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FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC 7247
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RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 OTTAWA 000173 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR OES, EEB/ESC, WHA/CAN 
 
DOE FOR INT'L AND POLICY AND IE-141 
 
EPA FOR OFFICE OF THE ADMINISTRATOR AND INTERNATIONAL AFFAIRS 
 
USDOC FOR 4320/ITA/MAC/WH/ONIA - WORD 
 
E.O. 12958: N/A 
TAGS: ENRG SENV PGOV CA
SUBJ:  MANITOBA HYDRO ANNOUNCES MAJOR ELECTRICITY DEAL WITH 
MINNESOTA 
 
Ref:  Ottawa 0135 
 
¶1. This is a retransmission of Ottawa 167.  This message originates 
from the U.S. Consulate in Winnipeg. 
 
¶2. SUMMARY:  The announcement of a major hydroelectricity purchase 
agreement between Minnesota Power and the Canadian province of 
Manitoba brings the development of some of the 5000 mw of 
hydroelectricity generation capacity in Manitoba's north an 
important step closer.  Significant amounts of this hydroelectricity 
will be available to U.S. markets in the upper Midwest, if the 
trans-border transmission capacity exists to deliver it (reftel). 
END SUMMARY. 
 
¶3. The decades-old logjam preventing the development of Manitoba's 
extensive hydroelectricity potential may have been broken with the 
announcement on January 29 of an agreement between Minnesota Power 
and Manitoba's government-owned hydroelectricity monopoly Manitoba 
Hydro.  The deal between Manitoba Hydro and investor-owned Minnesota 
Power allows Minnesota Power to purchase surplus energy beginning 
this year, and commits it to a 15-year agreement to purchase 250 
megawatts of hydroelectricity (worth a total of approximately $1 
billion) beginning in about 2020.  Minnesota Power provides 
electricity in a 26,000-square-mile electric service territory in 
northeastern Minnesota and provides wholesale electric service to 16 
municipalities and retail service to 141,000 customers. 
 
¶4. This agreement builds on a much more modest deal signed several 
years ago where Minnesota Power agreed to buy 50 mw of electricity 
from Manitoba Hydro from 2009-2015.  Last year Manitoba Hydro 
exported C$592 million worth of electricity, mostly to the United 
States.  Manitoba Hydro exports electricity to more than 30 electric 
utilities through participation in four wholesale markets in Canada 
and the Midwestern United States. 
 
¶5. The new 250 mw sale will hasten construction of hydroelectric 
generating facilities in northern Manitoba that have long simmered 
on the backburner due to Manitoba Hydro's inability to attract a 
long-term commitment for the purchase of the power.  Two generating 
stations have been proposed for the lower Nelson River, which flows 
into Hudson Bay.  Conawapa, a 1250 mw generating station, is further 
along in development, and is likely to be completed by 2021 at an 
estimated cost of $5 billion.  Gull Rapids, a proposed 600 mw 
generating station, has been discussed with local Indian tribes, but 
no design plan has been developed yet.  In addition, the smaller 
Wuskwatim generation project on the Burntwood River is ready for 
construction and is expected to come on-line in 2012, generating 200 
mw of electricity for export. 
 
¶6. The other major hurdle to development of Manitoba's hydroelectric 
potential has been the lack of transmission capacity to bring the 
power to markets in the upper Midwest and the Canadian heartland of 
Ontario.  According to a Manitoba Hydro contact, there is sufficient 
excess capacity to move Manitoba's surplus power to Minnesota Power 
for now, but the parties plan to build a cross-border line to 
accommodate the 2020 sale of 250 mw of electricity.  Our contact 
explained that under the terms of the deal with Minnesota Power, 
Manitoba Hydro will likely be responsible for getting the 
electricity to the border, where it will link up with a transmission 
line constructed by Minnesota Power to bring the electricity into 
Qline constructed by Minnesota Power to bring the electricity into 
its grid. 
 
What to do with the rest of the electricity? 
-------------------------------------------- 
¶7. Minnesota Power will not be able to use anywhere near the 1250 mw 
generated by the Conawapa project, so where would the rest of the 
electricity go?  Manitoba Hydro projects that increases in 
in-province demand for electricity will utilize some of the 
additional power, and small increases in exports to other markets in 
neighboring Canadian provinces and U.S. states may take up some more 
of the excess.  But clearly Manitoba Hydro will have surplus 
electricity in 2020, with more available if the Gull Rapids project 
comes on-line with 600 mw.  Manitoba Hydro would welcome an 
expansion of transmission capacity: either east-west, to facilitate 
more exports to other provinces, or north-south, to enhance its 
export options.   The electricity would be available to potential 
customers either in the upper Midwest or neighboring provinces, but 
there is not sufficient transmission capacity to get all of it to 
either market. 
 
 
 
OTTAWA 00000173  002 OF 002 
 
 
¶8. In recent years Manitoba and Ontario have studied the possibility 
of building an ambitious east-west line to get Conawapa power to 
Ontario markets.  Though the cost of this line would be daunting, 
the persistent lack of investment in the grid in border U.S. States 
has encouraged some Canadian players to advocate more east-west 
infrastructure as a way to open up Canada's undeveloped generating 
potential.  The Manitoba-Minnesota agreement is a strong signal that 
long-term trade on the established cross-border pattern can 
facilitate Canadian resource development in the future as well as it 
has in the past. 
 
WILKINS