Manitoba Committee Hansard — 12 January 2023 (Crown Corporations Committee, Sitting 4, 42nd Legislature, 5th Session)

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Manitoba — Debates (Hansard)

Fifth Session – Forty-Second Legislature of the Legislative Assembly of Manitoba Standing Committee on Crown Corporations Chairperson Mr. James Teitsma Constituency of Radisson Vol. LXXVII No. 4 - 12 p.m., Thursday, January 12, 2023 ISSN 1708-6604

MANITOBA LEGISLATIVE ASSEMBLY Forty-Second Legislature Member Constituency Political Affiliation ALTOMARE, Nello Transcona NDP ASAGWARA, Uzoma Union Station NDP BRAR, Diljeet Burrows NDP BUSHIE, Ian Keewatinook NDP CLARKE, Eileen, Hon. Agassiz PC COX, Cathy Kildonan-River East PC CULLEN, Cliff, Hon. Spruce Woods PC DRIEDGER, Myrna, Hon. Roblin PC EICHLER, Ralph Lakeside PC EWASKO, Wayne, Hon. Lac du Bonnet PC FONTAINE, Nahanni St. Johns NDP FRIESEN, Cameron, Hon. Morden-Winkler PC GERRARD, Jon, Hon. River Heights Lib. GOERTZEN, Kelvin, Hon. Steinbach PC GORDON, Audrey, Hon.

Southdale PC GUENTER, Josh Borderland PC GUILLEMARD, Sarah, Hon. Fort Richmond PC HELWER, Reg, Hon. Brandon West PC ISLEIFSON, Len Brandon East PC JOHNSON, Derek, Hon. Interlake-Gimli PC JOHNSTON, Scott, Hon. Assiniboia PC KHAN, Obby Fort Whyte PC KINEW, Wab Fort Rouge NDP KLEIN, Kevin E. Kirkfield Park PC LAGASSÉ, Bob Dawson Trail PC LAGIMODIERE, Alan, Hon. Selkirk PC LAMONT, Dougald St. Boniface Lib. LAMOUREUX, Cindy Tyndall Park Lib.

LATHLIN, Amanda The Pas-Kameesak NDP LINDSEY, Tom Flin Flon NDP MALOWAY, Jim Elmwood NDP MARCELINO, Malaya Notre Dame NDP MARTIN, Shannon McPhillips PC MICHALESKI, Brad Dauphin PC MICKLEFIELD, Andrew Rossmere PC MORLEY-LECOMTE, Janice Seine River PC MOSES, Jamie St. Vital NDP NAYLOR, Lisa Wolseley NDP NESBITT, Greg, Hon. Riding Mountain PC PEDERSEN, Blaine Midland PC PIWNIUK, Doyle, Hon. Turtle Mountain PC REDHEAD, Eric Thompson NDP REYES, Jon, Hon. Waverley PC SALA, Adrien St. James NDP SANDHU, Mintu The Maples NDP SCHULER, Ron Springfield-Ritchot PC SMITH, Andrew, Hon.

Lagimodière PC SMITH, Bernadette Point Douglas NDP SMOOK, Dennis La Vérendrye PC SQUIRES, Rochelle, Hon. Riel PC STEFANSON, Heather, Hon. Tuxedo PC TEITSMA, James Radisson PC WASYLIW, Mark Fort Garry NDP WHARTON, Jeff, Hon. Red River North PC WIEBE, Matt Concordia NDP WISHART, Ian Portage la Prairie PC WOWCHUK, Rick Swan River PC

57 LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON CROWN CORPORATIONS Thursday, January 12, 2023 TIME – 12 p.m. LOCATION – Winnipeg, Manitoba CHAIRPERSON – Mr. James Teitsma (Radisson) VICE-CHAIRPERSON – Mr. Andrew Micklefield (Rossmere) ATTENDANCE – 6 QUORUM – 4 Members of the committee present: Hon. Messrs. Friesen, Helwer Messrs. Micklefield, Sala, Teitsma, Wasyliw APPEARING: Mr. Dougald Lamont, MLA for St. Boniface Ms. Jay Grewal, President and Chief Executive Officer, Manitoba Hydro Mr.

Edward Kennedy, Chairperson, Manitoba Hydro-Electric Board MATTERS UNDER CONSIDERATION: Annual Report of the Manitoba Hydro- Electric Board for the fiscal year ending March 31, 2022 * * * Clerk Assistant (Mr. Tim Abbott): Good afternoon, everyone. Will the Standing Com mittee on Crown Corporations please come to order. Before the committee can proceed with the busi - ness before it, we need to elect a Chairperson. Are there any nominations? Hon. Reg Helwer (Minister of Labour, Consumer Protection and Government Services): I nominate MLA Teitsma. Clerk Assistant: Mr. Teitsma has been nominated.

Thank you very much. Are there any other nominations? Hearing none, Mr. Teitsma, please take the Chair. Mr. Chairperson: Our next item of busi ness is the election of a Vice-Chairperson. Are there any nominations? Mr. Helwer: I nominate MLA Micklefield. Mr. Chairperson: MLA Micklefield has been nominated. Are there any other nominations? Hearing no other nominations, MLA Micklefield is elected Vice-Chairperson. This meeting has been called to consider the Annual Report of the Manitoba Hydro-Electric Board for the fiscal year ending March 31st, 2022.

Before we get started, I'd like to remind everyone that questions and comments should be put through the Chair. Are there any suggestions from the committee as to how long we should sit this afternoon? Mr. Adrien Sala (St. James): –hours. Mr. Chairperson: It has been suggested that the com- mittee sit for three hours. Is that agreed? [Agreed] Does the honourable minister wish to make an opening statement, and would he also please introduce the officials in attendance? Hon.

Cameron Friesen (Minister responsible for Manitoba Hydro): As the Minister respon sible for Manitoba Hydro, I am here today along with senior officials from Manitoba Hydro to present, for your approval, the annual report of the cor poration for the fiscal year that ends March 31, 2022. I also would like to, at this time, welcome the following members of the cor poration's board and executive who are joining us virtually: first, Edward Kennedy, chair of the Manitoba Hydro -Electric Board; ne xt, Jay Grewal, president and chief executive officer; and then Aurel Tess, chief financial officer.

I also want to, at this time, indicate that in the room today we also have Ryan Klos, who is the ADM, the assist ant deputy minister for Central Finance, acting today also as the acting deputy minister for Finance. We have Rob Marrese, who is the executive director in the Crown's secretariat, which resides within Manitoba Finance; and also Jim Crone, who is senior adviser in the Crown's secretariat.

58 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 We welcome all these individuals to the meeting this afternoon. I want to simply indicate in advance of the discussions and deliberations this afternoon that Manitoba Hydro is one of our most important Crown corporations. It is one of the most im portant companies in Manitoba. It has the critical role of supplying electricity and natural gas needs of Manitobans. It helps to drive our economy. It maintains our quality of life.

It is our gov ernment's priority to stabilize and strengthen Manitoba Hydro for the benefit of future generations. * (12:10) We have made im portant changes to protect the long-term sustainability of Manitoba Hydro. And the government's significant reduction in the Crown cor - poration's annual payments of prov incial fees to redirect funds to debt reduction, that is ensuring that hydro rates will remain among the lowest in the country for Manitoba ratepayers for years to come.

I am engaged with the chair of Manitoba Hydro - Electric Board along with the corporation's executive on a regular basis, and I 'm confident that the corporation is focused on its critical core busi ness, improving its financial health and delivering on its commitment to maximize the benefit of Manitoba 's clean, dependable energy and keep costs as low as possible. Jay Grewal is now ready to make opening remarks and, along with the chair of the Manitoba Hydro-Electric Board, to respond to questions relative to the board' s–or, to the cor poration's operations, as well as the board's mandate.

I would be pleased to respond to any questions that involve gov ernment policy this afternoon. We look forward to the discussions this afternoon. Thank you, Mr. Chair. Mr. Chairperson: We thank the honourable minister. Does the official op position critic have an opening statement? Mr. Sala: Thank you to the members of this committee and the staff of Manitoba Hydro for the work that you do. We believe Manitobans should be proud of the great work and value of our most impor- tant Crown cor poration, Hydro.

And we believe Hydro needs to be protected against the inter ference and undermining that we 've seen from this current PC government. We know it 's been a difficult few years for Hydro's employees, and we thank them for their work during the pandemic and through trying times, including strikes caused by the actions of this minister and the entire PC government. We know we 've lost–we've also lost visionaries who helped build Hydro into the lasting jewel it is today, in spite of the current gov ernment's actions; most notably, former president and CEO Bob Brennan.

We offer our sincerest condol ences to his family and to his friends. We're committed to building and investing in Hydro for the future, and that means a Hydro that 's forward-looking, where r ates are kept affordable for regular families. It also means Hydro remains whole and wholly owned by the public, instead of being broken up and sold off to the highest bidder. We believe the current gov ernment's agenda of privatization is wrong and will only take away control of Hydro from the people of Manitoba while leading to rate hikes and reduced reliability.

And that 's why it's so im portant this committee do its work to hold Hydro and the gov ernment accountable, so that we protect this most important of Crown corporations. Thank you. Mr. Chairperson: We thank the member. Do the repre sentatives from Manitoba Hydro - Electric Board wish to make an opening statement? Ms. Grewal–I believe you may be muted, Ms. Grewal. Ms. Jay Grewal (Pre sident and Chief Executive Officer, Manitoba Hydro ): Good afternoon. I 'm pleased to appear before the Standing Com mittee on Crown Corporations to answer your questions about the past year at Manitoba Hydro.

It's a pleasure to be here in person again, though we are virtual, as we have been for the past two years, due to COVID. Before I continue, as is our practice at Manitoba Hydro, I'd like to do a land and territorial acknowl - edgement. We join you today from Treaty 1 territory and the homeland of the Métis nation, where Manitoba Hydro has a presence across this province on Treaty 1, Treaty 2, Treaty 3, Treaty 4 and Treaty 5 lands, the original territories of the Anishinaabe, Cree, Oji-Cree, Dakota and Dene peoples, and the homeland of the Métis nation.

We acknowl edge these lands and pay our respects to the ancestors of these territories.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 59 The legacy of the past remains a strong influence on Manitoba Hydro's relationship with Indigenous com- munities today. We remain committed to establishing and maintaining strong, mutually beneficial relationships with Indigenous communities. Before I answer your questions, I would like to give you a brief overview of the past year at Manitoba Hydro. As you know, we had one of the worst droughts on record in t he '21-22 fiscal year.

Water inflows from southern portions of the watershed supplying our generating stations were well below normal, the lowest in over 40 years at some locations. This reduction in water flows severely impacted our ability to generate electricity. While service to domestic customers was never in danger, thanks to our interconnections to the neighbouring wholesale markets that allowed us to import energy as required during peak demand periods, the drought did hurt our ability to sell surplus electricity on the export market.

As a reduction of–as a result of that reduction of export op portunity or spot market sales, as well as increased imports to support peak demand, we exper- ienced a $248 -million loss last year, and that 's outlined in our most recent annual report. This loss required us to borrow funds in order to meet the needs of our customers and did result in us applying for and receiving, from the Public Utilities Board, an interim rate increase of 3.6 per cent that was effective January 1, 2022 to help deal with the impact of this once-in-40-year drought. Then this past sing–spring, we saw a complete reversal.

We had some of the highest water flows on record, parti cularly on the Winnipeg River, Lake Winnipeg and Nelson River, due to melt ing of an extremely heavy snowpack in northwestern Ontario and a series of torrential snow and rain storms that moved across our watershed in March and April. To give you an idea of how much precipitation we received in late winter and spring last year, Lake Winnipeg rose five feet in four months, between March and July 2022, which is when it hit its peak. That's the fastest rise on record since the early 1900s.

This year, with so much water in the system, we're projecting a net income of $559 million. That's a swing of $807 million from one fiscal year to the next. While good news for both Manitoba Hydro and our customers, that swing shows just how vul nerable we are as a hydroelectric utility to drought, prices on the opportunity export markets and other factors completely outside our control. It also shows that, despite the year we 're exper- iencing now, with predictable high water levels and good export prices, regular, predictable rate increases are needed to guard against that volatility.

