Keeyask dam cost estimate balloons by $2.2B

There was more bad news today for Manitoba Hydro as the Crown corporation's most recent estimate on the cost to complete the Keeyask dam project jumped to $8.7 billion.

Dam project now expected to cost $8.7B; in-service date pushed back 21 months

The cost estimate for Manitoba Hydro's Keeyask dam project has soared to $8.7 billion, the Crown corporation says. (CBC)

The red ink continues to spill from Manitoba Hydro as the Crown corporation has revised its cost estimate and timeline for completing the Keeyask dam project, saying it will cost $2.2 billion more than a 2014 estimate.

Hydro now estimates the final price to finish the work will be $8.7 billion, and it will take 21 months longer than originally anticipated.

The 695-megawatt generating station, approximately 725 kilometres north of Winnipeg on the Nelson River, was originally estimated to cost $6.5 billion and expected to be in service by November of 2019.

In September of 2016, the Boston Consulting Group completed an analysis for Hydro that adjusted the estimate to $7.8 billion.

Hydro president Kelvin Shepherd says the increase in costs came into focus after a year of structural concrete work was completed and Hydro had a better understanding of the bedrock under the project, which also contributed to rising expenses for foundation work.

Shepherd says the revised estimate includes a $900 million contingency for any additional costs, and he's hopeful the project total will fall at or under the revised estimate.

"Keeyask is a very large and complex project and the updated control budget is based on what we know today," Shepherd said 

But he acknowledged there is still a chance the project could be even more expensive.

"There is always a chance of additional risks materializing that could impact the schedule and costs," Shepherd said.

Shepherd says he's confident adding 21 months to the completion date for the project will not impact signed contracts for electricity sales to U.S. customers.

But the Hydro president was not sure yet what impact the rising cost for Keeyask would have on the Crown corporation's application for rate increases from the Public Utilities Board.

"It's still too early to make that determination," Shepherd said, though he acknowledged the cost increases could put pressure on electricity rates.

Traditionally, Hydro makes its application to the PUB earlier in the year. Shepherd was unable to say when the utility will be filing its application, but said getting more precise data on the cost of Keeyask was critical before beginning the rate adjustment process.

Manitoba NDP Finance Critic James Allum said while it's never easy to swallow projected "major cost overruns," the New Democratic Party still believes moving forward with the dam is the right decision.

"It's important for Manitoba Hydro to account for any pressures they may experience in construction through their annual application to the Public Utilities Board," Allum said in a statement, adding Keeyask will help the province meet future spikes in demand for hydroelectricity in the province.

"This province is growing. Manitoba must develop clean and renewable sources of power to meet that demand and into the future."

The Progressive Conservative government blames the previous NDP government for the ballooning numbers.

"There was a heads-up given to the previous administration by many that the costs estimates submitted by Manitoba Hydro would be low-balled and they would be rising," Pallister said.

"So I can't tell you that I am happy about today's announcement, but I also can't tell you that I am tremendously surprised." 

Pallister would not say if his government would give Hydro an injection of cash to help improve its financial situation and potentially ease big rate increases.

The premier said a rate application hearing in front of the Public Utilities Board is the place to work that out. That application is months behind the usual schedule and no dates for a hearing have been set.