Really bad idea from NDP

Hey there, time traveller!
This article was published 08/09/2011 (5309 days ago), so information in it may no longer be current.

History gives Manitobans plenty of reason to distrust NDP meddling in Crown utility business. The NDP government’s repeated attempts to misuse Crown reserves were either thwarted by outraged Manitobans or ended with rate hikes. Greg Selinger’s pledge on Wednesday to ensure the “bundle” of utility rates in this province remains Canada’s lowest should be rejected outright as more of the same economically disastrous thinking.

Mr. Selinger says the NDP will have Manitoba Hydro and Manitoba Public Insurance set up reserves to keep “combined bills” for electricity, natural gas and auto insurance the country’s lowest. The Crown agencies already use reserves to stabilize rates; Hydro’s natural gas division uses market hedging to do the same. MPI is forbidden from using its reserves to cross-subsidize other Crown agencies and Hydro cannot cross-subsidize between its natural gas and electricity arms. Is Mr. Selinger planning to set up an account outside the Public Utilities Board’s rate approval authority?

When the rate regulator approved in 1999 Manitoba Hydro’s purchase of Centra Gas, it explicitly ordered there be no mixing of the finances of each entity, no subsidizing of losses in one by profits of the other. Such plundering of the pockets of one ratepayer to subsidize the costs of another exposes all to the market prices out of the government’s control. It interferes with the rational decisions Manitobans make in managing their expenses. Why would anyone with an old natural gas furnace — about 63 per cent of gas ratepayers — bother to upgrade to a high-efficiency model if the government keeps their costs low?

Such common sense escapes political parties looking to curry popular support with misguided policy. Manitobans see through that. That is why in 2005 the Doer administration was forced to back down on its plan to use Hydro export profits to keep natural gas rates from rising as market prices soared. That plan would have gutted the PUB’s power.

The NDP government similarly was forced to back off on a plan in 2000 to have MPI send profits to Manitoba’s universities to repair infrastructure that crumbled under an NDP-imposed tuition freeze. And it was forced after 2004 to stop raiding Hydro’s profits with hikes to water rental rates when a dry spell plunged the utility into deficit. Ratepayers were forced to pay to rebuild Hydro’s reserves.

It may be the NDP is now trying to pare back the PUB’s ability to order MPI to spill robust reserves to ratepayers through rebates or rate reductions — it won this fight years ago, resulting in repeat rebates in the hundreds of millions of dollars.

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MPI and Manitoba Hydro both boast that their rates are among or are the lowest in Canada. Natural gas ratepayers essentially pay market rates. The twist is Hydro expects electricity rates to rise 45 per cent in the next decade alone to pay for expensive capital projects — including the excessive costs of a new bipole line the NDP has ordered built on the west side of Manitoba, and new hydro dams to meet deals with American customers as export prices are falling.

Manitobans should beware any government interference in the PUB’s ability to scrutinize financial management at Crown utilities. They should view with grave suspicion the promises of the NDP to keep rates low as it forces Hydro to spend $1 billion more to send Bipole III down western Manitoba.