Regular, predictable rate increases also help us mitigate the risk we face from increasing interest rates, fluctuating export market spot prices and the chance of higher rate increases, should we experience a multi-year drought.

We recently applied to the PUB requesting a reduced electricity rate increase to 2 per cent in each of the fiscal years of '23-24 and '24-25, and these–this 2 per cent is well below the current rate of inflation, as noted in our general rate application, where we have also asked the PUB for confirmation of the interim 3.6 per cent rate increase that was approved in January 2022 that is to help counter the effects of last year's drought. Now, in our initial general rate application filing, we had requested 3.5 per cent in each of the two fiscal years. Why did we refile? What changed?

Why did we reduce our rate request from the 3.5 to 2 per cent? We lowered our request because of the announce ment in November by the Manitoba government to reduce half of what it collects from Manitob a Hydro annually in both provincial debt guarantee fees and water rental payments.

This announcement not only helps our customers by making lower rates possible for the foreseeable future at a time of high inflation, it also helps that – make Manitoba Hydro financially stronger as we look towards the future, giving us the financial strength and resources to handle future droughts, increasing interest rates and other factors we cannot predict or control. I want to em phasize the compounding effect of these savings from reduced payments to government, meaning we now forecast annual rate increases of only 2 per cent for the next 19 years, starting in '23-24.

That will save Manitobans, our customers, an esti - mated $4 billion over the next 20 years. * (12:20) It also gives us the ability to start to reduce our $24 billion in debt. That will reduce interest costs, giving us the flexibility to continue making valuable investments in our system so our customers get the service they expect and we commit to. Without the reduction announced by the gov ernment and regular predictable rate increases, our capacity to reinvest in

60 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 our system would be limited, and that would result in less reliable service for customers, and our customers have told us through various surveys, the first priority they want from Manitoba Hydro is to ensure reliability. Some of our assets, like the Pointe du Bois Generating Station, were built more than 100 years ago and they need to be updated, rehabilitated, and that needs to happen now. And, as some of you know, three Manitoba Hydro com munities are amongst the fastest growing munici palities in the country: Niverville, West St. Paul and Neepawa.

Our customers in these and other com munities need Manitoba Hydro to be there to instal l new poles and cables, new street lights and build new substations so they have the electricity they need so they can keep growing in the future. And we need the financial resources to continue to maintain, 'rehabilidate' and, in many cases, replace our aging infrastructure, much of which was installed in the '40s, '50s and '60s and is nearing the end of its service life.

On that note, since I joined Manitoba Hydro four years ago this month, I've been focused on the future and what Manitoba Hydro needs to be doing to navigate the rapidly changing energy landscape so we can ensure reliable, affordable electricity and natural gas, not just today but into the future.

As I discussed with you a year ago, Strategy 2040, our long-term strategic plan, sets out how Manitoba Hydro can deliver on this commitment by maximizing the benefit of Manitoba 's clean, dependable energy, keeping costs as low as possible while provi ding the level of service Manitobans have told us they want and expect. Simply put, Strateg y 2040 underpins how Manitoba Hydro will serve our customers not just today but power a bright future for all Manitobans.

Essentially, we need to build a new kind of relationship with our 'custermers;' one of a trusted adviser helping our customers underst and the changing energy landscape and the new options and choices it presents them with. Much of the work Manitoba Hydro has taken on over the past year is tied directly to this strategy. One of our biggest projects is the development of our first-ever integrated resource plan, or our IRP. The IRP will be a foundational plan that will guide the actions we take– Mr. Chairperson: Just one moment, please, Ms. Grewal.

You're only allotted 10 minutes for your opening statement, but perhaps someone would ask for leave–and that has been asked. Is there leave to allow the CEO to complete her opening statement? [Agreed] Please proceed, Ms. Grewal. Ms. Grewal: The IRP will be a foundational plan that will guide the actions we take and investments we will make to meet the energy needs of our customers in the future. Our IRP includes input from thousands of customers and interested parties across Manitoba and it also includes research available on future energy resources as well as trends being seen in the energy sector worldwide.

When completed later this year, our IRP will ensure the plans we make and act on are reflected not only of the input we gained from our customers and other stakeholders but are also understood and firmly rooted in a practical reality today and in the years to come. I also want to give you a quick update on the Keeyask project, the largest capital project ever undertaken by Manitoba Hydro. The seventh and final generating unit at Keeyask was released for service on March 2022.

All Keeyask generators, all seven, are delivering clean, renewable energy –dependable energy–to Manitobans and will do that for decades to come. These units came into service five months ahead of

schedule and the project is trending towards being completed approximately half a billion below the control budget of $8.7 billion, which was set in 2017. And this is despite almost two years of pandemic, health and travel restrictions. The project, following the partnership model esta- blished with Wuskwatim, ensures that com munities impacted by the project will derive ongoing and lasting benefit. This is in addition to the tens of millions of dollars of benefits in employment, training and contracts that First Nation com munities received over the construction life of the project.

The work at Keeyask now enters a phase with final work on ancillary systems in the powerhouse, which are under way, along with demobilization of the camp facilities a nd the continuation of work on environmental rehabilitation and remediation of the sites affected by the construction. We are estimating the project will take another 12 to 18 months before it will be complete.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 61 Finally, I would be remiss if I did not ac knowl- edge the dedication and contribution of our dedicated employees over the past year. As always, our front - line electric and gas employees continue to provide an essential service to all Manitobans, often in bad weather conditions like rain and blowing snow, and challenging circumstances like rebuilding a remote power lab–power line damaged by a forest fire in the summer of 2022. Our office employees began returning to the office in May after almost two full years of working from home.

We have adapted to a hybrid model, offering the choice for certain roles of working from home Mondays and Wednesdays where technically and operationally feasible. It's an important option in a post-pandemic world where employee retention is critical to all organizations. I am very proud to be a member of Manitoba Hydro and the employees of Manitoba Hydro. Each one has adapted to new work methods and techniques in the field. We 've all learned to work in a virtual environment and in a hybrid model without it affecting our commit ment to our customers and the entire province, and I thank all of them.

Finally, I thank the members of the committee for your time and allowing me addi tional minutes to finish my opening remarks, and I look forward to your questions. Mr. Chairperson: Thank you, Ms. Grewal. The floor is now open for questions. Mr. Sala: Thank you, Ms. Grewal, for your opening statement. I just want to start by asking where you 're coming to us from? Ms. Grewal: Mr. Chair, I'm coming to you from the boardroom of Manitoba Hydro at 360 Portage Ave. in Winnipeg. Mr. Sala: And was there anything obstructing the CEO's ability to participate in person today? Ms. Grewal: Mr.

Chair, though I don' t like to share my personal circum stances publicly, I have torn my ACL and am wearing a knee brace, and have been advised to stay off my leg and keep my leg elevated and iced. But I did come into the office to ensure we have the connectivity which would not negatively impact my participation in standing committee. Mr. Sala: Thank you for sharing that , and I'm sorry to hear about the injury. Hopefully, you recover very soon. We're going to start by diving right into some questions about operating expenses.

And looking at page 57 of the annual report, it states that Hydro 's overall operating and adminis trative costs went up from $608 million in 2021 to $660 million in 2022, which is about a $52- million or 8.5 per cent increase in operating and admin expenses year over year. I'm hoping the CEO can share what the biggest portion of those new operating and adminis trative costs are comprised of. Ms. Grewal: Mr. Chair, I'm happy to speak to that. So, in the increase in our O&A costs, as we've shared in the past, the primary component of our O&A costs is staffing levels.

But the increase that we're speaking to, there were two drivers for that change. * (12:30) The first driver is our FTE. Manitoba Hydro is currently at a FTE of 25 per cent below what it was in 2016 and 2017, which is a reduction of almost 1,500 FTEs.

The main drivers for the reduction in the FTEs are three: firstly, the voluntary departure program where we reduced the number of employees by 15 per cent and then the per cent of management by 22 per cent; secondly, the pandemic -related hiring slowdown, where we did not hire any new employees for at least a year; and, thirdly, higher levels of attri - tion coming out of the pandemic.

So, in terms of the FTEs, we are focused on building back up the front line, parti cularly oper - ations, firstly, to ensure we meet customer in -service date, because there is –the increase in days has gone up, particularly for our developers, large industrials and telecoms. Our service level there has deteriorated. And, secondly, our ability to execute and meet main- tenance schedules for our aging assets has also been impacted. So we're focused on increasing the number of the FTEs.

The FTE increase is only a–is a large portion of the increase we're talking about, but the other change that you 're seeing is an accounting change, which counts for approximately 4 per cent of the increase. And that accounting change relates to tech nology. Specifically, the accounting rule has changed for all companies for cloud computing. Historically, that is a cost that we would amortize over the life of using that asset. Currently, though, that rule has resulted in it now being expensed in O&A. Mr. Sala: –the CEO for the response. I'm hoping the CEO can confirm whether consultant costs would be

62 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 included in O&A costs and, if so, what the total costs were for consultant services in the last –in the two years listed in the annual report. Ms. Grewal: I believe the annual report is specifically focused on one year. In terms of consulting costs, I don't specifically have that number in front of me. The one consulting cost that I am aware of, because we tracked it, would be relative to building Strategy 2040, but that occurred two years ago and not in the year that we 're talking about in terms of the annual report.

But we can take it under ad visement and provide that subsequently. Mr. Sala: Thank you. I greatly appre ciate your will- ingness to take that under ad visement and to provide that later. On page 10 of the annual report, in your sum - mary, you state that you have, quote, sought and achieved cost reductions through close examination of our structure, processes and approaches to how we work, allowing us to both improve our level of service to customers while reducing our costs. End quote. Can Ms. Grewal–or can the C EO please explain what the size of the cost reductions were and what they consisted of? Ms.

Grewal: So the way I would frame this, if you look at what we 've done as Manitoba Hydro as an organization in the last couple of years, we've done a number of things. There's new business units that we built by not increasing our FTEs. So, effectively, we've reduced our costs because we' ve reallocated resources by looking at improving processes. So some of these new skills and new departments and divisions relate to the following: a strategic and enterprise planning group so we can build the enterprise plans that are publicly available on our website.

That group also is accountable for building our strategy and focusing on driving those initiatives. We've also built an enterprise risk manage ment capability, which will ensure that we always under - stand all the risks Manitoba Hydro is facing, and we have a disciplined approach in terms of how we manage those risks and mitigate those risks across the organization. Thirdly, we 've built ad ditional capabilities in other areas. For example, we have never built an IRP, an integrated resource plan, as Manitoba Hydro.

We are building our first integrated resource plan, which is a material under taking for Mani toba Hydro and involves many, many people to achieve this, including the degree of stakeholder engagement. We're also redeploying resources in terms of tech- nology, particularly digital or data, which is key in the evolving energy landscape. And that data will allow us to make better informed decisions. Another example would be what we've done in the customer segm ent.

We primarily, historically, as utilities, have looked at customers as ratepayers versus–as I spoke to in my opening remarks and is part of our mission statement, we're very much focused on our customers and how we engage with our customers and how we support them. And we're engaging with our customers on a regular basis and surveying them, where they're clearly telling us their No. 1 priority is reliability, second to affordability. Reliability is what they want, whether it's reducing outages, the number of outages, our–the pace with which we're able to respond to their requests.

And so, we're focused in those areas also. So that's w hat I was referring –we were referring to in terms of efficiency. That being said, one of the new initiatives that we're under taking currently, under the auspice of enterprise excellence, is a program built around continuous evaluation. And what is continuous evalu- ation? Continuous evaluation is two things. Firstly, we're asking ourselves: of any work we do, should we still be doing the work that way, that process? We then determine, if we should still be doing that, then how can we improve this work? Continuous improvement.

And we're going after those processes that will not require a huge technology uplift, but where we can streamline processes and where that will result in an easier for our employees to deliver the services to our customers, which will increase customer satisfaction. Mr. Sala: There was a directive from the Public Utilities Board in 2019 numbered 69- 19, which directed Hydro to use a 1 per cent escalation rate for projecting operating and admin increases. Can the CEO share wh at she understands that directive to mean, as it relates to Hydro? Ms.

