Manitoba Hydro is asking the province’s Public Utilities Board to approve an interim rate increase of five per cent as of Jan. 1.
It’s the latest move in an ongoing battle over how the Crown corporation might shore up its finances, deal with drought and address a level of debt that is eating up a lot of money in interest.
“Manitoba Hydro’s balance sheet is already highly leveraged and the corporation expects to spend 42 per cent of all revenues on interest costs in fiscal 2021/22,” the utility wrote in its application to the board this week.
“Manitoba Hydro’s current debt to equity ratio is 86 per cent. All other peer Crowns (in Canada) have achieved targets below that or have plans to achieve lower levels of debt within 10 years.”
Adding to the financial challenges this year is a long dry spell that has left rivers and lakes low, resulting in less excess energy to sell on the spot market.
Last week, the utility revised its financial outlook for this year from a surplus to a deficit of between $190 million and $200 million.
Manitoba Hydro saw its debt triple in 15 years as it built two megaprojects — the Bipole III transmission line and the Keeyask generating station — under the former NDP government. The projects ran a combined $3.7 billion over budget.
One credit rating agency, Moody’s, has warned that the utility has a weak financial profile but benefits from the financial backing of the government. Manitoba Hydro’s debt now accounts for about 40 per cent of the province’s total.
The utility applied for annual rate hikes of 7.9 per cent as recently as 2017, but the regulatory board approved increases of less than half that amount.
The Progressive Conservative government bypassed public regulatory hearings last year and set a 2.9 per cent rate hike. It was planning to set further rate increases of 2.5 per cent a year for three years, but withdrew the required bill from the legislature. The government then ordered Manitoba Hydro to submit an interim rate-hike request until a fuller review of the state of the utility can be conducted.
A coalition of consumer groups said it welcomes the return to public hearings on electricity rates and is not certain the drought warrants a five per cent increase.
“We appreciate there is a drought in Manitoba, however this is an expected part of the business cycle that Manitoba Hydro plans and prepares for,” spokeswoman Gloria Desorcy said in a prepared statement.
The Opposition New Democrats have criticized the government for wanting to unilaterally set rates. They have not promised to keep rates lower, but have vowed to let all adjustments go through the board.