Hydro seeks rate hikes; says it can’t meet debt targets

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This article was published 15/11/2022 (673 days ago), so information in it may no longer be current.

Manitoba Hydro says it expects it will need to increase rates by an average of 3.5 per cent per year for the next decade, as it released its long-awaited, long-term financial forecast Wednesday.

On Tuesday, the publicly owned utility applied to the Public Utilities Board for 3.5 per cent increases to electricity rates effective Sept. 1, 2023 and April 1, 2024. That works out to an average of $4 per month more for a residential customer without electric heat.

The proposed rate increases “will ensure Manitoba Hydro can continue to meet customer expectations and become a financially healthy utility that Manitobans can continue to rely on for their energy needs now and in the future,” the Crown corporation’s general rate application says.

That application includes a 20-year financial forecast scenario ordered by Manitoba’s rate-setting overseer, the PUB. Hydro’s long-term forecast is for an average 3.5 per cent rate increase annually followed by a 0.5 per cent yearly increase from 2033-34 to 2041-42.

Hydro says it won’t be able to meet debt-reduction targets set out in the Progressive Conservative government’s Bill 36, which passed Nov. 3, that caps rate increases at five per cent or the rate of inflation, whichever is less.

While the rate of inflation in Manitoba is at a 40-year high of 8.1 per cent now, it’s expected to return to a more normal rate of around two per cent when Bill 36 takes effect in 2025.

Bill 36 (the Manitoba Hydro Amendment and Public Utilities Board Amendment Act) sets out changes to the regulatory framework in Manitoba, including the establishment of financial targets and other metrics to guide rate-setting as of April 1, 2025.

The legislation says rates charged by Manitoba Hydro are to provide sufficient revenue to enable the corporation to achieve debt-ratio targets of 80 per cent by March 31, 2035 and 70 per cent by March 31, 2040.

Hydro said in its application this week that a number of factors are driving the need for rate increases.

“Taking those factors into consideration, the debt-ratio targets set forth in (Bill 36) cannot be achieved in conjunction with complying with the rate cap.”

On Wednesday, Finance Minister Cameron Friesen said his government will have more to say about that later.

“Stay tuned,” he told reporters after question period. “In the throne speech we say our government will finally stabilize Manitoba Hydro as a corporation,” said the minister, who noted Hydro has the worst debt-to-equity ratio of any Crown-owned hydro utility in Canada; the debt tripled to $24 billion in the last seven years.

“We’ve taken action and we will take more action in the months ahead to stabilize Hydro and keep rates low,” Friesen said.

“It is possible to do the balancing act. You won’t have to wait long for that update.”

During question period, NDP hydro critic Adrien Sala called for the government to freeze hydro rates.

“Manitoba Hydro is projecting a net income of $559 million for the current fiscal year,” Sala told the house. “Meanwhile, Manitobans are struggling just to keep the lights on,” the member for St. James said. “Rates should not be going up. Will the minister reverse course and support a freeze on rates at Manitoba Hydro?”

Friesen responded by saying Manitoba Hydro rates are the second-lowest in North America. He said his government is dealing with Hydro’s heavy debt, which he said resulted from the former NDP government’s mishandling of the construction of the Keeyask generating station and the Bipole III transmission line. He said Sala “sticks his head in the sand.”

After question period, the minister said modest increases “are necessary to keep the lights on.” Equipment and infrastructure need to be maintained and wages are going up and need to be paid, Friesen said outside the chamber.

He said he thinks most Manitobans understand that, and don’t believe the NDP’s promise of a hydro rate freeze.

“There is no way to sustain zero, zero, zero and zero (per cent increases) without a significant rate shock in Year Five,” Friesen said. “Their plan for the fifth year is a double-digit rate increase.”

NDP Leader Wab Kinew said there is a way to freeze hydro rates, which his party plans to do if it forms government.

“We’re saying there’s a different approach here, one that could actually save you money by freezing rates,” Kinew said. “We look forward to sharing the details as we get closer to the election.”

carol.sanders@freepress.mb.ca