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Hydro chair wants carbon tax to help vulnerable people offset big rate hikes

Sanford Riley, board chair at Manitoba Hydro, speaks to reporters after a speech to business leaders in Winnipeg on Friday, Dec. 1, 2017. Riley is hoping the Manitoba government will use some of the money collected through its proposed carbon tax to offset rising hydro rates for low-income earners. (Steve Lambert / The Canadian Press)</p>

Sanford Riley, board chair at Manitoba Hydro, speaks to reporters after a speech to business leaders in Winnipeg on Friday, Dec. 1, 2017. Riley is hoping the Manitoba government will use some of the money collected through its proposed carbon tax to offset rising hydro rates for low-income earners. (Steve Lambert / The Canadian Press)

Manitoba Hydro board chair Sanford Riley has proposed that Premier Brian Pallister dip into the province's expected $250-million annual carbon tax revenue to protect vulnerable residents from the hefty rate increases the corporation says it needs.

"It would be entirely reasonable for the government to soften the blow for those who are most vulnerable," Riley told a Manitoba chambers of commerce breakfast Friday morning.

Hydro goes before the public utilities board hearing beginning Monday to seek 7.9 per cent annual rate increases through 2024.

Crown Services MInister Cliff Cullen would not say Friday what he thinks about Riley's idea, though Pallister has suggested it as one possible use for carbon tax revenue.

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Manitoba Hydro board chair Sanford Riley has proposed that Premier Brian Pallister dip into the province's expected $250-million annual carbon tax revenue to protect vulnerable residents from the hefty rate increases the corporation says it needs.

"It would be entirely reasonable for the government to soften the blow for those who are most vulnerable," Riley told a Manitoba chambers of commerce breakfast Friday morning.

Hydro goes before the public utilities board hearing beginning Monday to seek 7.9 per cent annual rate increases through 2024.

Crown Services MInister Cliff Cullen would not say Friday what he thinks about Riley's idea, though Pallister has suggested it as one possible use for carbon tax revenue.

"There's quite a few ideas on the table how that money might be used. We had some expectations Manitoba Hydro might float that idea," Cullen told reporters.

He pointed out that Efficiency Manitoba — a new Crown corporation — begins operations in the new year, mandated to find ways to save energy and to keep rates as low as possible.

"When I use the words 'existential crisis' I'm not being alarmist." -Manitoba Hydro board chair Sanford Riley 

NDP Leader Wab Kinew accused Pallister of planning to give Riley his way in order to distract Manitobans from other issues.

"Tax rebates for low- and middle-income families would be a more effective way to offset the costs of carbon pricing. They would protect affordability and put money back in the pockets of consumers," Kinew said in a news release. "Pallister is trying to distract attention away from his massive and unnecessary Hydro rate increases, which will add thousands of dollars to everyone's yearly bills and make life harder for all families."

Riley told the chambers of commerce meeting that the previous NDP provincial government made bad business decisions in authorizing the Bipole III and Keeyask megaprojects, which have saddled the utility with debt that will soon grow to $25 billion.

"Our balance sheet is a mess," he said. "I'm not asking people to be happy with these (proposed) rate increases."

He said increasing rates is a crucial start in the effort to restore Hydro's financial stability, and with it, the province's economic future.

"When I use the words 'existential crisis' I'm not being alarmist," he said.

He acknowledged that the proposed rate increases will hurt low-income Manitobans as well as rural, northern and First Nations residents who rely on electricity to heat their homes and businesses.

Riley urged the chamber members to lobby government to use some portion of the carbon tax revenue to offset the necessary rate increases.

He clarified with reporters that he is not suggesting that all $250 million go each year to mitigate rate increases, and he emphasized that in making that proposal, he was speaking as a private citizen and not as Hydro chair.

"It's not Hydro's job" to advise the government on policy issues, he said. "I'm not asking for carbon tax money for Hydro."

As he's done since Pallister appointed Riley and his board almost 19 months ago, Riley blamed the NDP and its megaprojects decisions for the credit-rating "mess" Hydro and the provincial government are currently buried under.

"There's plenty of blame to go around," he said. "Hydro has borrowed way too much money."

And the loans were taken out without a plan to pay them back. But unlike previous Hydro boards, the one he now chairs has business experience.

"We understand capital markets," he said. "It's our obligation not to screw things up by beggaring the province financially."

Had the current board been in charge, Bipole III would have saved $1 billion by following a different route than the one ordered by the NDP, and Keeyask wouldn't have been built before Manitobans need it, which won't be until 2040 or beyond, according to current projections. Keeyask will supply $4.5 billion in power-sale contracts with the U.S., he said.

Riley used business-friendly graphs to show the chambers' crowd just how ugly a financial mess Hydro faces.

The corporation needs cash flow and it needs to restore at least a minimally favourable debt-to-equity ratio, Riley said, adding annual rate hikes could be lowered to 4.54 per cent beginning in 2025 if things go well.

"We have the lowest rates in North America," he said. "Not by a little, but by a lot."

Hydro is saving $65 million a year by having reduced its staff by 800 people, which he claimed has gone unnoticed.

Doing less than what Hydro has proposed would leave its financial future in even greater peril, Riley warned. Drought, lower export demand and lower export prices, higher interest rates on borrowing, efforts to reduce consumption — all could exacerbate a bad situation unless the debt is addressed, he said.

"Where I come from, hope is not a strategy, keeping your fingers and toes crossed is not an action plan. Something is going to go bump in the night, and we're not ready for it."

Without starting to get things in order, the utility could need annual rate increases of 13 to 15 per cent to handle unforeseen problems, he suggested.

Last year, Pallister balked when Riley called for the province to provide billions of dollars in what Riley called an equity infusion, and what others called a bailout. That's off the table.

"We are working with the tools we have available — rate increases and cost cuts," Riley said.

nick.martin@freepress.mb.ca

Read more by Nick Martin.

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Updated on Friday, December 1, 2017 at 4:23 PM CST: Updates

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