WINNIPEG — Billions of dollars in cost overruns and spiralling debt at Crown-owned Manitoba Hydro were caused in part by a lack of government oversight and overly optimistic sales predictions, says a report released Friday.

A review by former Saskatchewan premier Brad Wall looked at construction of the Bipole III transmission line and the Keeyask generating station, which together ran $3.7 billion, or 38 per cent, over their initial budgets.

The report said there were many factors, including one major contract that left the province instead of the contractor on the hook for cost overruns.

And as costs rose, the former NDP government did not take action, said Wall, who was hired by the province's current Progressive Conservative government to do the review.

"The commissioner saw no evidence of interest or proactive outreach on the part of the former elected Government of Manitoba to provide oversight, accountability, and overall leadership on the Keeyask and Bipole III projects," Wall's report states.

"As the costs of the projects grew and the potential impact on Manitoba Hydro became apparent, there is no evidence that the former government engaged with the (Manitoba Hydro board) or provided any direction."

The report also says Manitoba Hydro officials and the former NDP government overestimated the potential for export sales.

When the government began pushing the projects, it said hydroelectricity could do for Manitoba what oil had done for Alberta. But energy prices softened as the use of natural gas and fracking expanded in the United States.

Domestic demand was also overstated, Wall said. Instead of Keeyask being needed as early as 2019, its energy may only have been needed a decade from now, Wall said. The generating station started operating earlier this month.

Keeyask and Bipole III were built over the last 15 years and Manitoba Hydro's debt has tripled in that time to more than $23 billion.

The Crown corporation has applied to increase customer rates by up to eight per centtto pay down some of the debt, but provincial regulators have approved much lower increases.

Wall's report said up to $1 billion might have been saved had Manitoba Hydro been allowed to build Bipole III on a straight route along the east side of Lake Winnipeg. Instead, the NDP government ordered it take a much longer route through western Manitoba to preserve pristine boreal forest, respect Indigenous land use and to not raise environmental concerns among potential customers in the United States. 

When the Opposition Tories raised the issue in 2007, the government said export sales would pay for any extra costs.

Attempts by The Canadian Press to reach Greg Selinger, who was the minister responsible for Manitoba Hydro at the time and would became premier in 2009, were unsuccessful Friday.

The current NDP Opposition said the report from Wall, a former Saskatchewan Party leader, was the work of a political operative.

"Typically these types of reports would be produced by a judge or an expert in their field," hydro critic Adrien Sala said.

"Instead, the (Tories) have decided to hire their friend and political ally ... to write a report that would tell them exactly what it was that they wanted to hear."

Manitoba Hydro said it is reviewing the report and will discuss its findings with the government.

Wall's report makes many recommendations, including greater oversight by the provincial cabinet of major hydro projects. It also says some projects could be done in partnership with the private sector.

Wall said the province would continue to own any infrastructure under such an arrangement, but the Canadian Union of Public Employees called the idea a step toward privatization.

"Private, for-profit corporations ... aren't participating in projects for the public good. They're there to make a profit," CUPE Local 998 president Michelle Bergen said in a news release.

This report by The Canadian Press was first published Feb. 26, 2021

Steve Lambert, The Canadian Press