Hydro's bid for new rate hike starts Dec. 10

Manitoba Hydro makes it pitch starting Monday, Dec. 10  to the Public Utilities Board to increase electricity rates a second time within a year -- an increase needed to support its plan to deliver more power to customers in the southern part of the province and the United States.

Hydro wants the arm's-length rate watchdog to approve a 3.5 per cent rate increase effective this April 1. The board has already approved an interim rate hike of 2.5 per cent for all Hydro customers Sept. 1.

The Crown power utility says the rate increases are needed to put $108 million in additional revenue into its pockets as it continues its plans to build over the next decade the new Bipole III transmission line down the west side of the province and the Keeyask and Conawapa generating stations in northern Manitoba.

But Hydro's plans have faced criticism, including from the PUB, as being too ambitious at a time when export sales are lagging because of a weak U.S. economy. At the same time, new drilling methods for shale and natural gas have flooded the power market.

Critics say by not recognizing the steep downturn in export sales, Hydro and the Selinger government could leave Manitobans on the hook for paying for dams that produce power no one wants to buy.

"In my heart, I'm really concerned that we've got a politically driven agenda here that is paying short shrift to changing market circumstances," Progressive Conservative Leader Brian Pallister said Friday. "When I look at the numbers, I just don't get why there is such a giant head of steam here to rush."

Pallister said the NDP have put too much focus on selling surplus power to Minnesota and Wisconsin and not enough on market realities.

"By God, if the priority of this government is to put the consumer need of an American customer in a questionable market ahead of the priorities of return on investment for Manitobans, who own Manitoba Hydro, then they're wrong. They've got it backwards and it worries me."

In its most recent financial report, Hydro said it saw a net loss on consolidated electricity and natural gas operations of $43 million for the first six months of the fiscal year, compared to net income of $13 million for the same period last year.

It said the net loss comprised an $18-million loss in the electricity sector and a $25-million loss in the natural gas sector. The loss on the electricity side was blamed on decreased revenues from export sales and higher operating expenses mainly due to accounting changes and pension-related cost increases.

Hydro spokesman Glenn Schneider said the utility will table more updated financial information to the PUB starting Monday.

He added Hydro sees the need for the 695-megawatt Keeyask project, to be built 725 kilometres northeast of Winnipeg on the Nelson River, by 2020 to supply power to a growing Manitoba.

The Selinger government has already asked the PUB to study alternatives to the Keeyask and Conawapa generating stations. The two dams will cost more than $13.4 billion.

The board has said in earlier decisions Hydro could build a natural gas-fired plant to supply Manitobans with power cheaper than that from the two northern dams.

Dave Chomiak, the cabinet minister responsible for Manitoba Hydro, said Friday such a plan is short-sighted.

Chomiak said the roughly $18-billion transmission line and dam-building cost will never decrease while the cost of natural gas will eventually increase because there is a finite supply.

"Will fossil fuels be here forever? No. Natural gas has been fluctuating 600 per cent over the past decade. It might be low now. It's not going to change in terms of the overall economics. If we delay it now, we're only going do it in 10 years and then we'll have to pay a lot more."

Chomiak also said Manitoba has the lowest residential electricity rates in Canada and that won't change with the cost of building the two dams or Bipole III.

"We're going to get another fossil-fuel crisis and everyone is going to say, 'Oh, gosh, we want green energy, we want renewable energy.' If we don't build for that exigency we're going to be in trouble."

bruce.owen@freepress.mb.ca

Republished from the Winnipeg Free Press print edition December 3, 2012 A5