PUB allows Hydro to raise electricity rates in September, April

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This article was published 24/08/2023 (776 days ago), so information in it may no longer be current.

Manitoba Hydro electricity bills will rise an average of two per cent over the next seven months after the Public Utilities Board approved two smaller rate increases than the Crown corporation had requested.

On Thursday, the PUB gave Manitoba Hydro the green light to hike average electricity rates by one per cent on Sept. 1 followed by a second, one per cent increase on April 1.

The independent rate-setting authority also finalized an interim 3.6 per cent increase that went into effect Jan. 1, 2022.

Consumers’ Association Canada-Manitoba director Peggy Barker expressed disappointment with the PUB’s decision to raise electricity costs, though at a slower rate than was asked for by the utility.

CAC-Manitoba intervened in the rate hearing process with the Consumers Coalition, which includes Harvest Manitoba and the Aboriginal Council of Winnipeg.

The coalition argued a rate increase would not be necessary if Hydro reeled in its costs.

“Given Manitoba Hydro’s record net-income last year with another $400 million projected for this year, this was not the year for a rate increase of this magnitude,” Barker said in a statement.

Manitoba Hydro had argued it needed two consecutive rate increases of two per cent in the 2023-24 and 2024-25 fiscal years. The rate hikes would have generated about $62 million in additional revenue for the utility between Sept. 1 and March 31, 2025.

The utility projected $469 million net income on electrical operations this fiscal year and forecast $295 million in net income next year, with the requested rate increases included.

“The lower increase awarded by the PUB means that our ability to address our $24 billion debt will be reduced, which is unfortunate,” Hydro spokesman Bruce Owen said.

“There are also other decisions in the order that may further impact our finances over the next several years. We are still reviewing the order to assess the full impact to our finances and operations.”

High water levels in 2022 coupled with the Progressive Conservative government’s decision to slash fees the utility pays to the province propelled Manitoba Hydro to a “record net income” of $751 million in 2022-23, meaning the interim 3.6 per cent increase was not required in retrospect, the board said in its decision.

“However, the board considers it just and reasonable to finalize the increase as part of the board’s four-year rate decision, balancing the interests of ratepayers against the long-term financial stability of the utility.

“This has factored into the board’s decision to approve rate increases less than those applied for by Manitoba Hydro.”

According to the PUB, residential customers will see their rates increase by 1.4 per cent on Sept. 1 and again on April 1. Other customer classes will see no change or rate increases of up to 1.1 per cent.

Each rate change is estimated to cost residential customers about $1.50 more each month. Customers who heat with electricity will pay about $3 more a month.

The Tory government’s contentious Bill 36 — the Manitoba Hydro Amendment and Public Utilities Board Amendment Act — figured heavily into deliberations, according to the order, with parties taking opposing sides on whether statutory debt reduction targets and rate caps effective April 1, 2025 should be factor into rate setting.

Manitoba Hydro has forecast a long-term rate path that includes annual two per cent increases to meet the government-ordered debt-ratio target of 70 per cent by March 31, 2040.

If the 2023-24 and 2024-25 fiscal years were considered in isolation, “Manitoba Hydro would not require a rate increase” in either year, the board wrote.

“However, the board continues to endorse a debt-to-capitalization ratio of 75 per cent as a prudent long-term financial target for Manitoba Hydro, and a modest rate increase is justified to achieve a gradual paydown of the utility’s debt and allow it to make progress towards this target.”

The PUB also determined the current regulatory framework applied to the application, but warned requirements in Bill 36 “may significantly constrain the board’s discretion to fix just and reasonable rates in future proceedings.”

The approved rate increases will put Hydro on a path to hit its first debt target ahead of schedule and reach a debt-to-capitalization ratio of 75 per cent in 2039, the PUB said.

In its decision, the consumer watchdog also recommended Manitoba Hydro review its bill-affordability programs to address energy poverty in specific communities, including 61 First Nations that do not have access to natural gas for heating.

Residential customers on reserve have electricity bills that are twice as much as off-reserve customers and rates are likely to rise in the future, the board wrote. It recommended the provincial government also establish an “energy poverty program.”

“In Manitoba’s climate, heating is not a matter of comfort, but of necessity,” the board wrote.

The recommendation was issued despite an amendment in Bill 36 that “curtails the board’s ability to make recommendations in the future” without prior ministerial approval, the regulator said.

“The board considers this impracticable because the requirement undermines the independence of the Board and its ability to make recommendations it considers to be in the public interest.”

The PUB also found Hydro’s proposed staffing increases to be reasonable, though unlikely to be fully achieved in the targeted years, leading to the lower-than-requested rate increases.

danielle.dasilva@freepress.mb.ca