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PUB shoots down Hydro's 7.9 per cent rate-increase request; agrees to 3.6 per cent

Board rejects prediction that province's debt load and credit rating will be hurt without hike

The PUB this morning said rates can increase 3.6 per cent as of June 1, and formally finalized an interim 3.36 per cent rate increase effective Aug. 1, 2016, and Aug. 1, 2017. (Tim Smith / Brandon Sun files)</p>

The PUB this morning said rates can increase 3.6 per cent as of June 1, and formally finalized an interim 3.36 per cent rate increase effective Aug. 1, 2016, and Aug. 1, 2017. (Tim Smith / Brandon Sun files)

Hey there, time traveller!
This article was published 1/5/2018 (834 days ago), so information in it may no longer be current.

Manitoba Hydro has been given the go-ahead to charge customers 3.6 per cent more, on average, for electricity effective June 1, but most homeowners and renters will pay more than that.

On Tuesday, the Public Utilities Board of Manitoba rejected a Hydro request to boost rates by 7.9 per cent, refusing to accept the corporation's accelerated debt-reduction plan. In an extraordinarily far-reaching ruling, the PUB also recommended that the Pallister government create a program to make hydro rates more affordable for those with modest means. It urged the province to give Hydro a portion of future carbon tax revenues to help the corporation hold the line on rate increases.

In a ruling hailed as a major victory by Indigenous leaders, the PUB, in its 316-page decision, ordered that First Nations customers living on-reserve not face any increase in hydro rates this year.

And, in a surprising move, the PUB held that the province should compensate Manitoba Hydro to the tune of $900 million over 13 years for a decision by the former NDP government to locate the BiPole III transmission line down the west side of Lake Manitoba instead of on the east side of Lake Winnipeg.

The PUB gave Manitoba Hydro until May 15 to establish rate increases for various customer classes for its approval. Because it costs the corporation less money to provide energy to large industrial users, they will face an increase that is lower than the 3.6 per cent average rate hike the PUB ordered on Tuesday. That -- and a freeze on First Nations rates -- means residential customers will be paying more than the 3.6 per cent average hike. Exactly how much more won't be known for two weeks.

Hydro disappointed

Hydro president and CEO Kelvin Shepherd said the PUB's decision to grant the Crown corporation less than half the rate hike it was seeking means more debt and greater financial uncertainty for the company.

"It largely means that our debt is going to get higher than we would have liked over the next number of years," he told reporters.

Shepherd said while Hydro has reduced its overall staff by more than 800 and taken other cost-cutting measures, it was counting on a higher rate hike to bring down a debt load swollen by recent mega-projects to sustainable levels.

"We're borrowing money just to fund day-to-day operations, and that's not sustainable," he said. "Over a period of time, without sufficient rate increases, debt is going to continue to climb."

But the PUB didn't accept Hydro's prediction the province's debt load and credit rating would be imperilled unless the corporation got the hefty increase it wanted.

Said the PUB: "There was no expert evidence independent of Manitoba Hydro before the board that Manitoba Hydro’s debt is leading to higher interest rates for the debt borrowings of the province. While there are benefits to a shorter-term debt-retirement plan, such a plan imposes a short-term cost on ratepayers that is not justified."

"The PUB clearly did not buy Manitoba Hydro's claims," said Byron Williams, a lawyer who represented the Consumers Association of Canada and Winnipeg Harvest during the rate-setting process. "Manitoba Hydro's prediction of catastrophe just wasn't supported. They didn't buy the claim that access to capital markets would be impeded."

First Nations get a break

The PUB order created a new rate class for hydro customers living on reserves. For 2018-2019, First Nations residents will see their rates remain the same.

Freezing rates on reserves is not only necessary to address poverty issues, it is part of the reconciliation process, the PUB ruled.

"An appropriate starting point for bill affordability in Manitoba is a program targeted at on-reserve ratepayers, specifically through the creation of a First Nations On-Reserve Residential customer class with a differentiated rate to address energy poverty," the PUB said.

"The creation of this new customer class is justified by the need to address energy poverty on-reserve, supported by evidence that 96 per cent of First Nations people on-reserve live in poverty and that First Nations in Manitoba have the highest rates of child poverty in Canada," the PUB said, also pointing to poor housing stock and no access to cheaper natural gas for heating.

Grand Chief Arlen Dumas of the Assembly of Manitoba Chiefs regarded the ruling as a "major victory" for First Nations."We have long insisted that our relationship with the Crown has to be reflected in all of the Crown's actions, including those of Manitoba Hydro," he said.

In an interview, he said that the creation of a separate rate category for First Nations customers was precedent-setting. Dumas said he can envision First Nations playing a role in future rate-setting hearings.

"I think it's an acknowledgement by the PUB ... to say there's an opportunity here where we can create some tangible reconciliation on our historical relationships," Dumas said.




Compensation for BiPole decision

The Public Utilities Board recommended that the government compensate the province's largest corporation for a decision by the previous NDP government.

"As a result of a policy decision by the provincial government, the routing of the BiPole III was changed to a western route at an additional cost of approximately $900 million," the PUB said in its ruling. "The decision created a $900 million burden for ratepayers with no apparent technical benefit for the new route."

The PUB said the cost of this policy decision should be borne by taxpayers -- not Hydro ratepayers. It recommended, starting next year, that the government suspend certain fees it charges the Crown corporation "until the $900 million burden of a policy decision made by government is satisfied." It estimated this would take 13 years to accomplish.

NDP MLA Andrew Swan rejected the notion that former government had a choice about the BiPole route. He said Indigenous communities would have blocked the shorter transmission line route Hydro had originally preferred.

"Sixteen First Nations on the east side of Lake Winnipeg said we are not going to allow you to build this BiPole," Swan said Tuesday.

Making hydro affordable

The Public Utilities Board said it agrees with Manitoba Hydro that government can play a role in making rates more affordable for low-income Manitobans.

It recommended that the provincial government introduce a "comprehensive bill affordability program" to address "energy poverty issues" faced by Manitobans throughout the province.

"Although Manitoba Hydro’s rates are among the lowest in North America, this does not mean that all Manitoba ratepayers can equally afford to pay their electricity bills. The board has long been concerned with utility bill affordability issues," the PUB said.

Williams said his clients had argued for a lower rate increase -- 2.95 per cent -- than the one granted.

"Manitoba ratepayers have had above-inflation increases since 2008," Williams pointed out.

According to information contained in Manitoba Hydro's rate application to the PUB, the corporation received cumulative rate increases totalling 35.1 per cent between 2008-2009 and 2016-2017. The cumulative inflation rate was 16.3 per cent during the same period.

Larry Kusch

Larry Kusch
Legislature Reporter

Larry Kusch didn’t know what he wanted to do with his life until he attended a high school newspaper editor’s workshop in Regina in the summer of 1969 and listened to a university student speak glowingly about the journalism program at Carleton University in Ottawa.

Read full biography


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Updated on Tuesday, May 1, 2018 at 12:11 PM CDT: tweaks headline

5:41 PM: Final write through, adds fact boxes

6:21 PM: Adds hydro rates graphic

May 2, 2018 at 3:17 PM: Corrects sidebar reference to BiPole III as a "policy decision."

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