12/14/2012 11:59 EST | Updated 02/13/2013 05:12 EST

Manitoba Tories say Hydro projects should only be built for domestic demand

WINNIPEG - Manitoba's Opposition leader says new hydro projects should be delayed and built for domestic needs, not exports.

Progressive Conservative Leader Brian Pallister says a delay is needed to examine how low energy prices in the United States will affect the viability of new hydro dams in northern Manitoba.

Pallister says Manitoba Hydro, the province's Crown utility, is looking at selling hydro below cost in the U.S. and raising domestic rates to compensate.

The utility plans to spend more than $20 billion over the next dozen years to build two generating stations and a new transmission line.

It has said domestic rates will rise by 3.5 per cent or more each year, on average, to help fund the projects.

The NDP government has said world prices will rebound, and has suggested hydro power could do for Manitoba what oil has done for Alberta.

Pallister disagrees. He believes the projects could be pushed back for several years without affecting domestic supplies.

"This is a massive investment. Manitobans shouldn't be railroaded into being convinced by this government or any other government that this is something they should be speculating on."

A slumping U.S. economy has softened the export market and short-term spot prices have plummeted in part due to competition from low natural gas and coal prices.

The Public Utilities Board, the provincial regulator, warned last year that low prices could force Manitoba consumers to subsidize exports and could see domestic prices jump by 140 per cent over the next 20 years.

Manitoba already exports power to Minnesota, Wisconsin, northwestern Ontario and other markets.

But revenues from exports have been dropping. In its latest financial report, the utility said it incurred a net loss on consolidated electricity and natural gas operations of $43 million for the first six months of the 2012–13 fiscal year compared to net income of $13 million for the same period last year.

The government is confident export sales will be a net positive in the end.

"Hydro has signed firm long-term contracts with our export customers which will bring in $16 billion in export sales in the next 20 years alone, and $29 billion over the next 30 years," Sally Housser, press secretary to Energy Minister Dave Chomiak, wrote in an email.

"These $29 billion of export revenues will help pay for necessary capital investments, which would otherwise cost Manitoba customers."