Grewal: The–that directive is part of a number of directives which we receive from the PUB, and as with any directive from our regulator, we do our best to comply with it. The reality for Manitoba Hydro is as follows: we were just talking about O&A costs and the need to rebuild our FTE to the level it was pre-pandemic, but

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 63 still staying within the level's max cap, as a result of the 15 per cent reduction in the voluntary departure program. You may be aware that, over the last year and two years, we've also experienced strikes from two of our unions and–where those strikes went for the 60 days; and then third parties –whether it was a labour board or an arbitrator –are deter mining what the increases are, and not Manitoba Hydro. Additionally, we're experiencing–as are all Mani- tobans–inflation.

And that inflation is not just impacting salary, it's also impacting our supplies, the materials that we use to ensure reliability and maintain the assets that we rely on to deliver reliable energy. * (12:40) So, while we are doing our best, as I shared earlier, in terms of continuous evaluation, continuous improvement, revisiting processes, looking at all work we do, redistributing resources while we're taking on and increasing what we are delivering and the capabil- ities and skills needed, we are not able to, given all of that, including increasing interest rates and given how highly levered we are, we're very exposed to interest rate increases.

There are many, many factors that are beyond our control that will not allow us to comply with that 1 per cent and we will be having those discussions with the PUB during the active, ongoing general rate application process. Mr. Sala: I ap preciate the response. I think the concern here is that we just discussed O&A increases of about 8.4 per cent year over year and, at the same time, we have a directive from the Public Utilities Board which requested that Hydro ensure that O&A costs remained capped at a maximum of 1 per cent per year.

So, that's eight times the size of increase in O&A costs that the Public Utilities Board, which is the voice of Manitobans –it's there to protect us from rate increases–requested that Hydro achieve. And so I unders tand that there's a number of factors driving that, but as we just discussed earlier today, it seems as though the majority of these costs are tied to Hydro-developed strategies and a focus on hiring back a number of employees that this current PC government forced Hydro to let go.

So I guess, you know, I hope the CEO can ap- preciate why this is so con cerning for the average Manitoban to see an operating increase of 8.5 per cent, knowing that every $18-million increase in costs equals a 1 per cent rate increase for Mani - tobans. So, here we have a $52 -million increase, which works out to about a 2.8 per cent hydro rate increase on all Manitobans as a function of that increase.

So, I guess I'd like to ask the CEO if she intends on making an effort in this fiscal or the following to keep O&A costs limited to that maximum of 1 per cent that Hydro was directed to do by the Public Utilities Board in 2019? Ms. Grewal: Firstly, I'd like to correct what we are doing in terms of increasing our FTEs. We are increasing the FTEs to the same level pre -pandemic. It was never our in tention to reduce the FTEs at that time. It occurred as a result of the pandemic.

It occurred as a result of attrition–a higher percentage of employees choosing to retire coming out of the COVID environment where we were returning to the office. And the FTE level, again, is below the level of the VDP cap–the total after we reduce it 15 per cent. So I just want to clarify what we are doing in terms of building our FTEs. As I said earlier, we have been ex periencing inflation of 7 to 8 per cent, and some of these impacts are in areas that we cannot cut. So, if we are being asked to hold to the 1 per cent, it means we will not fuel our vehicles.

We will reduce the number of vehicles out there serving customers during storms. It means we would cut labour and overtime, particularly we incur overtime for reliability during weather events. It would mea n we would not procure the supplies and materials needed to maintain the aging infrastructure and ensure reliability. We are always committed, as Manitoba Hydro, to operating as effectively and efficiently as possible. Secondly, at the time when the PUB made this directive, I do not believe any of us were aware of the environment we are currently in, in terms of the high inflation.

And we are committed to, as I pointed out earlier, through the current rate application, having discussions with the PUB in terms of what the impact has been. And, as always, the PUB determines rates, and the rates that we are provided by the PUB will be what we will continue to work within. Mr. Sala: I appreciate the response. I guess it does beg the question about the value of a public regulator if our utilities aren't actually following the directives

64 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 that are being issued to them, and I'd suggest that's a serious concern. Has the provincial government expressed concern to Hydro ov er the fact that Hydro has repeat edly exceeded those O&A targets that were delivered to it by the PUB? Mr. Chairperson: Ms. Grewal? You are muted, Ms. Grewal. Ms. Grewal: My apologies. As a Crown corporation, we present our budgets to Treasury Board and are asked many questions, including we were asked questions and are provi ding additional detail on the changes and increase in our O&A costs to gov ern- ment. Mr.

Sala: Did gov ernment at any time request or direct Hydro to keep their O&A increases to the 1 per cent target outlined by the PUB? Ms. Grewal: As I stated earlier, we presented to gov- ernment the same materials that we presented to the regulator, and through the GRA process, the PUB, which ultimately sets rates, will deter mine whether the O&A costs are considered valid to be included in rates going forward. Mr.

Sala: Appreciate that the infor mation was presented to Treasury Board, but I'll ask again, because we're not getting the answer: Did gov ern- ment, in those discussions –whether it be within Treasury Board or any other context–communicate to Hydro that it should keep O&A expenses–increases– to a 1 per cent target as outlined by the PUB? Ms. Grewal: As I stated, gov ernment has asked us questions about our increases in O&A, a nd there is ongoing dialogue occurring with government regard- ing our O&A costs. But these were not in the context specifically of that directive. Mr.

Sala: What is Hydro forecasting as the O&A for this fiscal and the following? Ms. Grewal: Are you referring to fiscal '22-23? Mr. Sala: That's correct. Ms. Grewal: For fiscal '22-23, with respect to O&A, we are forecasting increases in wages and salaries, as I identified earlier, due –also an increase associated with the number of FTEs as we rebuild to pre- pandemic.

As we move to operating, the increase in assets such as Keeyask and Bipole III, and those costs are moving from being capitalized to operations as well as the accounting rule changes on cloud computing and an increase in vehicle prices–vehicle fuel prices. The specific increase in O&A – Mr. Chairperson: Sorry, Ms. Grewal. Was that the end of your remark or are you still going? You can go ahead now, Ms. Grewal. Ms. Grewal: So, the increase we are seeing is 11 per cent in O&A and, as I p ointed out earlier, 4 per cent of that 11 per cent is related to an accounting change in cloud computing.

The residual is 7 per cent, and that 7 per cent–a large component of it is wage increases which we do not control. Those decisions were made by third parties. An Honourable Member: Mr. Chair? Ms. Grewal: We are not immune from the pressure of inflation, as all busi nesses are ex periencing. And again, as I pointed out earlier, we are focused on operating as efficiently and cost -effectively as pos - sible in serving our customers. Mr. Chairperson: Mr. Sala. Mr. Sala: Mr.

Chair, I'm asking for clari fication. [interjection] No, I'd like to ask another question, if I could. * (12:50) An Honourable Member: Point of order. Point of Order Mr. Chairperson: Mr. Friesen, on a point of order. Mr. Friesen: A point of order, Mr. Chair. We have in front of us for the afternoon the consid eration of the Hydro-Electric Board's annual report, ending 2022. The member is straying from the context of this meeting. H e's asking questions about the current operating year. These questions are clearly out of scope for this afternoon's consideration.

The member has all kinds of opportunities within the legislative framework to ask questions pertaining to the current operation of Hydro. He can do so in the House in question period. He can do so in the Estimates process; there was a very con siderable Committee of Supply process. But this is not the process and the context for questions in consideration of the current operating year. Mr. Chairperson: Mr. Sala, in response to the same point of order.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 65 Mr. Sala: Yes, I mean, I ap preciate that the minister doesn't feel eager to have us explore these giant increases in operating and administrative costs, and I can see why he certainly wants us to make sure that we're keeping those things as quiet as possible. Unfor- tunately, this is a serious concern for Manitobans because these operating and admin increases will translate directly into hydro rate increases.

So I think it is relevant to be asking the CEO for information about this year's O&A cost increase, and would be grateful for the chance to have Manitobans learn more about what they're forecasting. Mr. Chairperson: Okay, anybody else on the same point of order? Mr. Dougald Lamont (St. Boniface): Just to make the point that I think we have discussed issues that have–and policy changes that have arisen; f or example, the changes in the debt fee and their water rentals that occurred in this year. So I think it is legitimate.

We've sort of opened the door to that, and so I think that that's–it's reasonable to be asking these questions. Mr. Chairperson: Okay, thank you. I've–I think I've heard enough from the members. What I would say is that we are, indeed, discussing the report that's before us. I think I can allow some latitude as to the nature of the questions, but I would just ask respectfully that when questions are phrased, when it's possible to tie them to the report that's before us, that would be ap- preciated. And I think that should allay some of the concerns that have been raised.

We are here to discuss the report, so make sure we're doing that. * * * Mr. Chairperson: Thank you, and now back to questioning. Mr. Sala: So, ap preciate the clari ty that this year we're expecting an 11 per cent increase in O-A, and I just would like to ask, for the '23- 24 fiscal, what that number would be. And that's as far as I'll be going in looking for clarity on increases in O&A . [interjection] Point of Order Mr. Chairperson: Mr. Friesen, on a point of order. Mr. Friesen: Mr. Chair, I've been part of these com- mittee hearings for 12 years.

I think it's an im portant sign of respect to the com mittee process to constrain questions to the com mittee report under way. There are op portunities that are very sig nificant for legis - lators on both sides of this House to peruse expenditures of Hydro in- year, but this is not an in- year examination of the performance of the fiscals of Hydro. I clearly see in front of us that the meeting agenda today is the consid eration of the annual report that ends March 31, 2022. So, I ask the members with respect, and with respect to the comments you've made, Mr. Chair, to focus on the work that's at hand.

I assure all members of this com mittee that Manitoba Hydro CEO, senior manage ment and the chair have prepared extensively for discussions in respect of the previous year's expenditures, a plan and how that plan played out. If the members want to have discussion beyond that, they should avail them selves of those sig nificant op portunities the Legislature provides for these members to delve into other discussions.

And I want to say that I doubt that the CEO and the chief financial officer will have at their disposal the detailed information about the current fiscal year, the budget, the first quarter and the forecast for Manitoba Hydro in respect of this year. So, I'm just making the point again that we know what the work of this com mittee is and we're here to undertake that work. Mr. Chairperson: Mr. Sala, on the same point of order. Mr. Sala: I mean, I beg to differ. The infor mation should be on hand.

It would be available in any of their rate applications to the Public Utilities Board, but I am happy to move on and to move to a new line of questioning. Mr. Chairperson: Thank you for that. * * * Mr. Chairperson: Mr. Sala, a question. Mr. Sala: Yes, and just before moving on, I do want to put a finer point on the concern there that, with a 7 per cent increase expected this year and 8.2 per cent increase outlined in the annual report, that those sig- nificant increases in O&A will translate directly into hydro rate increases for Manitobans.

Just using these two numbers, ballpark it, we're talking about a 5 to 6 per cent increase in hydro rates required to meet these increases in O&A, and I think that's a serious concern. And I think it also needs to be just highlighted that the fact that Hydro is working in

66 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 contravention of the directive given to it by the Public Utilities Board is a serious concern. Moving on to integrated resource plan dev elop- ment. We know that the IRP is celebrated and mentioned multiple times throughout the annual report, so I'd like to ask some questions relating to that. The first one I'd like to ask is: Have any external consultants been engaged by Hydro to support the development of the IRP? Ms. Grewal: Majority of the work on the IRP is being done by Manitoba Hydro employees.

That being said, given this is the first time Manitoba Hydro is undertaking building an integrated resource plan–which is a utility best practice, and it is also some thing that the PUB ha s asked Manitoba Hydro to do in past years, parti cularly as part of the NFAT process–we engaged a third party to review our plan and provide us with any guidance or input to ensure that we were going about it in a disciplined and diligent manner, and in a manner that involved material consultation with all Manitobans to inform potential future decisions. Mr.

