We’re paying the price for political promises

If Manitobans didn’t see this coming, they haven’t been paying attention.

On Tuesday, the Manitoba Public Utilities Board ordered that rates charged by Manitoba Hydro for electricity would rise by four per cent, effective yesterday, as part of an interim general rate increase.

Hydro had been seeking just a 3.5 per cent increase for the coming year, along with same-sized increases for 2027 and 2028, but the PUB has taken the unusual step of imposing a rate hike that is higher than the increase Hydro was seeking.

The PUB justifies that higher increase on the basis that “The increase is necessary, on an urgent basis, to protect the financial health of Manitoba Hydro in light of the current drought.” It says that “Water inflows into Manitoba Hydro’s watershed are currently near the second-lowest level in 112 years.”

The PUB also noted that when Hydro filed its original rate application, it was expecting to earn a net income of $218 million for the fiscal year ending on March 31 of this year. As a consequence of those lower water levels, however, Hydro expects to lose $409 million during the current fiscal year, which the PUB characterizes as “a deterioration” of $625 million.

On that basis, the situation facing Hydro does indeed appear dire, but nobody — not even the PUB — should profess to having been caught by surprise by the fiscal squeeze in which Hydro finds itself. In fact, we largely predicted this problem almost 12 full months ago.

On Jan. 23 of last year (“Set record straight on false rate freeze ads”), we argued that the Kinew government’s decision to impose a one-year rate freeze upon Manitoba Hydro was reckless, given the severe financial pressure the Crown corporation was already experiencing.

We reminded readers that Hydro owes approximately $25 billion to its lenders, and could soon be forced to borrow billions to pay for the construction of additional generating capacity in order to meet an anticipated growth in demand.

In that same editorial, we also referred to the fact that Hydro had already suffered two consecutive years of unanticipated multimillion-dollar deficits due to low water levels. Based on that reality, combined with the accelerating pace of climate change, we argued that it may become increasingly difficult for Hydro to produce electricity at a profit without higher rates.

Despite those and other concerns raised at the time, the government stubbornly clung to a rate freeze that Hydro couldn’t afford. Manitobans will now bear the consequences of that decision, in the form of even higher electricity bills.

A year ago, Premier Wab Kinew defended the electricity rate freeze, arguing that “We’re confident that the (PUB) will approve this because we think that it’s financially sustainable.” Based on the reasons given by the PUB for the higher-than-requested rate increase, however, it is now obvious that Kinew was wrong.

As we argued last year, and the PUB confirmed this week, the rate freeze was never financially sustainable. All it did was put Hydro in an even worse fiscal position, which Hydro customers are being forced to fix through higher electricity rates.

For Brandonites, this situation comes with a sense of déjà vu, adding to the affordability anxiety felt by many. After all, we are already enduring large property tax and water rate increases because previous city councils played politics and failed to increase rates at a pace that kept up with growing costs. The higher Hydro rates will just add to the pain.

If there is a lesson to be learned from this situation, it is that taxpayers should always be skeptical when politicians promise rate freezes or lower-than-necessary rate increases. That’s because we always end up shouldering the cost of those commitments.