THE provincial government’s directive to downsize operations is driving up Manitoba Hydro’s losses, at least in the short term.
The public utility suffered a net loss of $89 million for the first six months of 2017-18, compared to a net loss of $72 million for the same period a year ago.
About $44 million of the loss is due to restructuring, according to the Crown corporation’s quarterly report.
"The increase in the net loss is primarily attributable to restructuring costs driven by the implementation of a significant cost-reduction program," the report says.
About 325 employees have recently left Manitoba Hydro via its voluntary departure program, including 25 per cent of its senior management team. The Manitoba government’s order to cut costs will result in a total of 825 positions disappearing by Feb. 1, the report says.
The downsizing will eventually save the corporation more than $90 million annually, the report says.
Without staff cuts, Manitoba Hydro losses would be $45 million for the first six months of 2017, a sizable improvement over the same period the previous year. High water conditions have allowed it to increase power production for export sales on the spot market, accounting for a $32-million improvement in the net loss.
As well, growth in domestic electricity sales increased by $9 million.
Manitoba Hydro applied for 7.9 per cent rate increase this year, but was rebuffed by the Public Utilities Board and the utility settled for a 3.36 per cent increase. The report indicates it will again seek a 7.9 per cent rate hike next year, as part of a 10-year plan.
Manitoba Hydro needs the requested rate increase or it will face an $800-million cash shortfall to fund core operations, including investing in replacing and upgrading aging infrastructure, the report says.
"Failing to address Manitoba Hydro’s deteriorating financial position in a timely manner substantially increases the likelihood of unexpected and higher rate increases."