Sala: Can the CEO share who provided those consulting services and what was the value of that contract? Ms. Grewal: I do not have that information at hand. I will take that under advisement. Mr. Sala: More broadly speaking, how long has work been ongoing on the IRP, and how much of that process is complete? Ms. Grewal: Manitoba Hydro started working on its first-ever integrated resource plan approximately a year-plus ago. We started, I believe , in the fall of 2021. We anticipate being– have that completed, as I mentioned earlier, at some point this summer in 2023. The majority of the work has been completed.

We've completed, I believe, up to th ree rounds of stakeholder engage ment and con sultation with our customers, our large industrial customers, our com - mercial customers, the different intervener groups, advisory groups repre senting our customers, the numerous associations such as home builders, manu- facturing, agricultural, along with the Public Utilities Board and with government as input in developing the integrated resource plan. And we hope to be coming–making public the futures that this integrated resource plan work is informing, and that will be this summer. Mr.

Sala: The Province released –or, the prov incial government, rather, released a request for services for consultant services to, quote, assist the government of Manitoba in esta blishing the condi tions and r equire- ments for a transparent, objective and comprehensive planning framework for the provision of electricity and natural gas resources in the province of Manitoba. The consultant will provide expertise in the area of integrated resource planning in support of a gov ern- ment project team respon sible for developing a framework for IRP.

Can the CEO or board chair describe the way in which the work of this consultant has informed the Hydro IRP process being used? How have they influenced the overall approach to IRP development? It seems as though this individual was hired in November by the Province. Ms. Grewal: I can't speak to the role that this individual played with government. What I can say is that we've been actively engaged with government in consulting with them and informing them as a stakeholder, as well as our owner, as we've worked through the integrated resource plan process. Mr.

Sala: I'd like to ask the minister about the work of this consultant who was hired by his government to help inform the IRP process. What was the purpose of this consultant en gage- ment, and how does the minister perceive their role in informing Hydro's IRP development? * (13:00) Mr. Chairperson: I'll just give the minister a moment to prepare his response. Mr. Friesen: The committee hearing doesn't make it easy for me to consult with my senior officials, so I'm doing so just outside of the–off of the table so that we don't have to do it in a written way, so I appreciate that accommodation.

The member is asking a question about a contract that has not yet been let, so that contract right now is active. We are seeking that expertise that he refers to. And that expertise would be, essentially, fastened on to Hydro to assist with specific parts of receiving the integrated resource planning work. And then it also,

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 67 of course, references the work of the PUB, and it basically asks–acts as an additional resource. As the CEO has already said previously this afternoon, the work of an integrated res ource plan is very significant work. It takes significant resources of Hydro. It is a best practice approach. It provides a road map in future.

It is designed to do what the previous government was ineffectual in doing, and that was to guide better intelligent decision making about the needs for genera tion and for dis tribution of power, the rate at which con sumption was happening domestically, to make intelligent deter minations about where excess energy should be directed, to look at that whole array of potential new invest ments that could be made. And so, knowing that it's complex work, our gov- ernment takes the view that it is helpful and in the best interests of ratepayer s and taxpayers to engage third party expertise in this area.

Nevertheless, as I said, this work is under way. No contract has yet been awarded. Mr. Sala: I appreciate the response. The–your request-for-services document that we have that outlines this request for consultant support in developing expertise or a proposed IRP process suggests that the project completion was supposed to be February 1st. So, knowing that now this is yet to be even let at –by this point, it sounds as though we're going to see yet a further delay of maybe a month or two beyond February.

So, I just–I'd like to ask the minister how he feels it's effective to be hiring a consultant to provide expertise on IRP framework dev elopment to be –this individual isn't even hired on yet, but the IRP process started one year ago at Hydro and it's expected to be completed this summer. Can he provide some clarity on how he expects this consultant to be able to meaningfully engage with the IRP work that's been done at Hydro, given we're so deep into that process? Mr. Friesen: So, I'm happy to provide an answer to the member's question.

He seems to be asking the question of why a consultant but then he's also asking the question why now. We would say the consultant was necessary and was always planned for because, as I stated already, the work is extremely complex and that we know that while Hydro is significantly allocating workforce and expertise within that shop, it is the opinion that addi - tional support is necessary.

To the question of why now –well, that was always the design; that there is work that must be done within Hydro and then this, we believe, is the oppor - tunity to engage a third party to additionally respond– to respond to the expert report on bipole and Keeyask. The member will note that this recom mendation is contained in the e xpert report on bipole and Keeyask. It indicates that the integrated resource plan work should proceed.

It indicates that that work is essential for helping keep rates –energy rates low in the future and informing practices when it comes to making next inve stments to continue to increase Manitoba's assets in Manitoba Hydro. But we believe that this is the right time to under- take the work to engage that third party. Mr. Sala: Appreciate the response.

One would think that the government would want to clarify how they would like to see the IRP process be undertook before Hydro went ahead and developed their own process, to ensure that it reflected the best practices that the minister has highlighted that they're seeking to get clarity on. The timing and the sequencing here doesn't really make sense, I think, to the average Manitoban.

Speaking about sequencing and concerns around that and gov ernment input into IRP or into Hydro's decision making, one question I wanted to make sure we probe today a bit about was the question about the impact of energy policy on the IRP. So I'd like to ask the CEO what happens to the IRP process if the provincial energy policy states that it wants Hydro to take a direction that isn't reflected in the scenarios out lined in the IRP. For example, what if it takes an aggressive stance in developing green hydrogen or in the electrification of heating in Manitoba?

Should Hydro's IRP not reflect the direc - tion given by the Province's energy policy? Ms. Grewal: Energy policy and the IRP are, rightly as identified, very much interrelated. Energy policy is currently under dev elopment and energy policy will consider a number of things that also extend beyond what Manitoba Hydro's responsibilities are. Mr. Vice-Chairperson in the Chair But firstly, what I'd like everybody to understand is the IRP, just like strategy, is not a static process or document.

It is a living docu ment that we will be revisiting on a regular, ongoing basis because there's underlying assumptions that we'll be making in dev- eloping the IRP. And we need to continue to assess

68 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 those assumptions because we are operating in a landscape which is changing, which we do not have control over the degree of change nor the pace of change. So it has to be very, very agile. Secondly, the IRP is being built so that as energy policy is finalized, we will revisit the IRP and one hundred per cent ensure it is allied with energy policy.

The majority of the work we have done today, as I called out earlier, is with stake holder engagement, to understand what it is that Manitobans want on a number of topics in a number of different areas, as well as to understand what their expectations are and the planned use of energy, of electricity going forward.

But I would be remiss if I also did not speak to natural gas, in terms of the comment made about natural gas being replaced by electricity for space heating. * (13:10) As a result of the work we've been doing, one of the things –a risk we face in Manitoba is if spac e heating is electrified, because the amount of elec- tricity that would be required to change all space heating that is currently natural gas in the province to electric would require, at minimum, a doubling of the current capacity we have with the generating stations operating today, including Keeyask, plus we would be short about another 2,200 megawatts.

Mr. Sala: Appreciate that response. And to that point that was just made by the CEO– and this ties into another question that I was hoping to pose today in terms of the numbers that are being used by Hydro, and I'll just take the numbers that were just offered by the CEO –which is to do–I guess, essentially, look at load forecasting and to deter mine what our future energy needs would be, the CEO just outlined that we would need to double our current energy production in order to meet a future state where we've electrified home heating throughout the province.

I'm wondering if the CEO can identify whether or not, in that analysis that's being used by Hydro, are they using an econometric forecast or an end- use forecast? Said differently, is the numbers that she is using account for the efficiencies that will be gained by moving towards electric heating or efficiencies that would be gained through the el ectrification of transportation in the province? The risk being that, if we're not looking at an end- use model and we're not looking at those efficiencies, Hydro risks drastically exaggerating the amount of energy that we need in that future state.

Can th e CEO clarify the approach that's being used in looking at that –those load requirements, that load forecast, going forward? Ms. Grewal: So, firstly, what I would like to restate is that the IRP process is not yet complete. So what I provided was some early analysis we did when we were developing Strategy 2040 to understand, perhaps, what we need to be focusing our work on. And just that question alone identified and reinforced that we need to go through an IRP process.

The outcomes of the IRP process, and that analysis and modelling, will speak to some of the questions that were just raised and asked of us, so I can't comment, because that–we are in the process of that work. And, primarily, the work to date has been very much focused on input and stake holder engage- ment. We are still seven to eight months away from finalizing the integrated resource plan. Mr. Vice-Chairperson: Mr. Sala. Mr. Sala: Oh, new face. The load forecast would be a key input into the IRP process, so I would like to ask the CEO again, because we didn't get an answer there.

And I would think that, even though this is an iterative process, that this would be a very im portant key question in terms of an input, which is the load forecast and how it's been approached. So, I'd like to ask again, and hopefully we'll get a clearer answer, about the approach that's being used by Hydro in doing that load forecast, which would have been an input into the IRP. Does it account for efficiencies going forward in transportation and space conditioning? Ms.

Grewal: I would–though it is out of scope, I would suggest that our current thinking in– prior to completing the IRP, in terms of the load forecast, can be found in the general rate application we filed with the PUB on November 15, which speaks to our long- term financial forecast based on the best infor mation that we had at that time. In our IRP work, we absolutely will be consid - ering efficiencies, including efficiencies delivered through the programs of Efficiency Manitoba. In terms of the other two specific areas requested, I can't speak to that, but it will be a consid eration in

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 69 developing our best practice IRP, where we are also looking at other utilities and how they've approached this and looked at it. But I do not have the specific details, as the–as we are still working on that. Mr. Sala: I'd like to now refer to some of the reorganization of MHI work that's been done by Hydro.

On page 112 of the annual report, it references this reorganization of MHI, and it also references that the tele com services busi ness, which is known as Manitoba Hydro Telecom but not named, quote, "may be impacted, " end quote, by agree ments associated with the rural broadband expansion project. So, I'd like to ask some questions in relation to these two aspects of the report.

Firstly, as members of this committee will know, Manitoba Hydro previously sold its profitable subsid- iary, Teshmont, and over the last year it has been working furiously to priva tize work which was once performed by Manitoba Hydro Tel ecom, work that was performed profitably and with a high level of excellence. I'd like to take this op portunity to state very clearly that we, on this side of the House, believe that this slow erosion of Manitoba Hydro through the privatization of i ts subsidiaries will hurt the corpor- ation in the short and long term.

And we also think that further privatization will only mean Manitobans will lose control of our most important Crown corpor- ation while rates increase for regular families and Manitobans. I'd like to ask the board, will the board chair or CEO tell this commit tee if they're con sidering winding down or selling off any further business units within MHI? And I can constrain my language here to the language within the annual report: Will they be reorganizing out any of the subsid iaries currently within or that fall underneath the MHI umbrella? An Honourable Member: Mr. Chair? Mr.

Vice-Chairperson: The honourable minister. Mr. Friesen: I'd be happy to provide an initial response to the question that the member is asking based on page 112 of the report, and set the record straight. The government has been crystal clear in respect of the RFP and the initiative to expand and increase rural broadband in Manitoba based on the fact that we have essentially dark fibre strewn through out the province that is there, the infrastructure necessary for Manitoba Hydro.

But those who understand, you know, to a greater degree than I do, fibre optic networks, understand that Hydro does not and did not utilize or need the full capacity provided within that trunk line. And yet, we have that grid and that manifold throughout the province of Manitoba. On the basis of that, the exploration that the gov- ernment of Manitoba did, initially leading to the decision to tender for the work, was to under take to connect hundreds of com munities in Manitoba who had inferior levels of high- speed Internet or no provision of high-speed Internet.

So, let us understand that when the member takes exception to this, he is taking exception to the very significant work that is under way now in the province, work that would not have been done to the extent that is now possible through this award. However, I want to make very clear, as has been made clear time and time again in this Legislature and in the public, is that there is no sale of the asset.

Manitoba Hydro continues to own the fibre optic and the network, and what the member is referring to is a lease not of the capacity needed by Hydro to under - take their very im portant work, but rather a connection. And so what the RFP is, and it was there for all Manitobans to read, was that this was a contract that was tendered and awarded, in this case to Xplornet, to be able to light that dark fibre, to create these meet - me vaults, to provide those services locally. That work continues.

