Hydro customers will see their bills climb by 2.75 per cent retroactive to May 1.
The Public Utilities Board approved the interim rate increase Tuesday. The hike is less than the 3.95 per cent boost Manitoba Hydro had been seeking.
In its decision, the PUB approved a two per cent increase to cover inflationary costs.
It approved another 0.75 per cent increase to help with the funding of the Bipole III transmission line.
The PUB said it based its decision on reduced Hydro revenues from export sales, higher Hydro operating costs with respect to the Wuskwatim generating station and higher corporate operating costs, among other reasons.
Hydro has announced plans to seek rate increases of 3.95 per cent annually until 2021 to carry out a series of system improvements. Also factored in are the costs of building the Bipole III transmission line and the proposed Keeyask generating station.
Scott Powell, a Manitoba Hydro spokesman, said the corporation is pleased the PUB recognized the need for small, ongoing regular rate increases to fund infrastructure improvements and new facilities. However, the corporation is disappointed at having to make do with less than it had hoped in the coming year. Powell said the concern is getting a lower increase now will "put pressure on future rates."
"We've always appreciated the importance of rate stability to our customers," he said, noting neighbouring jurisdictions have seen rate hikes of six per cent and nine per cent.
The PUB said Hydro's application for a 3.95 per cent rate hike was consistent with its preferred development plan that involves construction of both the Keeyask and Conawapa generating stations. The PUB is still studying that plan in what is known as a Needs For and Alternatives To (NFAT) review process.
"The issues and decisions that result from the NFAT review will have impacts on the rates set in future general rate applications," the PUB said in a news release.
Manitoba Hydro's next general rate increase application is expected this fall.
The Consumers' Association of Canada had opposed Manitoba Hydro's requested rate hike. It felt the corporation could meet its financial targets without any increase. It said any increase the PUB granted should be limited to the rate of inflation.