New boss needs to shed former leader’s bad habits

Opinion

Hey there, time traveller!
This article was published 22/08/2022 (925 days ago), so information in it may no longer be current.

How many times do you need to be caught misrepresenting the facts before you start acknowledging the truth?

For two years, Manitoba’s Progressive Conservative government has been trying to gut the regulatory system that sets electricity rates for Manitoba Hydro. A second bill, Bill 36, would dramatically reduce the ability of the Public Utilities Board to independently review Hydro operations, and give cabinet unfettered power to set rates.

The justification for this unprecedented intrusion into the PUB’s independence is a claim by Hydro and the Tory government that the regulatory process costs are so expensive — $10 million a year — they are driving up rates. Despite abundant evidence to the contrary, Premier Heather Stefanson and Finance Minister Cameron Friesen have repeatedly relied on that figure to justify this bill.

However, in a recent decision denying Hydro its request to make a single rate application for both electricity and natural gas rates, the PUB appears to have settled the matter of the costs of annual rate hearings.

Relying on numbers provided by Hydro in its submissions, the PUB found that from 2015 to 2022 — the period used by Stefanson to calculate regulatory costs — the total cost for electricity rate applications, including interim rate applications, was $23.6 million, or an average of $2.95 million per year. That figure includes special, one-time costs related to reviews of capital projects which are amortized as part of the financing of those projects.

If you remove those one time costs and inflated calculations of internal labour — and accounting principles suggest you should — then “the average cost of a typical general rate application would be significantly lower,” the PUB reported. Even if you bundled together all of the costs, both operating and capital, and lumped in the costs of natural gas hearings, you only get to $3.1 million annually.

According to interveners, those costs amount to 0.3 per cent of the average electricity bill, and 0.7 per cent of an average natural gas bill. Hardly a rate-inflating force on their own.

Why is the Stefanson government so committed to something so poorly conceived and universally decried? In addition to a coalition of consumer advocacy groups, it’s worth noting the biggest industrial power consuming companies are threatening to scale back operations in Manitoba if Bill 36 goes ahead.

Without going into the mind-numbing details, there is certainly evidence that Bill 36 is more about providing relief to the government’s summary budget bottom line, and less about relief for electricity customers.

All Hydro debt servicing and equity is built into the provincial government’s consolidated or summary budget. In years when Hydro revenues are down, or debt servicing costs go up, the government’s bottom line suffers. For a government desperate to eliminate its budget deficit, this is not an insignificant concern.

So, perhaps it’s not surprising that Bill 36 includes requirements for Hydro to reduce its debt and significantly increase its equity, which will almost certainly require aggressive rate hikes. The PUB has rejected these requirements as unnecessary for a government monopoly, but Bill 36 would enshrine them in law and move them outside the reach of the regulator.

That makes future Hydro rate increases required to meet the debt-to-equity requirements a back-door tax increase on Manitobans. And one that would largely offset many of the other tax cuts introduced over the past six years by the Tory government.

Regardless of the real reason, the Stefanson government’s continued support of Bill 36 is starting to cause significant political problems.

When Stefanson took over from Brian Pallister last year, she inherited a party and government brand that was deeply defined by her predecessor’s penchant for stretching the truth and exaggeration. Let’s also not forget how incorrigible Pallister could be when confronted with evidence that truth was not on his side.

Stefanson has signalled it is important for her government to strike a new tone, and distance itself from the stain of the previous premier. In the past month, Stefanson made all kinds of announcements and initiatives designed to unshackle her from some of Pallister’s most egregious baggage.

Stefanson announced her government would not appeal a court decision that concluded Manitoba was wrong to claw back hundreds of millions of dollars in federal child welfare payments, a practice Pallister stopped but refused to remedy. She has completed tri-level funding deals for the north end sewage plant and the Hudson Bay Railway and Port of Churchill, files that were neglected by Pallister for years.

The gestures do fairly give Stefanson the opportunity to claim there is a new sheriff in town. But they are not the only gestures that need to be made.

Given the rising tide of opposition, the premier needs to either ditch Bill 36 or offer a more sincere and transparent explanation for why she needs to gut the regulatory system that oversees Hydro payments. Otherwise, she will be telling Manitobans her efforts to shed Pallister’s legacy are not sincere.

In other words, although there may be a new sheriff, it’s at least possible she comes with the same old bad habits.

dan.lett@winnipegfreepress.com