We have, already, customers who have gained that service, and because of that work, we have services provided to Manitoba that would otherwise not be the case. There is no sale of the Hydro Internet, in this case. There is a lease with clear provisions that the public understands and knows. Mr. Sala: Appreciate the response.

The response from the minister clearly shows that he's not actually familiar at all with the impacts of the rural broadband expansion contract and the impacts of it, because if he were, he would know that this has resulted in the delay of the expansion of broadband Internet to rural and northern Manitoba. And he can consult with his team and hopefully he'll consult with the small busi nesses, the Internet service provider

70 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 businesses through out Manitoba who've lost a year and a half of revenue, work, and have been signifi - cantly impacted by that contract. I'd like to, again, ask the CEO the ques tion, and the minister asked a question that –answered a question that I didn't ask. I still appre ciated the response. But I will, again, direct the same question to the CEO: Are they con sidering winding down or selling off any further business units within MHI? * (13:20) Ms. Grewal: Firstly, I'd like to speak to the issue of Teshmont.

To provide context to my statements, Teshmont was always a private company, and it was a majority-owned company, a private sector company, where Teshmont Consultants owned 60 per cent of the company. Manitoba Hydro had bought a 40 per cent owner- ship in–from–many years ago, as we were starting to get into HVDC as a new capability within Manitoba to support bringing energy from the North to the south. So, clearly, we are a minority shareholder. The decision to sell Teshmont was made by the majority shareholder.

Secondly, I do not characterize this as priva tiza- tion, and the reason why I do not is you cannot priva- tize what is already a private company. So, the deci sion was made by the majority shareholder. Manitoba Hydro has no employees – never had any staff–that were in Teshmont, as well as we never played a role in the day-to-day operations of Teshmont. Secondly, Manitoba Hydro is owned by the people of Manitoba, and it will remain that way. What we are talking about is subsidiaries that, firstly, are not regulated.

Therefore, these subsidiaries do not have an impact on rates, electricity and gas costs that our customers pay for delivering green, dependable, reliable electricity and natural gas. Manitoba Hydro undertook, as it did, as part of Strategy 2040, a com prehensive review of all of Manitoba Hydro, including the subsidiaries. In terms of going forward, of the four key busi - ness divisions that make up Manitoba Hydro Inter - national, what we are doing is –and we've made public–is we are exiting the inter national consulting business. There were increasing risks and we were less and less competitive in this business.

But more importantly, as is state d in our mission statement for Manitoba Hydro, we are focused on our core business. Secondly, what I would like to identify is all of the employees of Manitoba Hydro Inter national are now employees of Manitoba Hydro. The sub sidiary, Manitoba Hydro, and the board busi ness units, whether it's inter national consulting, whether it was what we were doing in the broadband space, et cetera, there are–were 88 employees of a 5,400 FTE.

Of those, 88 employees we offered em ployment to join into Manitoba Hydro and join Manitoba Hydro in focusing on our core busi ness, 86 of those 88 employees accepted those offers and continue to work as part of Manitoba Hydro as we move forward with our strategy. Mr. Sala: Appreciate the response. The CEO stated there that the profits generated by Hydro subsidiaries in no way contributed to the reduction of rates for Manitobans. MHI earned approximately $80 million over the last 20 years.

It's my understanding that revenues generated by MHI as a sub sidiary con tributed directly to Hydro's overall revenues, which would then, in turn, be used to help keep rates low. Can the CEO please confirm whether or not what she stated is accurate, that the profits generated by subsidiaries in no way contributed to rate setting by Hydro? Mr. Chairperson: Ms. Grewal. Ms. Grewal, I don't know if your mic is off–please go ahead. Ms. Grewal: To clarify, as I stated earlier, the–it's Manitoba Hydro–the core Manitoba Hydro–is what is regulated.

What you are referring to is t he consolidated Manitoba Hydro, which is not regulated, which includes any profits that are earned by MHI, and those are not considered in our rate applications, nor do they impact our filings with the PUB. Mr. Sala: One concerning bit of information that I've received recently was that these HVPT substations, the high voltage padmount transformer substations, which are actually this in credible product, this innovative product that was created by Manitoba Hydro International, that have been sold in juris dic- tions around the world, are no longer able to be sold.

And that the reason we're not–MHI is not selling these is because they've been directed by Hydro executive to cease the sales of this highly innovative, made -in-

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 71 Manitoba product, which we, as Manitobans, all own and had a stake in or had a

part in helping to develop. Can the CEO clarify or confirm whether or not Hydro did direct Manitoba Hydro Inter national to cease the sales of these HVPT substations that were produced by MHI? Ms. Grewal: I can confirm that Manitoba Hydro made the strategic decision to exit Manitoba Hydro International consulting business. From myself, there was not a specific directive related to the tech nology that you reference. It was strictly the consulting side of the business. If, as part of the consulting, they were part of what was being offered, that I can't comment on.

That being said, though, I'd like to clarify, and though this information is not public, the profit earned in the consulting business had materially reduced and shrunk. Mr. Sala: I'll put a finer point on it. Has Manitoba Hydro Inter national, in any way, been directed to cease the sales of the HVPT substations? Ms. Grewal: No. Mr. Sala: Manitoba Hydro International also developed an online DC line fault locator, which is this in cred- ibly–again, an incredibly innovative product, made in Manitoba, that allows utilities to identify where line faults occurred within a kilometre.

These have been sold, again, around the world and ins talled across Canada. And, again, a made-in-Manitoba technology that, as far as I understand it, makes a very tidy, handsome profit for Manitoba Hydro with each one sold. Again, I've learned that these are no longer able to be sold by Manitoba Hydro International. I'd like to ask the CEO if she can clarify whether or not direction was given to MHI to cease sales of the online DC line fault locators. Ms. Grewal: No such direction was given. Mr.

Sala: Can the CEO provide follow -up to clarify whether or not that direction was given and provide that information to the committee? Ms. Grewal: We will take that under advisement. Mr. Sala: Page 112 of the annual report references that Manitoba Hydro Telecom may be impacted by the rural broadband expansion agreement, and I'd like to ask some questions about this aspect of the annual report.

As part of the agreement the Manitoba gov ern- ment signed with Xplornet regarding broadband services, a number of Manitoba Hydro Telecom contracts with ISP providers previously held by Manitoba Hydro International were sold to Xplornet. Can the CEO or board chair confirm who oversaw the valuation of those contracts? Ms. Grewal: Firstly, I'd like to clarify: none of the existing customer contracts have been sold to any third party, including Xplore.

We are having discussions with Xplore that are ongoing, as well as the third party of these contracts, to see if there is any interest in moving to Xplore as a service provider, or remaining with Manitoba Hydro Telecom, where we will continue to serve and honour the commitments under those contracts. * (13:30) Mr. Sala: In those instances where private s ervice providers are the ISPs in question–these third party service providers are willing to continue working with Xplornet once the work has been transferred to them by Manitoba Hydro Telecom–will those contracts be sold to Xplornet? Mr.

Friesen: I think I can be of some assist ance in this matter, just in terms of helping to distribute questions appropriately. The member was asking similar questions in the Commit tee of Supply when we met earlier–or, I should say, later last year. And I did indicate that, while we are trying to be helpful, the member should remember that the con- tract actually resides in the Depart ment of Labour, Consumer Protection and Government Services.

This is the de partment in gov ernment that holds the con- tract, the department that issued the original RFP and the department that delineated that two -part process that the CEO just spoke to, which is in respect of future work to connect as many as 70,000 homes in Manitoba, which is a very significant undertaking for those communities that might be unserved or under - served when it comes to high-speed Internet.

And then that second part of the contract that the CEO just spoke to now, which is that consideration of what happens to existing contracts –and, as the C EO just indicated, none of those contracts have actually been sold to a third party. So I think, in this case, as I continued to say during the Committee of Supply hearings at Finance, I was requesting and recommending that the member

72 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 avail himself of the opportunity to appear at the Com- mittee of Supply for LCPGS–Labour, Consumer Pro- tection and Government Services. I believe he did so, and–where that depart ment could answer more specific questions, which would perhaps be the more appropriate way to deal with the questions he's asking. Mr. Sala: Could not disagree more strongly with what was shared by the minister. In fact, I think this is the ideal place.

Of course, we have the executive who's responsible for overseeing a lot of the work that's been done in part nership with Xplornet, so I could not imagine a better place to get the infor mation I think that Manitobans want to learn about. And again, this was very clearly referenced –the impacts on Hydro and on Manitoba Hydro Telecom are very clearly referenced in the annual report itself, so I would appre ciate the latitude and do ap preciate the oppor tunity to continue asking questions in this area.

The question was whether or not–or, sorry, the question was who oversaw the valuatio n or who continues to oversee the valuation of the contracts in question. And we're referencing, again, the contracts that currently exist between Manitoba Hydro Telecom and ISP providers. Those contracts have been valued, and 'they're've' been valued in preparation for transferring or sale to Xplornet. So, I would like to ask the CEO again if she can clarify who oversaw the valuation of those contacts? Ms.

Grewal: Each contract will have to be looked at individually, given that it is not a portfolio of contracts that will be potentially–I want to be clear, potentially– no contracts have been transferred to Xplornet. Each contract will be looked at individually, depending on the third party's interest, as well as Xplornet's interest. Mr. Sala: Can the CEO share whether the provincial government sent Hydro a proposed valuation of the contracts to Hydro or to Xplornet? Ms. Grewal: I cannot comment on behalf of govern- ment as to whether or not anything was shared with Xplornet.

We did not formally recei ve any valuation from government regarding the contracts. Mr. Sala: I thank the CEO for the response. I have an email here directly from someone in Central Services, an individual named Ayo Kuewumi, to the deputy minister for Crown Services, which states: Hello, Scott. This has been formally com- municated to Manitoba Hydro. Should I communicate it to Xplornet or has it been communicated to–and it's blanked out.

The following email from Scott Sinclair to the same individual with Central Services respo nds: Please formally com municate that the valuation of MHT contracts have been determined to be–and then it's blanked out –we couldn't get that

part in our FIPPA. Hoping that the CEO can clarify again whether or not she did, in fact, receive a valuatio n from govern- ment as asked and as does seem to be indicated in these emails. And, if so, what the value of that –what that was valued at by gov ernment in their valuation work? Mr. Vice- Chairperson: I'm obliged to inform the committee and–all members of the committee–that is a private email and the member is requested to table the email that was quoted from.

I believe that under - taking has happened, that the email has been tabled, and the honourable minister has indicated his intent to respond to that question. Mr. Friesen: Mr. Chair, I just want to reiterate the member is reading from an email that comes from the deputy minister for LCPGS. He's referring to it as essential services, but it's actually Labour, Consumer Protection and Government Services. Mr. Chairperson in the Chair But, more importantly, he's referring specifically to a de partment of gov ernment, an interaction between a deputy minister and another official.

He's not referring to an interaction between Hydro officials or the minister responsible for Hydro. And so, again, I would suggest that the member's better opportunity to get the clarifications he's seeking would be at the Committee of Supply for LCPGS and not here. Mr. Sala: I appreciate that, again, that the minister isn't comfortable with the questions that are being asked here, but we just heard from the CEO that no valuation was provided to Hydro. And while it was a private email, the email was from a deputy minister that's responsible for or has accountability as it relates to Hydro.

And, of course, we assume that the CEO should be aware of this valuation, given that it was communicated–it says that it was communicated to Hydro.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 73 So, I'd like to ask the CEO again: Having heard here today that we clearly know that a valuation was sent to the corporation, can she clarify whether or not she received a valuation for those contracts from gov- ernment and, if so, what were the value of those contracts? Mr. Chairperson: Ms. Grewal. Sorry, you're muted. Go ahead. Ms. Grewal: Can you hear me now? Mr. Chairperson: Yes. Go ahead. Ms. Grewal: Thank you. Firstly, I can't comment on government emails.

