Manitoba Hydro is asking the provincial regulator, the Public Utilities Board, to approve electricity rate increases of 3.5 per cent in each of the next two years.
It also warns that it will likely need rate hikes above the rate of inflation in the future if it is to meet government debt-reduction targets.
“These proposed increases will help ensure Manitoba Hydro has the financial resources available to handle the risks created by our $24-billion debt load and factors that are out of our control like fluctuating interest rates, export market prices and water levels,” Jay Grewal, president and CEO of the Crown-owned utility, said in a press release Wednesday.
If the requested rate increases are approved, the average homeowner who does not heat with electricity will see their monthly bill rise by $4 next year and another $4 in 2024, the utility said.
Manitoba electricity rates have traditionally been among the lowest in North America, but the utility has long warned that steady rate hikes are needed.
The corporation’s debt tripled over a 15-year period, due in part to cost overruns on a generating station and a major transmission line under the former NDP government.
Grewal has said Manitoba Hydro is spending more than other utilities on servicing its debt.
Moody’s, an international credit rating agency, warned in the spring that recent rate hikes have not been high enough to keep up with rising costs.
Last year, the utility posted a $248-million loss, due partly to low water levels that left less energy for export. It is projecting this year a net income of $559 million due to higher water flows and higher prices on the export market.
The Opposition New Democrats have promised to freeze electricity rates if they win the provincial election set for next October, although they have not said how they would convince the Public Utilities Board to do so.
The Progressive Conservative government recently passed a law to limit annual rate increases to a maximum of five per cent or the rate of inflation, whichever is lower. The cap is to take effect in 2025.
The law also sets debt-reduction targets, with progressive deadlines in specific years.
In its new rate application, Manitoba Hydro said it cannot hit those targets if it is limited to rate increases at the rate of inflation. It expects inflation to average two per cent per year starting in 2025.
“Manitoba Hydro is forecasting that an additional $1.9 billion in debt would be added between 2025-26 to 2039-40 under a scenario where the rate cap is set at inflation,” the application reads.
Finance Minister Cameron Friesen, the minister responsible for Manitoba Hydro, said there is a way to cut debt and keep rates low. But he said details will only be released in the coming weeks or months.
“I’m sorry that all I’m able to tell you today is stay tuned.”