Analysis

An 'existential crisis' at Manitoba Hydro? Problems that led to board's resignation run deep

Premier Brain Pallister and former Hydro chair Sandy Riley have diametrically opposed versions of what prompted the board to resign en masse this week.

Former chair of Manitoba Hydro and premier have different explanations for board's mass exodus

Former Hydro chair Sandy Riley says he couldn't get a meeting with Premier Brian Pallister. The premier says it would have been inappropriate to meet. (CBC News )

In an effort to describe the financial woes facing Manitoba Hydro, Sandy Riley once used the words "existential crisis."

It would appear Riley's resignation, and that of nine of 10 members of Hydro's board this week, has created a similar political crisis for Premier Brian Pallister.

Riley, though a Progressive Conservative supporter (as were many members of the Hydro board), was not willing to go gently into the night after reaching an impasse with Pallister. Nor were his fellow board members.

It has become a situation where the two sides are far, far away from agreeing to disagree.

There are two distinct versions of how this extraordinary situation unfolded. 

Premier Brian Pallister says the impasse with Hydro board was over a deal with the Manitoba Metis Federation. (CBC News )

Riley and a board of directors filled with accomplished people say they attempted for more than a year to engage the premier in a conversation about the options for right-sizing a debt-bloated Hydro.

They were decisions only the government could make — regardless of how much independence or autonomy the board was promised, and despite the pledge of no political interference Pallister made when he appointed the board.

Would the government consider injecting cash into the Crown utility to help stem the financial bleeding?

Would the province consider easing back on water rates and finance charges that cost Hydro hundreds of millions of dollars annually?

Would the premier consider assigning a portion of carbon tax revenues to ease any potential electricity rate increase on the most vulnerable Manitobans?

Riley says the board has suggested those alternatives to the government for many months. If they had been acted on with any dispatch, it would have likely shaped presentations to the PUB and been a factor in their deliberations on a rate hike.

Won't lobby on Hydro's behalf: Pallister

But Riley and the board believed they were strategic financial options that had to be examined and decided on, and despite repeated contact with senior staff and the Crown services minister, Riley says the decision maker — Pallister himself — wasn't available. Eight other people say they resigned under the same belief.

The former board chair says the work the board and management could do on its own — wage freezes, a huge trim of Hydro's work force and senior staff — were done.

Pallister's response is that any discussion with Riley or the board would smack of interference on the deliberations of the Public Utility Board on Hydro's request for a rate hike.

The PUB, also picked by this government, is arms-length and independent.

"I respect the process unlike previous administration. We have a process we are going to respect. I don't try to lobby the PUB on behalf of Hydro on a rate hike," Pallister said on Wednesday.

"They had their chance to make their case to PUB. They made it."

Premier Brian Pallister says he'll replace the nine Manitoba Hydro board members who stepped down Wednesday amid complaints of a lack of communication with the provincial government — including with the premier himself — by noon Friday. 3:16

That raises the question of whether a group of individuals appointed by the government to an entity in which they have no financial stake, and which they are tasked with fixing, can be accused of "lobbying" in the first place. The questions Riley and his board sought answers on appear to focus on stabilizing the finances of Hydro. 

The now-departed board were appointed at a time when the Pallister government had pledged to end political interference at Manitoba's Crown corporations. The government scrapped the civilian oversight body — the Crown Corporations Council — and replaced them with government staff.

Then-Crown services minister Ron Schuler said at the time the civilian council wasn't doing its job.

"Unfortunately, what happened with the corporation as exists right now is the oversight wasn't taking place,"  Schuler said in August of 2016. "There was a lot of political interference from this legislature into the Crown corporations."

'Hush money'

Riley is clearly riled by Pallister's contention there were "untruths" in the statement the board gave when exiting.

But the demeanour of the former Olympic sailor and long-time businessman is a ripple in a pond compared to the bear that was awoken in Manitoba Metis Federation president David Chartrand.

Pallister's contention that a nearly $70-million agreement with the MMF for a land and rights settlement with Hydro morphed Wednesday from "persuasion money" to "hush money" in the legislature Thursday — to be paid, Pallister said several times, to a "special interest group."

Manitoba Metis Federation president David Chartrand says he will not allow the work of the former Hydro board to be lost through what he calls "political interference." Chartrand accuses Premier Pallister of using "race card" tactics against Indigenous people to divide Manitobans. 1:41

Chartrand swiped back multiple times.

"Premier Pallister's antics and storytelling this week have made Donald Trump look like a pillar of stability and truth," Chartrand wrote in a statement.

A statement from Hydro says the company has entered into these kind of agreements in the past.

"It is our understanding that we had the authority to negotiate these agreements (subject to board approval) in order to address impacts of system development and ensure our business can continue to operate effectively and efficiently," wrote Hydro spokesperson Scott Powell.