But, secondly, I can confirm I did not receive a formal valuation from government with respect to the telecom contracts. Mr. Sala: Did anyone in your executive receive a valuation of those contracts? Ms. Grewal: Not that I am aware of. Mr. Sala: Did the CEO engage any consultancies in estimating the value of Manitoba Hydro Telecom contracts which were to be transferred to Xplornet? Ms. Grewal: We did early on engage a third party to do a preliminary report, but that report is no longer valid, given how the model evolved and where we are at today. Mr.

Sala: And what did that early analysis conclude in terms of the value of those contracts which were to be transferred from government–our government–or, sorry, from Manitoba Hydro Telecom to Xplornet? Ms. Grewal: As I noted earlier, the work that was done was preliminary and any infor mation or views on it are not valid today. Mr. Sala: So, again, the question was what was the valuation that was proposed through that engagement with that consultant? What was the total proposed value of the contracts? Ms.

Grewal: Again, as I stated, that was preliminary work where we had not defined any of the–understood any of the terms under which the contracts would be considered, and therefore, it would not be appropriate or valid or representative to share that information. * (13:40) Mr. Sala: I hope that the C EO can see that even if those numbers were not perfectly accurate–even if they were 25 per cent more or 25 per cent less–that it would be very im portant for Manitobans to under - stand the value of those contracts, even if they are somewhat inaccurate at this point in time.

And the reason that's germane or im portant, I think, to this conver sation is it just clarifies that the CEO and government were aware that the contracts, which are currently held between Manitoba Hydro Telecom and a wide number –or, a large number of Manitoba-based ISP providers, which are profitable contracts, have a value, and we're taking that value and were giving that value and were offering to transfer that over to Xplornet, who I'm sure is very eager–very eager–to pick up this opportunity to make some profits off what were once profitable contracts for us as Manitobans, as the owners of that.

So it's very concerning to see that we're not getting clarity here and that Manitobans aren't getting that op portunity to unde rstand what it is that we're missing out on, or we will be missing out on, as a result of this proposed transfer of those contracts. So what I have heard here today is that, although I'm not getting the number, I am hearing that Hydro did work with a cons ultancy and placed a financial value on c ontracts that currently benefit ed Mani - tobans–or, that benefited Manitobans, and that we are confirming that that value is now being passed over to a private business. Is that accurate? Ms.

Grewal: I–I'd like to reiterate that if any contract is taken over by Xplornet, there will be a valuation done of that contract. And that is (1) if the customer is making the choice to have Xplornet be its service provider, and secondly, Xplornet is choosing and wanting to take on that contract. At this point in time–we are not even aware of any contracts at this point in time that may be transferred– taken on by Xplornet. Mr.

Sala: I have an email here between yourself and the deputy minister, Scott Sinclair, which states : please see–this is from yourself, the CEO –please see below regarding a $30- million valuation and the methodology used by the proponent. We are continuing the work regarding revenue Manitoba Hydro would have received from MHI for this fibre, based on historical precedent, as well as all MH costs associated with the fibre, including managing the contracts, et cetera. Will get that across as soon as we have it.

Regarding the $20-million Clear Sky in-kind, when this was done, the in- kind was in the form of fibre, which is part of the rural broadband RFP, which

74 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 is identified in the annual report. We cannot give away the same fibre twice. Wanted to ensure you are aware of this, as it could become political. In that email that you sent to the deputy minister, you state that you are continuing the work regarding revenue that Manitoba Hydro would have received from Manitoba Hydro Inter national for this fibre based on historical precedent. Can the CEO please provide the numbers that were developed in relation to that commitment to the deputy minister?

What is the total revenue that Manitoba Hydro would have received from MHI for this fibre, based on historical precedent? Mr. Chairperson: Just con sistent with commit tee practice, if you could please table the letter, that would be appreciated. Mr. Sala: –the email. Mr. Chairperson: Thank you for tabling the email. Ms. Grewal, are you prepared to respond at this time? Ms. Grewal: We will take that under advisement. Mr. Sala: I'd like to ask again.

And I think this is pretty important question, and I don't think it's appro- priate to take this one under advise ment given we've got clarity here in writing from you stating that this work had been done. So, again, I'd like to ask the CEO, can she clarify the total revenue that Manitoba Hydro would have received from MHI for this fibre, based on historical precedent? It's clear the work was done, and it's clear that it should be available, and I'd–we'd like to ensure that Manitobans can get a line of sight on that infor - mation. Will the CEO provide that info? Ms. Grewal: We will take that under advisement.

Mr. Sala: –the CEO again. Just one more time here, I'd like clarity from her, and if she's not willing to answer this, I'd like clarity as to why, given this analysis has been done. Will she provide the revenue that Hydro would've received from MHI for this fibre based on historical precedent? And again, I'd like to remind the C EO that we have an email from her to the deputy stating that this analysis had been done. So, advise ment seems like kind of an off-ramp here that we shouldn't be taking. Again, I want to remind the CEO that Manitobans are watching. They want to know how much this fibre was worth to us.

That's a pretty im portant question that I think people have a right to know. So I'd like to ask the C EO one more time: Will she clarify what the total value o r what that revenue for Manitoba Hydro is, based on historic precedent? Ms. Grewal: To clarify, I never saw any specific numbers. They did not cross my desk, nor did I receive an email. But I will take it under ad visement and respond at a future date. Mr.

Sala: In the response that was provided to you in that same email, which I've already tabled, the deputy minister says to you: Also need more infor mation on the MHT dividend Hydro gets annually and how it is applied to regulated electricity and gas costs to offset rates. I'd like the C EO to provide the com mittee with clarity over what that dividend was that Manitoba Hydro Telecom provided to Hydro annually. Ms. Grewal: As I spoke to earlier, Manitoba Hydro Telecom is a sub sidiary of Manitoba Hydr o Inter - national.

It is a non- regulated entity, and as it is not regulated, any potential profit that might have occurred in Telecom did not affect rates for Manitoba Hydro customers, both on the electric and the gas side. Mr. Sala: I'd like to ask again. Again, this is an email from the deputy minister to yourself, who states: We need infor mation on the Manitoba Hydro Telecom dividend Hydro gets annually and how it is applied to regulated electricity and gas costs to offset rates. I'd like to ask the C EO, just clearly: Did she provide the deputy minister with the infor mation he requested, and if so, what was the information?

Ms. Grewal: I'd like to confirm that Manitoba Hydro has never received a dividend from Manitoba Hydro International, including Manitoba Hydro Telecom. Mr. Sala: Like to review some of the costs associated with the handover of gov ernment contracts to Xplornet, or the yet to occur, but soon to occur, handover of government contracts to Xplornet. Is the C EO aware of the tot al costs associated with MHI staff supporting the handover of these contracts? Ms.

Grewal: The contract that Manitoba Hydro was party to ensures that costs that we incur in this transaction with Xplornet are borne by Xplornet, and we built the ap propriate system to track any costs,

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 75 including the time of our people, which will then be paid for by Xplornet. Mr. Sala: I'd like the C EO to provide infor mation around how much money Hydro has invested in the upkeep of the infra structure which is being used by Xplornet since the agreement was signed. Ms. Grewal: I do not have that information. Mr. Sala: Will the C EO endeavour to provide that information to the committee at a later date? Ms. Grewal: I will take that under advisement. Mr.

Sala: And does Hydro anticipate receiving any revenue from the deal between Xplornet and the prov- incial government? Ms. Grewal: Can you please clarify what you mean by revenue? Mr. Sala: Will Manitoba Hydro be a financial beneficiary of the agreement between Xplornet and the provincial government? * (13:50) Ms. Grewal: We will recover our costs associated with any interaction involved in supporting Xplornet. That is the extent of what the financial arrangements look like at this point in time, given the wo rk completed to date. Mr. Sala: I'd like to thank the CEO.

That's it for my questions in this area but, again, I just want to put a finer point on this and just recap.

I think what we heard today very clearly in this committee is that, although this g overnment likes to repeatedly suggest that they're not priva tizing anything at Manitoba Hydro–and, again, we heard the minister earlier comment that we were somehow stating that priva tization was occurring where it wasn't–the last 15 or 20 minutes, what we've clearly identified is that these contracts, which are currently held between a Hydro subsid iary, Manitoba Hydro Telecom, and a huge number of Manitoba small busi- nesses, are about to be transferred to a private business and that the value of those contracts have been identified by a consultant that had been hired by Hydro, as well as by government.

And what that tells Manitobans, with total clarity, is that we are taking contracts that benefit us as Manitobans and help to keep rates low, and we're giving that profit-making opportunity over to a private business. If that isn't priva tization, I don't know what is. So, I think it's very im portant that we high light here today we've heard with total clarity that this PC government has, in fact, supported and encouraged the privatization of those contracts and the value that those contracts provide for Manitobans. I'd like to move on to another area of questioning here.

In the annual report, the president notes there was a review of the quote, unquote, business model of Manitoba Hydro. Can this be described in more detail? Who conducted the review? What were its terms of reference? Mr. Friesen: Because the member did not pause between his former area of questioning and his new one, I'm going to take the oppor tunity to respond to the former area and just reassert again that the CEO this afternoon made clear that there is no sale of assets within this planned expansion of Internet within Manitoba.

Also, the critic here asserted a number of times, falsely, and the CEO made this clear: there is no relationship between the subsid iaries of Hydro and rate application processes; that when Hydro essen - tially goes to the Public Utilities Board for a general rate application, it does not include amounts received through these subsid iaries. In that respect, he's referring to a different structure altogether. So, let's be clear about what the value of these contracts is, because the member has suggested, well, what was the value to Man itoba Hydro received as a result of this? Let's return to first principles.

The invest ments were made because there was dark fibre completely unutilized, not underutilized but unutilized, by Manitoba Hydro. It was latent; it was in the ground. On that basis, the government said we could do better for Manitobans. I made a reference to 70,000, but in the original press release there's actually a reference to 120,000 households that are underserved or unserved by high-speed Internet.

I would also note for the record that in the email the member himself referred to, I would indicate that part that he didn't choose to read into the record because the very first part of this email says: Thanks, I'm really unclear how this matters because we are not selling the fibre. Manitoba, through Manitoba Hydro, is retaining 100 per cent owner ship. No cash is exchanging hands for fibre access. And then the email goes on to say that the true valuation in this is

76 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 essentially in terms of the expansion of connections to Manitoba. So, let us be clear on what the advantage and benefit to Manitobans is of this arrangement in which no priva tization takes place: that hundreds of thou- sands of Manitobans who are underserved get high- speed Internet, who would not otherwise have received it. But then, to be really clear on the final point that the member has continued to refer back to: not a priva- tization and furthermore, no valuation comprehen- sively has been undertaken.

I have myself been in the meetings in my time in this file, and I've been in this file for probably almost exactly one year in duration with this new responsi - bility–responsible for Hydro–and I've had exactly these conversations with the c hair of the board, with the CEO, with the minister respon sible for Hydro.

And I have had exactly these con versations with the chair of the board, with the CEO, with the minister responsible for LCPGS, with the deputy minister responsible for LCPGS, talking about the complexity, not of the fundamental contract but essentially what's been referred to as an ad ditional assignment of customers. And, indeed, I've heard exactly those responses, saying this work would have to be under taken on a company-by-company–or, I should say, on a contract- by-contract basis, which is exactly the point that the CEO made clear today. That work, I can concur, to the best of my knowledge, continues.

There has been no assignment to those customers, but the funda mental contract, the one that the press release from November 30th, 2021 refers to, is that agreement with Xplornet to light up that dark fibre, to serve First Nations communities, 30 of them, 350 rural communities across Manitoba and provide services where no services exist. So, let us be clear that when that member takes exception to this work, he's taking exception to this decision of government to use unlit, high-speed fibre to connect Manitobans. Thank you, Mr. Chair. Mr.

Sala: What we take exception to is the fact that– and it's interesting the minister highlights this as though this is some sort of a positive –that our prov- incial gov ernment is taking publicly owned infra - structure, dark fibre, towers, all types of very expen- sive equip ment that we've invested in, and we're handing it over to a private company so that they can make profit with that infrastructure. And he's bragging about the fact that we're doing that, we're handing over that infrastructure, at no cost.

