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Manitoba Hydro seeks bigger rate hike than originally sought

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The province’s power utility wants an even bigger rate increase than first tabled to deal with its lower-than-anticipated financial performance and rising constructions costs.

Manitoba Hydro and the Public Utilities board began their first day of hearings today on Hydro’s request for a 3.5 per cent rate increase as of April 1.

As part of that process it also released its most up-to-date financial report.

What it says is no surprise: A sluggish U.S. economy has meant poorer export sales and the recent introduction of cheap natural gas south of the border has created another competing energy supply.

The changing market has not put off Hydro from its plans to build Bipole III down the west side of the province and to build two new generating stations over the next 20 years: Keeyask by 2019-20 and Conawapa by 2025-26.

Hydro says Keeyask will be needed to meet Manitoba’s own power needs, never mind export sales. http://www.hydro.mb.ca/projects/keeyask/project_overview.shtml

Construction on Conawapa has already been delayed one year, but will be needed not only to meet that growing domestic demand, but to meet export sales to Minnesota and Wisconsin. http://www.hydro.mb.ca/projects/conawapa/index.shtml

"As a consequence of the deterioration in projected financial results, moderately higher domestic rate increases will be required in order to restore the debt/equity ratio to the target level of 75:25 by the end of the 20-year forecast period," the report said. " In addition to the requirement for a 3.5 per cent rate increase effective April 1, 2013 -- currently being considered by the PUB -- it is projected that rate increases of 3.95 per cent will be required in each of the remaining 18 years of the 20-year forecast."

Hydro also said it has downgraded what it expects to see in revenue from export power sales by $2.9 billion over the 20-year period.

It has also said it expects construction cost top-ups for Conawapa by $2.4 billion and Keeyask by $0.6 billion.

"Net income is projected to remain relatively low (averaging about $40 million per year) for the first 10 years of the forecast," the report said. "Should a severe drought be encountered during the first 10-year period, net income and the equity ratio would be further challenged.

The full report is http://www.pub.gov.mb.ca/exhibits/mh-gra-2012-13-14/Consolidated_Integrated_Financial_Forecast_IFF12.pdf

Several groups are to question Hydro’s plans at the PUB hearing, which continue up to Dec. 21 (The PUB is not sitting Dec. 11), including the Manitoba branch of the Consumers Association of Canada, the Manitoba Industrial Power Users Group, Manitoba Keewatinowi Okimakanak and the Green Action Centre (GAC).

In its brief, the GAC said it is concerned that new dams and transmission will encourage more power use.

"We are concerned that demand reduction, efficiency improvements and alternative renewable generation will get subordinated to and displaced by new dams," GAC said.

"Green Action Centre believes the grid should be constructed to insure the capability for Manitoba Hydro to perform an enhanced role in support of renewable alternatives, geothermal, district heating, demand management, electrification of transportation, and various smart grid attributes that permit the more efficient, reliable, and cost-effective use of power."

History

Updated on Monday, December 10, 2012 at 2:59 PM CST: update

3:01 PM: update

3:05 PM: add art

3:11 PM: update

3:13 PM: update

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