Consumers, groups outraged over proposed Hydro rate increases miss the point

There is a stubborn political fantasy in Manitoba that electricity should be cheap forever, regardless of drought, aging infrastructure or soaring debt. It’s a comforting idea. But it’s also nonsense.

Manitoba Hydro’s request for rate increases of roughly 3.5 per cent a year over the next three years — a cumulative hike of about 11 per cent — triggered the usual outrage this week during Public Utility Board hearings.

Consumer groups lined up to claim the proposed increases were unfair and unnecessary.

But strip away the noise and rhetoric and one uncomfortable truth remains: Manitoba has no realistic choice but to accept moderate electricity rate increases.

Anyone who believes Hydro can absorb drought-related losses, replace crumbling infrastructure, expand generation capacity and magically return to financial health without steady rate hikes of three to four per cent a year is dreaming.

Hydro’s numbers are grim, but not surprising. The Crown corporation is projecting a net income loss of $409 million this fiscal year, driven largely by severe drought and weak export prices.

Low water levels have plagued Hydro in four of the last five years — no longer an anomaly, but a pattern. Climate risk isn’t theoretical anymore; it’s showing up on the balance sheet.

This is Hydro’s third net loss in five years. Retained earnings, once at a historic high, are sliding. And Hydro says bluntly that rate increases below 3.5 per cent would lead to cash-flow shortfalls and more debt.

That’s not fearmongering, it’s arithmetic.

Meanwhile, Hydro estimates it must spend $31 billion over the next 20 years to maintain and upgrade its infrastructure and expand generating capacity. That includes replacing aging assets that Manitobans depend on every day, as well as developing new resources to meet rising demand.

Without new generation, Hydro warns it could face capacity shortfalls during peak periods within four to six years.

Doing nothing is not an option — unless rolling blackouts are suddenly part of the affordability agenda.

And yet, the NDP government imposed a rate freeze this year, with the last increase a token one per cent in April 2024. It was a political decision dressed up as compassion.

Freezing rates in the middle of mounting losses didn’t make Hydro stronger; it made the problem worse.

That’s the part governments never like to admit. When you hold rates artificially low, the bill doesn’t disappear. It just gets deferred — with interest.

Yes, Manitoba Hydro can and should do more to control administrative and operating costs. The Consumers Coalition is right to demand scrutiny, and the Public Utilities Board exists for precisely that reason.

Hydro is a monopoly and deserves tough questioning. But cost-cutting alone won’t plug a drought-driven revenue hole measured in hundreds of millions of dollars, nor will it pay for billions in capital investment.

The province has reduced the amount Hydro pays to government in the form of debt guarantee fees, water power rental rates and corporation capital tax. That has helped the utility’s bottom line.

But those fees still amounted to more than $300 million in 2024-25 and should be reduced to zero. Hydro shouldn’t be a cash cow for provincial coffers. Its mandate should be solely to provide Manitobans with reliable and affordable electricity and natural gas, period.

Even with the proposed increases, Manitoba will still have among the lowest electricity rates in Canada. Hydro’s 2024-25 annual report points out that since the late 1960s, electricity prices have risen far less than inflation. In real dollars, adjusted for inflation, electricity in Manitoba is cheaper today than it was more than a half-century ago.

The real policy challenge isn’t whether rates should rise — they must — but how to protect those who genuinely can’t afford it. Targeted relief for low-income households, seniors and non-profit housing providers makes sense. Broad, blunt rate freezes do not.

An average monthly increase of $12 to $22 over three years, Hydro’s proposed increase, is not painless, especially for households already stretched thin. But pretending that zero is a sustainable number is worse. It would lead to higher debt, deferred maintenance and bigger shocks down the road.

Manitobans like to boast about Hydro as a public asset. But public assets still have to obey financial reality. You either pay for them transparently through rates, or you quietly hollow them out and let future ratepayers pick up the tab.

The NDP government helped create this mess by freezing rates for short-term political gain. Now it faces a choice: continue indulging the fantasy that Hydro can run on goodwill and good intentions, or level with Manitobans about what sustainability actually costs.

Moderate, predictable rate increases aren’t a failure of public policy. Refusing to face reality is.

tom.brodbeck@freepress.mb.ca