And at the same time, he's glossing over the fact, and getting lost in a mess of words there, that his govern- ment is handing contracts over, or intends on handing contracts over, over to a private business. I know that's tough sledding and it's tough for him to navigate because it's a tough truth that we're trying to avoid here, but that's the basic reality: they're giving away access to publicly owned infrastructure so that a profit can be made on it, which is a profit that we no longer benefit from, and they're selling profitable contracts to a private company. That is the truth, end stop.

There's no debating that. We can continue to go around in circles, but that's what's happening here; that's highly problematic. I'll go back and repeat the question that I posed to the CEO. In the annual report, the president notes that there was a review of the business model of Manitoba Hydro. Can this be described in more detail? Who conducted this review, and what were its terms of reference? Ms.

Grewal: As part of undertaking the work around Strategy 2040, what we then asked ourselves the question is: what needs to be true for us to be effective in becoming the Manitoba Hydro of the future that our customers will continue to depend and rely upon for electricity and natural gas? We engaged a third party, PWC, to assist us in this assessment because the model, or the org structure that Manitoba Hydro had been using today was very much the org structure that had existed for decades and decades, and that org structure would not allow us to be successful going forward.

So, it was effectively a review of our operating model, how we operate as Manitoba Hydro, and it was focused on looking at different options, different models that we could consider relative to our objectives in the Manitoba Hydro of the future as articulated in our vision statement for Manitoba Hydro. This work was done over approximately a one - year period. It was work where Manitoba Hydro also put in considerable effort and analysis, and the cost of that work to create and design our new org structure was approximately $2.26 million.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 77 Mr. Sala: Within that review by PWC, were there areas found where Hydro can improve, areas where Hydro should change or alter its operation? Ms. Grewal: Yes, there were areas that were identified. Traditionally, Manitoba Hydro was based on asset; it was an asset-based model. We had a busi- ness unit on the operational side called generation.

We had a second busi ness unit called trans mission and then a third one that was focused on distribution. * (14:00) What we've chosen to evolve to, which is actually an industry best practice –and we see utilities in the US, including recent discussions as late as last week, that Xcel has just shifted to that, where we did that work approximately two years ago–is we moved to a process-based model. There are efficiencies and effectiveness in a process-based model.

An example of that is one asset management model, and one asset manage ment methodology, and one underlying asset manage ment technology; work management, as a process to align it, whether you're in generation, whether you're trans- mission or distribution. So we reframed, restructured our operations –our current operations group, which is our largest group within Manitoba Hydro. That is what our customers would consider the front line. They do the day-to-day operations of genera tion, trans mission and dis tribu- tion and they optimize the work management system.

In the asset management and delivery busi ness unit, which is our second largest business unit, we are focused on industry best practices around asset management and life cycle costing in terms of the engineering and planning and design, in terms of how we do the delivery of major project. For example, all asset -based projects are now overseen by one group that is focused on industry best practices and project management from stage gating to how we actually monitor projects as we build them to how we contract.

And that group has oversight on, as well as account ability to continue to engage with what is happening in project management as a field of expertise. Mr. Sala: I'd like to ask if that review found any areas of Hydro that are no longer relevant or will no longer be relevant to the operations of Hydro going int o the future. Ms. Grewal: There were no areas of Manitoba Hydro that, as a result of this review, said that these functions or capabilities should not exist.

That being said, though, there were areas identified, and I actually touched on them earlier, that we needed to either build the capability or improve – elevate the capability within Manitoba Hydro from strategic and enterprise planning to how we look at enterprise risk manage ment and other areas such as that. Mr. Sala: The annual report notes, quote , continued co-operation with the provincial project team and expert panel as they develop their recom mendations to government on the imple mentation of the recom - mendations and the Economic Review of Bipole III and Keeyask, end quote.

What were the specific actions Hydro undertook as part of its co -operation with the provincial project team on the recom mendations and the Economic Review of Bipole III and Keeyask? And I apologize for the word salad, there. Mr. Chairperson: No apology needed. We're in com- mittee. Ms. Grewal: Could you please confirm that you're referring to the work that was done by Commissioner Wall? Mr. Sala: Yes, that would have been a much more succinct way of putting it. Ms.

Grewal: So, the role Manitoba Hydro played in supporting the work done by the com missioner, as well as the review done by the in dependent commit- tee, included making pre sentations, providing infor- mation and data and analysis, as was requested. We've also reviewed and are currently reviewing the gov ernment response to the recom mendation. And, as we have in the past, we will work with the Province on the next steps. Mr.

Sala: How much staff time and operating funds were budgeted and expensed to support the provincial project team that were implementing the recommen- dations to the Economic Review of Bipole III and Keeyask? Ms. Grewal: We will take that under advisement. I do not have that information. Mr. Sala: I'd like to ask the CEO again if she'll commit to providing that information, which I would imagine should be available to the committee at a later date.

78 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 Ms. Grewal: We will take that under advisement. I do not–I am not aware that we were tracking this work specifically as a project. It was done by existing employees within Manitoba Hydro as part of the work that they undertake on an ongoing basis. Mr. Sala: Was the CEO or board of Manitoba Hydro consulted with during the work of the prov incial implementation of the recom mendations of the Wall report? Ms.

Grewal: I can confirm that Manitoba Hydro management was consulted and engaged in the process, and as I identified, we co- operated and provided information, analysis and presentations. Mr. Sala: I'd like to ask the CEO kind of a softball question here, but what is the core mandate of Hydro according to yourself? Ms. Grewal: The mission statement for Manitoba Hydro is as follows: Our mission is to help all Manitobans efficiently navigate the evolving energy landscape, leveraging their clean ener gy advantage while ensuring safe, clean, reliable energy at the lowest possible cost. Mr.

Sala: I'd like to pose the same question to the chair of the board: What does the chair perceive as the core mandate of Hydro? Mr. Edward Kennedy (Chair person, Mani toba Hydro-Electric Board): Thank you, good afternoon. The board is aligned with that mandate that the CEO just described. Mr. Sala: I apologize. The support team here that we have that's normally helpful just distracted me and prevented me from hearing –being able to hear the answer. I apologize to the chair. I would ask whether or not he could just repeat the answer, just– Mr.

Kennedy: The board is aligned with that description that–of the mandate that Jay just gave you. Mr. Sala: I'd like to again ask the chair another question here, whether or not the board supports the conclusion of the prov incial project team, including their endorsement of the recom mendation to sell off subsidiary elements of Hydro if those sub sidiary elements are not, quote, core to Hydro's mandate. Mr. Kennedy: Well, we haven't really talked about those issues and –on the board since I've been in the chair, as well, in June.

So, hypothetically, we'd– I'd–I would say take it under advise ment to look at that in more detail. It hasn't been a board topic. Mr. Sala: I'd like to ask the same question to the CEO. Ms. Grewal: Could you please repeat the question? Mr. Sala: Does the CEO agree with the recom men- dation of the prov incial project team that Hydro explore the selling -off of sub sidiary elements of Hydro that are not deemed to be part of Hydro's core mission? Mr. Chairperson: Ms. Grewal. Ms. Grewal, if you are trying to speak to the com mittee–now I'm muted. Ms.

Grewal, if you're trying to speak to the com mit- tee, we're not hearing you. So, we thought you were consulting with your personal staff but, in fact, it seems like you are trying to speak, and so I will now ask you to begin your remarks afresh. Ms. Grewal: My apologies. As I stated earlier, I stated the core mandat e for Manitoba Hydro. The only sub sidiary Manitoba Hydro has of any scale or size is the Manitoba Hydro International, a group of 88 people.

Those individuals are now part of Manitoba Hydro and they continue to do the work that they've done in the past other than on the Manitoba Hydro Inter national consulting side. We're not pursuing any new contracts and we're continuing to honour our obligations under the existing contracts. Mr. Sala: Could the CEO provide clarity over –or examples, rather, of activities that would be core to Hydro's mandate? * (14:10) Ms. Grewal: As I've shared earlier, in terms of our customers and Manitoba Hydro, what is paramount is safety; public safety and employee safety.

Second, what is critical and paramount f rom our customers' perspective, who've repeat edly told us through various surveys –third party surveys and surveys we've done –reliability is some thing that is also non-negotiable. Mr. Vice-Chairperson in the Chair Whether it's outages, duration of the outage, whether it's how quickly we can respond to connections to ensure reliability, that is fundamentally core. Dependability is core. Reliability, safety, at the lowest possible cost. That's always been the focus: safe, efficient electricity and natural gas at the lowest possible cost.

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 79 Mr. Sala: Is Centra Gas considered to be core to Manitoba Hydro's operations? Ms. Grewal: As I stated, core is electricity and natural gas. We don't speak about Centra Gas as standalone; we speak as Manitoba Hydro. And gas is part of Manitoba Hydro, though the entity that we acquired in the early 2000s from the private sector was known as Centra Gas. Mr. Sala: So, just to put a finer point on that, we know that the Wall report recommended that subsidiaries or non-core aspects of Hydro be sold off, or considered to be sold off.

Does the CEO consider Centra Gas to be core to Hydro's mandate, or could it be included under this definition of being a subsidiary as put forward in the Wall report? Ms. Grewal: As I stated, natural gas is core to Manitoba Hydro's service to Manitobans of energy, and that would include the organi zation of our busi - ness entity corporate structure named Centra Gas. Mr. Sala: Could the CEO provide examples of busi- ness activities –specific examples of busi ness activ - ities–that are not core to the mandate of Manitoba Hydro? Ms.

Grewal: As I spoke to earlier, what is Manitoba Hydro that is regulated remains core, and both gas and electricity are regulated by the Public Utilities Board, who has oversight over setting rates for Manitobans. Mr. Sala: I'll ask the same question again. Hoping the CEO can provide specific examples of busi ness activities within Hydro that are considered by the CEO to be non-core activities. Ms. Grewal: I would be speculating if I was to indicate what I thought from a subsidiary perspective is non-core, and I think I've been clear as to what we consider core. Mr.

Sala: Are the various busi ness units within Manitoba Hydro Inter national, which has now been brought under the umbrella of Manitoba Hydro, as you've stated; are those considered to be non- core elements of Hydro? Ms. Grewal: If they were considered to be non-core, we would –I would be speculating, but we brought them in, and those employees into Manitoba Hydro. So, that would stand for itself to say that those services and the role they play in serving the customers of Manitoba Hydro are important today. Mr.

Sala: By that definition, wouldn't the work of Manitoba Hydro Telecom be considered a core aspect of Manitoba Hydro? Ms. Grewal: Those individuals were brought into Manitoba Hydro as part of our operational group in terms of how we engage and manage our dark fibre going forward. Our dark fibre remain s core to Manitoba Hydro. We operate and maintain that system to support operations throughout the province. The percentage of dark fibre that was underutilized that we anticipate using in the future, 10, 20 years out, is solely 10 per cent; 90 per cent o f the fibre is owned, man- aged, operated by Manitoba Hydro.

Mr. Sala: This question, again, is for the CEO. Is there a roles and responsibilities record that is signed and publicly available for Manitoba Hydro? Ms. Grewal: There is a roles and respon sibilities record. I can't recall which year that was executed, and I can't recall if it is public, but–actually, it is, because it is in tab 2 of our general rate application. Mr. Sala: I'd like to ask the CEO which business units of Hydro are not regulated by the Public Utilities Board? Ms. Grewal: Within Manitoba Hydro, we have seven business units.

I already spoke to operations, I spoke to asset management and delivery and there's customer solutions and experience. In addition, we have a business unit called digital and tech nology. We have a busi ness unit which is finance–the office of the CFO. We have a busi ness unit, health–HR, health, safety and environment. And then we have a busi ness unit which includes legal, stakeholder engagement and communications. Those are all core to Manitoba Hydro, and those are the business units that make up Manitoba Hydro. Mr. Vice-Chairperson: Sorry, my mic was not on. Mr. Sala. Mr.

Sala: That didn't answer the question. I'll ask it again. Can the CEO let us know which business units of Hydro are not regulated by the Public Utilities Board? Ms. Grewal: All business units that I spoke to fall under Manitoba Hydro. The–what you may be referring to are the unregulated busi nesses, which I touche d on earlier, which are the subsidiaries.