Agreement was unique

But Riley says the board knew this agreement was unique and felt it necessary to canvas the government for their input.

"So before we operationalized, we sent it to the government and said to the government, 'we'd like to talk to you about this agreement and how it fits in. We'd like to talk to you about the areas you're dealing with outside of Hydro. And we'd like to talk to you about how it makes sense,'" Riley told CBC News.

That was in the fall of 2017, he said.

And Riley says the premier, who has been described by his most senior advisors as the one who decides in this government, was not available to talk about it.
Former chair Sandy Riley says Pallister's description of an agreement with the MMF as 'persuasion money' is 'cynical, offensive and wrong.' (CBC)

In the former chair's words, "it was on the desk of the premier. To quote … one of the last conversations I had, with one of the senior members of the government staff, 'It's beyond my pay grade.'"

Yet on the morning of the announcement of the board's departure, it was the decision about that agreement that Pallister says was the impasse that prompted the resignations.

Management decision

The impasse between the premier and the board goes deeper than just the nine people who left. The board of Hydro made the decision to approve the MMF deal based on the recommendations of Hydro president Kelvin Shepherd, his legal team and business advisors. 

"Management was responsible for negotiating and developing terms of the agreement, which was then forwarded to the board for approval," Hydro's Scott Powell wrote to CBC News. "The proposal went through all of Manitoba Hydro's standard internal review processes."

Hydro has entered into multiple agreements with First Nations communities to address damage to their land and settlements for future use.

The MMF agreement was a "management decision" before it was a board decision.

On Friday, Crown Services Minister Cliff Cullen said the government still had full confidence in Shepherd and his team.

'Stay tuned' for changes at other Crown boards, says Crown Services Minister Cliff Cullen. (CBC )

Pallister disclosed his view on the lines between government and management on Wednesday when he spoke to the media about the resignations.

Our job as government is to make sure the policies and priorities of our Crown boards align with the policies and priorities of the Manitoba government.- Crown Services Minister Cliff Cullen

"There's a difference between management and leadership. The NDP interfered with the management of Manitoba Hydro in decisions like the direction the Bipole [III transmission] line should take. They interfered with Manitoba Hydro on other issues too, costing Manitobans ultimately billions of dollars."

Pallister may not have liked the board's view of the MMF agreement, but he was willing to appoint its chair into another Crown board. 

The day before the board resigned, Riley got a call from a senior staffer about a plan to re-jig at Hydro and a proposal to give Riley another job at another Crown corporation.

Riley wasn't willing to go. "Shocked," is what he recalls feeling.

'Stay tuned' for Crown changes: Cullen

If Pallister, through his staff, offered a new slot to Riley, it could mean one of two things; the premier was dissatisfied with the leadership on the boards of either Manitoba Liquor and Lotteries or Manitoba Public Insurance, or the move would be made to incentivize Riley to quell his dissenting voice. Perhaps both.

On Friday, Cullen said Manitobans should "stay tuned" for changes at the other two Crown corporations.

Regardless of what transition the Pallister team planned for the board of Hydro, its members had another plan and left en masse, leaving Emerson MLA Cliff Graydon as the remaining loyalist.

This situation is unique in many regards.

It is rare for several prominent citizens entrusted with a massive responsibility such as the stewardship of something as grave as the crisis at Manitoba Hydro to leave with the situation unresolved.

One of the most effective things we do in Manitoba is we talk. We work together. Regardless of political stripe, in many cases. This didn't happen here.- Former Hydro board chair Sanford Riley

It is unusual that several such people, politically aligned with the current government, would be compelled to turn their backs to a government they helped elect.

It is extraordinary that the person who approved their appointments would cast doubt on why they left.

Riley, in his interview with CBC News, concluded with an almost wistful remark.

"One of the most effective things we do in Manitoba is we talk. We work together. Regardless of political stripe, in many cases. This didn't happen here."

On Friday, Cullen met with the press to speak about the five replacements for the board of Hydro.

The Crown services minister said the new board will operate under the guidelines set by the government early in its mandate — which is to allow them to be them independent and free from political influence.

"That's correct," he said.

"Our job as government is to make sure the policies and priorities of our Crown boards align with the policies and priorities of the Manitoba government."

About the Author

Sean Kavanagh

Provincial Affairs Reporter

Born and raised in Winnipeg, Sean has had a chance to live in some of Canada's other beautiful places (Whistler, B.C., and Lake of the Woods, Ont.) as well as in Europe and the United States. In more than a decade of reporting, Sean has covered some of the seminal events in Manitoba, from floods to elections, including a stint as the civic affairs reporter responsible for city hall.