Winnipeg Free Press - PRINT EDITION

Hydro, gas hikes get go-ahead

Board approves increases to help cover capital costs

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Manitoba's Public Utilities Board brought some fresh pain to Manitobans Friday when it boosted hydro and natural gas rates -- the same day the Selinger New Democrats voted to boost the provincial sales tax to eight per cent July 1.

The NDP said despite the 3.5 per cent rate hike awarded to Manitoba Hydro -- and the prospect of similar hikes during the next few years -- Manitobans will stay pay less than their provincial neighbours.

That's also despite the fact consumers will pay eight per cent more in electricity -- starting May 1 -- than they did a year ago, because of earlier interim rate increases.

"We'll still be the lowest, if not the second-lowest, in the country," Energy Minister Dave Chomiak said. "Everyone's rates are going up -- Saskatchewan's rates went up 4.9 per cent and Ontario's rates are higher.

"It's not a great time to be raising anything, but at the end of the day with Hydro, we've already signalled we will be asking for regular increases. We are guaranteeing that we will be the lowest and we will be held to that."

The PUB also awarded Centra Gas, a subsidiary of Hydro, an increase in natural gas rates -- the projected hit for a typical residential customer is approximately 5.6 per cent or $42 per year -- due to rising supply prices.

The Progressive Conservatives said the increases in energy rates are a symptom of a government that's going after a shrinking piece of the pie to pay for its spending and Hydro projects.

"There's a little less money on the table for Manitobans and it adds up," PC Leader Brian Pallister said.

The PUB order for the Hydro rate increase outlines the challenges the Crown corporation faces due to a weak market for its surplus export power and the risk it faces under its 20-year, $33-billion development plan.

"The board is concerned about the deteriorating financial condition of Manitoba Hydro in the face of pending significant major capital expenditure," the PUB said.

The risk comes on several fronts, including a $6-billion decrease in forecast export revenues during the next 20 years and the steadily increasing cost of fixing and replacing aging Hydro generation and transmission systems, including the Pointe du Bois dam on the Winnipeg River that went into service in 1926. Hydro forecasts it will spend $2.4 billion on Pointe du Bois alone.

To soften that risk, the PUB told Hydro to use 1.5 per cent of the new rate increase to mitigate future increases when Bipole III comes into service in four or five years. The increase will generate $48 million in 2013-14.

Hydro's development plan includes building the Keeyask and Conawapa generating stations in Manitoba's north. The two mega-dams come with a combined price tag of $16.4 billion -- a cost that, in part, will see electricity rates more than double during the next 20 years at approximately twice the forecast level of inflation, the PUB said.

"Just because you have low prices now doesn't mean you should squander a Manitoba advantage by doing something that doesn't make sense in the longer term," Pallister said. "Clearly, at best, it will double our prices for Hydro."

Chomiak said Manitoba will continue to enjoy lower energy prices compared with the rest of the country as the two new generating stations will pay for themselves.

"We have (export) contacts that are firm, valued at $7 billion," he said. "We probably have another $20 billion that we're negotiating. We feel really confident about the future."

The board also said since a portion of the granted increase is to be dedicated to major capital, Hydro has to do more to control its operational, maintenance and administrative costs.

"Manitoba Hydro's cost-containment measures appear to be modest at best, and despite a hiring freeze, the utility's current projections still reflect a growth in staffing of 243 equivalent full-time positions from 2011-12 levels," the board said. "Since the economic downturn in 2007-08, levels have increased by 771, with total payroll increasing by $197 million, or 41 per cent, since that time."

It also said Hydro has to increase energy-conservation targets.

Hydro should expand its Lower Income Energy Efficiency Program as increasing energy prices will hurt low-income earners, the board said.

Interest rates are also a concern. The PUB said Hydro's long-term debt is expected to grow to $29 billion by 2027, from $9.4 billion in 2013, which will lead to a finance expense exceeding $1.6 billion in 2028; three times the current level. "The board sees a genuine risk that the capital cost for the major capital projects will escalate further and that interest rates will be higher than forecast," the PUB said.

Ready to dig deeper?

WHAT the Public Utilities Board decision means to you:

It approved a 3.5 per cent increase in Manitoba Hydro customers' billed rates effective May 1;

The Crown utility was already granted a two per cent hike last April and another 2.5 per cent increase in September;

Hydro says the monthly cost of the latest increase for the typical residential customer, without electric space heat, using approximately 1,000 kilowatt-hours per month will be $2.60 or 3.4 per cent. A residential customer with electric space heat, consuming an average of 2,000 kilowatt-hours per month, will see an increase of $5.20 per month or 3.6 per cent;

The PUB granted Centra Gas, a subsidiary of Hydro, a hike, too. The approximate 5.6 per cent increase, or $42 per year to the average homeowner, is somewhat cushioned after almost five years of decreases due to low market supply prices for natural gas.

Republished from the Winnipeg Free Press print edition April 27, 2013 A3


Updated on Saturday, April 27, 2013 at 12:13 PM CDT: kilowatt-hours

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