Manitoba Hydro says it must spend billions in the coming years to replace or overhaul aging generating stations, transmission towers and distribution lines that are degrading to the point where their declining condition poses a threat to Manitoba’s existing power supply.
The Crown corporation says it must ramp up spending on existing infrastructure by an additional $200 million a year in order to avoid what it described in a 2022 asset-management report as “accelerated system performance degradation and diminished supply.”
The report, presented to the Public Utilities Board as part of its rate application for 2024-25 fiscal year, warned it must start spending the additional funds for “the foreseeable future to sustain an ever-growing and continuously degrading asset base.”
Those assets include most of its hydroelectric generating stations, the oldest of which dates back to 1911, as well as some of the major transmission lines that convey power down the spine of the province and smaller distribution lines that deliver electricity to customers.
“The generation, transmission and distribution system have all reached an age where overall condition has begun to degrade, and declining performance is apparent through common industry metrics,” Manitoba Hydro warns in the report.
This degradation has been compounded by an existing maintenance and replacement schedule that is not keeping up with the demands, the Crown corporation warns. The combined effect of aging infrastructure and inadequate maintenance, which include both maintenance backlogs and cancellations, has led to an increasing number of service failures and power outages.
“An increasing amount of degraded asset failures are occurring,” the report states. “The impacts of the failures are growing due to factors that include obsolescence, leading to decreased availability of both spare parts and equipment knowledge and loss of system resilience.”
Hydro has started spending more money on replacing and overhauling infrastructure. In the 2022-23 fiscal year, Hydro increased its spending on asset maintenance by $27 million to $531 million overall, said Scott Powell, the Crown corporation’s communications director.
The 2022 asset management report suggested an annual spending target of closer to $700 million.
The increased tab for replacing and overhauling existing infrastructure comes in addition to a pending need for Manitoba Hydro to spend billions more on new generating capacity — expected to be wind farms — as well as new transmission lines.
After taking more than a century to build its generating capacity to 6,100 megawatts, the growing demand for clean electricity led Hydro to announce last year it must double or even triple this generating capacity within the next 25 years.
The pending capacity crunch has already led Hydro to warn it can not provide electricity to every new high-intensity industrial customer that wants to connect to its power grid — and warn actual shortages are possible within five years.
Even though more attention has been placed on Manitoba Hydro’s need to generate more capacity, the growing infrastructure deficit remains the same problem for the Crown corporation today as it was when the asset management report was authored in 2022, Powell said Wednesday in a statement.
“We know many of our assets are aging and will require refurbishment, increased maintenance, or replacement in the future. This is nothing new,” Powell said.
“As we have been doing for many years, we are continually striving for the right balance between what we can afford based on the rates we are awarded from the Public Utilities Board and what work will be required in the immediate-, medium- and long-term,” he added.
“We also must plan for expansion of the system to meet customer demands and help ensure economic growth in Manitoba.”
Hydro also spends large sums every year to service its debt, which stood at $24.6 billion at the end of the 2022-23 fiscal year. The utility spent $988 million on debt-financing charges that year.
Manitoba’s NDP government, meanwhile, has pledged to keep Manitoba Hydro rates affordable for consumers. Premier Wab Kinew said that goal can be achieved at the same time Hydro replaces aging infrastructure and builds up generating capacity.
“Probably the most affordable way for Manitoba to add this is for us to be looking at some combination of retrofits on home heating and doing upgrades on existing electrical generation stations,” Kinew said Wednesday in an interview, explaining those upgrades could involve placing additional turbines or high-capacity turbines at existing installations.
“I think when you put those things together, we’ve got a pretty good road map for keeping Hydro affordable and building it out for the next generation.”
Kinew said his government will present a new energy plan before the end of September. It will replace an energy road map presented by the former PC government in July 2023.
That plan, the premier said, will call for the construction of wind farms, similar to a plan unveiled by Quebec. Entirely new hydroelectric dams and nuclear power plants are likely not on the table, Kinew said.