Hydro mess could spark disaster for premier

Disarray doesn’t seem a strong enough word to capture the magnitude of the mess that enveloped Premier Brian Pallister and his government Wednesday morning.

With most Manitobans only an hour or so into their workday came word that Manitoba Hydro chairman Sandford Riley and eight other members of the Crown utility’s board had resigned.

A news release issued by Riley attributed the resignation to a number of factors, including a failure by Pallister to engage in “meaningful dialogue” on pressing issues facing the utility. The news release also said Pallister was preparing to “remove” Riley as chairman, suggesting Pallister had “lost faith in the board.”

“Accordingly, we have determined it is necessary to resign,” Riley stated in the release.

It was a pretty sticky situation for Pallister, the man who appointed Riley and the other dissident board members. However, when faced with an incendiary situation, the premier did what he does best: he added fuel to the fire.

In a scrum with reporters, Pallister said the real reason for the mass resignation was the Hydro board’s decision to pay the Manitoba Metis Federation $70 million. In exchange, the federation would agree that no further environmental challenges would be undertaken to slow down completion of a transmission line to Minnesota. Pallister said cabinet decided to veto the payment, which “led to the decision you see here today.”

Pallister did confirm that he was planning to reassign Riley to another Crown corporation board, part of a mid-term strategy to shuffle board appointments and bring more women into the mix. Given all that has happened since Riley took over the Hydro board, that seems like a pretty unbelievable excuse.

The fact is that with one news release and one media scrum, the Progressive Conservative government and its most valuable Crown corporation have been thrown into chaos. The timing could not be worse.

Pallister is still trying to build public support for the recently tabled provincial budget that has been criticized as deceptive and confusing by some of the government’s staunchest supporters. Into that mayhem, you can now add a leadership vacuum at the top levels of Hydro that arrives just a few weeks before the Public Utilities Board makes a critically important decision on a general rate application.

It is hard to overstate the magnitude of the problem that the mass resignation creates for the premier. In fact, it has created several problems.

First, it creates instability at what is arguably Manitoba’s most important Crown corporation at a time when it is facing unprecedented challenges. Hydro is struggling to manage an expensive capital expansion program that includes a new generating station and new transmission infrastructure. Notwithstanding the reasons that Riley gave for stepping down, leaving the helm of the utility at this point in its history is irresponsible and selfish, at best.

However, the full effect of the resignations extends well beyond the financial stability of the utility.

The decision by Riley and his supporters on the board to abandon Hydro is tantamount to a public rebuke of the premier, something that could significantly weaken Pallister’s position as leader of the PC party.

Riley is considered royalty within Manitoba’s Progressive Conservative constituency. For decades he has been a significant source of political and strategic advice, and financial support. Many within the party think he may very well be the best leader the party never had.

However, since taken charge at Hydro, he has had an uneasy relationship with the government that appointed him.

Riley’s inflammatory warnings about impending financial doom at Hydro — a condition he believed would be brought on by the utility’s growing debt load — were a frequent and surprising source of concern for Pallister. Riley talked openly and often about Hydro’s debt-to-equity ratio, and how it could undermine the province’s credit rating. He suggested the province dig into general revenues to make an “equity investment” in the utility to stabilize finances.

At the PUB, Riley directed Hydro to seek a series of unprecedented rate hikes to lessen the effect of the growing debt. Unfortunately, almost no one outside the board agreed with Riley’s view of the world in which Hydro operated. Last year, the PUB turned down Hydro’s first major rate increase and is expected to do the same next month when it rules on the 2018 general rate application.

Riley’s continued assertions that Hydro needed more than double the rate increases being approved by the PUB was becoming a political liability for Pallister. As were suggestions from the Hydro board that the government lessen the PUB’s influence over Hydro finances. Riley had become an uncontrollable rogue element, operating at cross purposes with the politicians who appointed him.

In this context, Pallister’s claim that he was preparing to shuffle Riley to another Crown corporation board to make more room for women seems unbelievable. The premier clearly needed to get Riley out of Hydro. His claim about the need to appoint more women, something that he really does need to do, was clearly a ruse designed to help his partisan brother avoid the indignity of being dumped.

Just as clear is the likelihood that Riley deduced the pointlessness of that farce and resigned before he could be effectively fired.

Where does this leave Pallister?

Pallister’s government has lost support since being elected in 2016. He desperately needs the support of longtime, core Tories as he prepares for the 2020 election. And up against that challenge, he has found himself at war with one of the most famous and influential Tories of them all.

That’s not disarray. But it could spell disaster.


Read more by Dan Lett.