Latest forecast may push back promised hydro rate freeze By: Danielle Da Silva Posted: 6:55 PM CST Friday, Nov. 24, 2023

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The Kinew government may put its promise to freeze electricity rates on ice after drought conditions have confronted Manitoba Hydro with a forecast $160-million loss.

On Friday, the Crown corporation released its second-quarter report, showing a $610-million swing in projected revenues for the 2023-24 fiscal year.

The publicly-owned utility had budgeted $450 million in profit this year; the figure has been revised to a $160-million loss in just six months.

Finance Minister Adrien Sala called the massive swing concerning and disappointing. It could also delay the new NDP government’s commitment to temporarily freeze electricity rates by as early as April 2025, he said.

“We’re not saying that we’re not doing it,” Sala told reporters Friday afternoon. “What I am saying is that we are going to proceed with that commitment, but it’s just a question of how and when.”

According to Hydro’s financial update, lower net exports, lower domestic revenues and increased operating expenses contributed to the projected shortfall.

Export revenue was down $155 million compared to the same period last year, driven by low water conditions, Hydro said. Meanwhile, operating expenses increased by $22 million.

Overall, hydraulic generation is forecast to be 25 per cent lower this year compared to the provincial budget estimations.

The Crown utility also warned of significant variability in the projected financial results, which could further deteriorate owing to higher import prices in the winter.

During the recent election campaign, the NDP promised to temporarily freeze rates by reducing the utility’s debt guarantee fee, which it pays to the province, and cutting revenue the province receives from Hydro.

The move was estimated to save ratepayers $37.5 million and was one of the NDP’s signature affordability promises.

The NDP also pledged not to interfere with the independent rate-setting process at the Public Utilities Board, and to create the conditions for a freeze to be approved when Hydro submits its next rate application.

“We’re not saying that we’re not doing it … What I am saying is that we are going to proceed with that commitment, but it’s just a question of how and when.”–Adrien Sala

Electricity prices for the next 16 months have already been set.

Aside from the “how and when” of a rate lock, Sala said Hydro’s finances have not changed the NDP’s plans to fix health care, improve affordability and balance the budget in one term.

A mid-year fiscal update from the provincial government is expected before the legislative assembly rises for the winter break Dec. 7.

On Friday, Sala accused the former Progressive Conservative administration of glossing over Hydro’s financial position in the government’s first-quarter report in July.

It noted “current water levels and export market prices suggest Manitoba Hydro may not achieve the budgeted net income of $450 million.” The fiscal update did not, however, include any changes to revenue and held the deficit at $363 million.

“What we can see clearly is that the last government did not include that information very intentionally because they wanted to save their seats and they wanted to give a rosier impression of the provincial finances than were actually in place,” Sala said.

He offered no evidence information was withheld from the province’s report.

“We’re here to state clearly that those days where government is lacking transparency is over,” Sala said. “Our NDP government is going to ensure full transparency as it relates to numbers and we’re going to be accountable and Manitobans can count on that.”

Spruce Woods MLA Grant Jackson (PC critic for Manitoba Hydro) said revenue changes at Hydro are not unexpected and the province includes a $200-million revenue contingency in its budget for a rainy — or in this case dry — day.

The Tory government’s last fiscal update plainly outlined the revenue risk, he argued. The bigger concern is paying for future rate freeze, Jackson added.

“Now we have some not so favourable numbers coming forward — how are the NDP going to pay for this without seriously putting in jeopardy the debt load of Manitoba Hydro,” Jackson said. “We can’t risk the financial health of our Crown jewel.”

The promised rate freeze — delivered on time or not — won’t help Manitobans struggling with the cost of living right now, said Josh Brandon, a community animator with the Social Planning Council of Winnipeg.

Rather than meddle with rate setting and threaten the utility’s financial stability, the government could instead help lower-income households reduce their energy bills with efficiency programs and grants, Brandon said.

“We need to be prioritizing that right away. Our environmental commitments in Manitoba require us to make that shift, to make our homes more environmentally sustainable, more energy efficient and more cost effective.”

Delaying a rate freeze won’t spell an early end to the NDP government’s honeymoon period either — so long as it can show progress on other major campaign promises, University of Manitoba political studies adjunct professor Christopher Adams said.

“If the NDP’s going to fail on one of their commitments… it makes the most sense to put a pause on the Hydro one, because it’s a Crown corporation and it needs to be financially sustainable,” the veteran political analyst said.

“You can’t milk that cow ‘til it dies.”

danielle.dasilva@freepress.mb.ca