Winnipeg Free Press - PRINT EDITION

Hydro lays out case for new rate hike

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MANITOBA Hydro wants its customers to pay more for keeping the lights on.

The province's power utility and the arm's-length Public Utilities Board began the first day of hearings Monday on Hydro's request for a 3.5 per cent rate increase as of April 1.

Hydro also signalled it wants increases of 3.95 per cent in each of the remaining 18 years of its 20-year financial forecast -- a forecast that includes the building of the Bipole III transmission line down the west side of the province, two massive generating stations in northern Manitoba and an overhaul of its other dams, transmission lines and substations built decades ago.

Hydro president and chief executive officer Scott Thomson said Hydro needs the extra money from rates to offset an estimated $2.9-billion loss in forecast revenue over the 20-year period.

"The revenue stream that we had been expecting to help underwrite some of the capital development, and some of our overall requirements, has declined," Thomson said Monday.

When Hydro first put the idea out four years ago it needs a steady series of rate hikes over the next decade, it was pegged at about three per cent every year.

But that was before the global recession hit and sidelined export power sales to the United States. It also came just as the shale gas boom exploded in North America and flooded the market with cheap natural gas to compete against Hydro's electricity.

The result hasn't been pretty for Hydro's bottom line. In its most recent financial report, Hydro saw a net loss on consolidated electricity and natural gas operations of $43 million for the first six months of this fiscal year, compared to net income of $13 million for the same period last year.

Hydro has also revised the construction costs for the Keeyask and Conawapa generating stations.

Conawapa's estimated in-service cost of $7.8 billion in 2025-26 has gone up $2.4 billion and Keeyask's estimated in-service cost of $5.6 billion in 2019-20 has gone up $600 million.

"What we have experienced over the last five, six, seven years is that construction and labour rates have been substantially higher than inflation," Thomson said, adding Conawapa's costs have gone up partly because it's been pushed back one year.

The PUB has already granted Hydro a two per cent hike last April and another 2.5 per cent increase in September.

Byron Williams, who represents the Manitoba branch of the Consumers' Association of Canada, told the three-member PUB panel if Hydro gets its wish of a 3.5 per cent hike, Manitobans will be paying eight per cent more on their Hydro bills in just one year.

Hydro says the rate increases are modest and only add a few dollars a year to the average residential user's bill -- and still keep its rates among the lowest in North America.

Manitoba Keewatinowi Okimakanak, which represents most First Nations in the province's north, and the Manitoba Industrial Power Users Group also oppose Hydro's rate request.

The GAC said it's concerned energy conservation will suffer with the building of two new dams.

It says Hydro should put more focus on other forms of renewable energy such as wind, solar, geothermal and electric vehicles.

Republished from the Winnipeg Free Press print edition December 11, 2012 A5


Updated on Tuesday, December 11, 2012 at 11:26 AM CST: Removes GAC from list of groups opposed to the rate hike.

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