
Manitoba Hydro Public Affairs
PO BOX 815 STN Main
Winnipeg, MB R3C 2P4