80 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 Mr. Sala: Can the CEO identify what those business units are, for clarity? Ms. Grewal: Manitoba Hydro Inter national, which– is not a busi ness unit; it is a sub sidiary of Manitoba Hydro. Mr. Sala: I just want to go back to a question I'd asked to clarify. The CEO stated that there is, in fact, a roles and responsibility record that is published and publicly available. Can she confirm that's the case? Ms. Grewal: I can confirm that, in tab 2 of the GRA, there is a roles and responsibility discussion and docu- mentation. Mr.

Sala: The CEO would know that this is subject to the Crown Corporations Governance and Account- ability Act. And I'll just read the par t of the act that's relevant here: 4 -1, a cor poration must, within three months of becoming subject to this section, have a roles and respon sibilities record that is jointly developed by the cor poration and the responsi ble minister. End quote. Hydro became subject to this provision in September of 2017.

I just want to clearly ask the CEO: Does the roles and responsi bility document that she identified satisfy this provision within the Crown cor- porations and governance and accountability act? Ms. Grewal: As govern ment sets and defines the roles and responsibilities document, I would defer to government on your question. Mr. Sala: I'll pass the question–or, pose the question to the minister. Does the minister–can he confirm whether or not there is, in fact, a roles and responsibilities record, as is required under the Crown corporations governance accountability act?

Is there a roles and responsibilities record in place that satisfies that provision within that piece of legislation? * (14:20) Mr. Friesen: In my one year of time in this role, the governance aspects of the relationship that determines the interactions appropriately between the board chair, the CEO and executive management and the minister's office has been a subject of con versa- tion.

I believe that there was a former document, and it was our gov ernment that delved into the area of renewing those documents, so I can tell that member that I did myself review roles and responsi bilities, documents that were provided to me that were under development by my predecessor, actually. And at this point in time, I can commit to him that I can let him know–I'll let him know when I can deter- mine specifically what the state of those documents is and what is currently in place as that newer set of guiding documents has been developing.

And why I'm saying that is I'm not simply sure of when that new roles and respon sibilities set of parameters will be implemented and substitute for what was formerly in place. So, I will endeavour to get that to the member. Mr. Sala: Appreciate the minister's willingness to provide that document. And what I've heard him state here, on the record, is that there is a roles and respon- sibility record that satisfies the legislation, that provision, as written, and that they are not in violation of that legislation. That's what I've heard the minister state clearly today.

I look forward to getting that document from him as, from our perspective, that document does not currently exist. So looking forward to receiving that and getting clarity that they're not in contravention of their own legislation. Manitoba Hydro received and made use of federal funds for the Birtle transmission line. And this is from the annual report, we see, quote, Received f ederal funds for the Investing in Canada Infra structure Program under the Climate Change stream for the Birtle Trans mission Project, which increased transmis sion capability between Manitoba and Saskatchewan. End quote.

And that's from page 27. Under what legis lative author ity did Hydro receive and make use of these funds? Ms. Grewal: Manitoba Hydro is owned by the Province of Manitoba. The source of these funds is a fund that was created by the federal gov ernment called Investing in Canada Infrastructure partnerships or fund. It was a model that the federal government set up a few years ago where, on a per capita basis, funds were allocated to every province and territory and projects would qualify as long as i t met certain criteria. One of the –one, it was for infrastructure funding.

Another criteria was that it was focused on green. And the Province had the ICIP funding, and they came to Manitoba Hydro and said, do you have any projects that might qualify under this criteria? And we

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 81 identified three projects, and we put together business cases for that, for the Province to consider as part of the overall use of the ICIP fund from the federal gov- ernment. The way that the program works is, for all costs that are within the scope of the ICIP funding, 50 cents of every dollar from –will be received from the feds.

Therefore, 50 cents of every dollar, because we solely focus on those regulated projects, those regulated assets, projects that were already projects t hat we would be needing to invest in as Manitoba Hydro to ensure reliability, those funds are now going to be paid by the federal government versus our customers. Mr. Sala: Did Manitoba Hydro require any type of special legal authority to receive those funds? Ms. Grewal: We are not aware of any special legal authority required, as we are owned by the Province. Mr.

Sala: I'd like to just–further to that, did these funds have to flow through the Manitoba government prior to being made use of for the Birtle transmission line? That's to the CEO. Ms. Grewal: Correct, the ICIP funding is an agree- ment between the federal gov ernment and the Province. Mr. Sala: So, just to clarify, we've heard here in no uncertain terms that Hydro was able to receive fund s directly from the federal government without any type of special legal author ity, and they did not need to flow through the Manitoba government in any way.

I appreciate that clarity from the CEO that she's offered us here today. I'd like to move on to another area of questioning here, regarding rates. The passing of bill 36, which is referenced on page 32 of the annual report, will have a sig nificant impact on hydro rates required to be charged to families and busi nesses to meet the debt - to-equity targets set out in that piece of legislation. Not long after the bill passed, Hydro stated in local media that it was unable to meet the financial targets laid out for it in bill 36.

So, I'm hoping the CEO can share why they made that statement to media and why they concluded that they were unable to meet the targets in the bill. An Honourable Member: Mr. Chair? Mr. Vice-Chairperson: The honourable minister. Mr. Friesen: Thank you for the opportunity to speak and revert to the previous conversation and correct the record. The member is attempting to assert an untruth. I'll correct the record here and indicate, as I've indicated to that member during the consideration of the budget implementation and tax statutes act.

He knows that, in BITSA, there was a reference exactly, by the advice of Legis lative Counsel, that it was not, in fact, possible for Manitoba Hydro, as an owned entity by the gov ernment of Manitoba, to directly receive an award under the Investing in Canada Infra structure Program. Rather, there was no mechanism by which the Crown cor poration could receive an award by ICIP.

Though–even though Hydro did apply for this, and we are pleased that Hydro is in possession of these additional funds that will help with the refurbishment of the Pointe du Bois project that is designed to bring online additional hydro generation capability, and that planned refurbishment will help to increase the total kilowatt capability of Manitoba and Manitoba Hydro, it was, in fact, the case, directly opposite of what the member asserted, that it was necessary to establish legal author ity, legislative author ity, so the gov ern- ment could essentially receive the funds and imme - diately flow them through to Manitoba Hydro.

Mr. Sala: And yet, we heard from the CEO only moments ago that that was not, in fact, necessary and did not reflect the way that those federal funds were moved to Hydro to support the dev elopment of the Birtle Transmission Project. I just want to actually just jump back here quickly because–just reflecting on some aspects of the annual report and tied to this question about what's core to Hydro, I just want to ask the CEO: Does Manitoba Hydro Utility Services Ltd. fall under the core mandate of Manitoba Hydro? Ms. Grewal: Firstly, I would like to correct the statement just made.

If there was any confusion I created, I want to clarify. The funds went to the Province. The agreement was between the federal government and the Province, and the Province then made the funds available to Manitoba Hydro for three specific projects. Secondly, could you please restate the question? Mr. Sala: Sure, I appreciate that. And so, I had asked whether or not Manitoba Hydro Utility Services Ltd. is considered to be part of Manitoba Hydro's core operations?

82 LEGISLATIVE ASSEMBLY OF MANITOBA January 12, 2023 Ms. Grewal: I believe you're referring to Manitoba – MHIUS is the division or 'subsid uary' within Manitoba Hydro International that was engaged, and is still engaged, in honouring the inter national consulting contract that we had executed. As I stated earlier, due to concerns about reducing competitiveness, geopolitical risk and safety of those employees working in a number of Third World countries, as well as it is not core to our busi ness, we made the decision to exit.

And by exit, we're not pursuing new work in this area. * (14:30) I also would like to point out that this was –inter- national consulting was work that other Crown-owned utilities did in the past, but bo th BC Hydro and Quebec hydro exited this business a number of years ago. Mr. Sala: So, the CEO had previously stated that Manitoba Hydro International was the only subsidiary of Manitoba Hydro, but I just want clarity, because now she's stating that M anitoba Hydro Utility Services is part of Manitoba Hydro International as a subsidiary?

And if that's the case, just hoping for some clarity as to why it's listed as being distinct within the annual report. Ms. Grewal: I think there's some confusion her e. MHIUS is the international consulting business that is part of –and structured as a sub sidiary of Manitoba Hydro International. Are you asking questions about MHUS, which is our meter -reading busi ness on both the gas and electric side? Mr. Sala: That is accurate, yes. And maybe–I'm sorry if things got lost in translation, we're throwing around a lot of acronyms, here. I'll state the full name.

Manitoba Hydro Utility Services, which in the annual report is listed as providing meter reading and related services to Manitoba Hydro, Centra and other utilities, is that another subsidiary of Manitoba Hydro that wasn't identified earlier or is that considered to be part of Manitoba Hydro International? Ms. Grewal: My understanding is it's structured as a subsidiary of Manitoba Hydro but it is core to how we provide meter reading, which is the infor mation necessary to accurately bill our customers for the electricity and natural gas that they –that we serve them with. Mr. Chairperson in the Chair Mr.

Sala: So, to put a finer point on that, is it or is it not a core part of Manitoba Hydro's business? Ms. Grewal: Ensuring we have accurate meter reads is core to the business of Manitoba Hydro. Mr. Sala: And the annual report also lists that Manitoba Hydro owns Minell pipeline. Is that a core part of Manitoba Hydro's business? Ms. Grewal: Minell pipeline remains core to Mani- toba Hydro. Mr. Sala: I'm going to go back to rate -setting questions here.

I'd asked the question regarding–once bill 36 had been passed, Hydro stated in local media that it was unable to meet the financial targets laid out for it in bill 36. Can the CEO share why Hydro made this statement to media and why they concluded they were unable to meet the targets in the bill? Ms. Grewal: Firstly, there are a number of specific financial targets in bill 36. There are the targets that relate to rates and the rate path that we submit to the Public Utilities Board.

And to clarify, what bill 36–is caps at a maximum to the lower of i nflation or a maximum of 5 per cent if inflation is greater than or at 5 per cent, that rate increases are not to exceed inflation. Secondly, within bill 36, our targets relative to our financial health, our debt equity structure. Currently, Manitoba Hydro, from a debt equity perspective, is 86, 87 per cent debt and 13 per cent equity. And what does that mean?

Forty cents of every dollar that our customers give us to deliver clean, reliable power is used to pay interest on that debt–not to reduce or pay down that debt, but to pay interest on that debt. In bill 36, the Province has set debt equity targets that would bring us more in line with other Crown hydro utilities, which is , by 2035, an 80- 20 debt equity. And as I said, we're 86, 87 per cent debt right now.

And by 2040, a 70-30 debt equity test, which–it will pull us into a place where it's comparable to other Crown hydro utilities and where it strengthens our balance sheet to position us relative to being the Manitoba Hydro of the future and what's required to be successful in that environment. With the rate cap at inflation and the debt equity target, and what that rate trajectory over the longer

January 12, 2023 LEGISLATIVE ASSEMBLY OF MANITOBA 83 term would look like using that rate cap, we would not have achieved the debt equity targets. And the other point I want to make is, at the time, it was a bill; this will be legislation. And, as it is legis- lation, Manitoba Hydro will be required to comply with both. Mr. Sala: I ap preciate that infor mation.

And, you know, what we just heard here was that the CEO confirmed that the legislation that was passed by this government had internal contradictions that actually made it such that Hydro could not even raise its rates fast enough to meet the financial targets outlined in the bill, and that the bill essentially tied Hydro in knots. It was telling it to raise hydro rates as fast as it could; however, it had these other internal limitations that prevented it from doing that. So, it begs the question of who designed this bill, or why this bill was constructed in the way it was.

I'd like to ask the CEO if she can share what Hydro determined–what would have been required as a rate increase in order to meet the targets outlined in bill 36 before the government announced a r

Document details

Collection	Manitoba — Debates (Hansard)
Citation	42-5-cc4
Type	hansard
Volume / chapter	42nd 5th hansardpdf cc4.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	f4cef30e2bd076b58d7297026b52a4a3b2551885

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