Earlier today the Manitoba Public Utilities Board (PUB) awarded Manitoba Hydro a 3.36 per cent interim rate increase, effective August 1. As part of the utility’s General Rate Application filed with the PUB in May of this year, Manitoba Hydro had requested an interim rate increase of 7.9 per cent in August 2017 and a further 7.9 per cent in April 2018.
“We are pleased that the PUB recognized the need for an interim rate increase,” said Kelvin Shepherd, President and CEO of Manitoba Hydro. “However, we are concerned that the PUB has not taken quicker action to begin to address the serious financial challenges and risks facing Manitoba Hydro. This order gives the PUB more time to review our full rate application and consider all the evidence on some very important issues that we believe need to be addressed in any final rate decision.”
Shepherd explained that Manitoba Hydro needs additional revenue to fully fund its operations, including investing in the replacement and upgrading of its aging infrastructure. Additional revenue would also help the utility withstand the risks of rising interest rates and drought.
“Our business is subject to a great deal of volatility in terms of water flows, which are extremely hard to predict and can have a very major and rapid impact on our revenues,” said Shepherd. “With our debt already having increased to $16 billion and scheduled to grow by another $8 billion over the next five years, it’s imperative we increase our financial capacity to fund our ongoing operations, rebuild equity in our company, and have sufficient free cash flow to ensure that our debt is considered self-sustaining.”
“We cannot count on faster growth in electricity usage or factors outside our control such as continued historically low interest rates, a rebound in market prices for electricity exports, or above average water flows to recover from the significant deterioration in our financial strength,” Shepherd added. “The best way we can ensure continued delivery of safe, reliable service at competitive rates is through the actions we are already taking to significantly reduce our operating costs, balanced with increasing rates sufficiently over the next several years.”
Shepherd said Manitoba Hydro looks forward to the comprehensive PUB review of Manitoba Hydro’s full General Rate Application, with public hearings scheduled to begin in December, and expects that this detailed public review process will ultimately confirm the need for the level of rate increases that were requested.