Hydro numbers should derail reckless rate freeze

Hey there, time traveller!
This article was published 27/11/2023 (715 days ago), so information in it may no longer be current.

We aren’t the only ones who saw this coming. And yet, the finance minister, who is also the minister responsible for Manitoba Hydro, is acting as if he has been blindsided by the bad news.

On Friday, the Manitoba government issued a “statement from Finance Minister Adrien Sala, Minister responsible for Manitoba Hydro, on Hydro second quarter report.”

In that statement, Sala announced that “The previous government budgeted Manitoba Hydro’s net income for this fiscal year at $450 million, but the second quarter report published today shows that Hydro is projecting a net loss of $161 million. This outlook has changed by over $600 million in just six months.”

He then added that “This raises serious questions about the accountability and transparency of the previous government regarding Hydro’s books. The former government’s decision not to be open and honest with Manitobans about Hydro’s future was irresponsible. “

Based on those veiled accusations, some might think there was a vast conspiracy to hide the fiscal facts regarding Manitoba Hydro from Manitobans. That conspiracy would have to involve not only the Stefanson government, but also Hydro management, the Public Utilities Board and many in the media.

That’s ridiculous. The financial challenges facing Manitoba Hydro are no secret at all. In fact, we discussed them in an editorial just three weeks ago (Reconsider the rate freeze – Nov. 4), when we urged Sala to rethink the electricity rate freeze that his fellow New Democrats promised during the recent provincial election campaign.

We noted that media reports indicated that Hydro was anticipating a significant drop in its revenues due to lower-than-expected water levels in the watersheds that feed water to Hydro’s generating station turbines.

Those reports, which were based on information publicly released by Hydro, revealed that the Crown corporation expected to only earn half the $450 million in net income that it had budgeted for during the current fiscal year — a reduction of more than $200 million.

We also noted that Sala was aware of an expected shortfall at Hydro, telling the media “That’s going to have a big impact on Hydro’s bottom line.”

We further noted that the rate freeze promise was subject to the government creating the “financial conditions” for the Public Utilities Board to approve a freeze the next time Hydro applies to the independent rate-setting authority, but that electricity rates for the 2024-25 fiscal year have already been set by the PUB.

On top of that, we referred to the massive $24 billion in debt that Hydro is carrying, as well as the fact that the PUB had recently approved a one per cent average rate hike effective April 1 — just half of what Hydro had requested.

We also pointed out that a one-year rate freeze would save Hydro customers an estimated $37.5 million in total, but that the province would have to forgo about that much revenue annually for three straight years to avoid rate shocks.

Based upon all of those factors, we argued that Hydro cannot afford a rate freeze and we urged Sala and his Kinew government colleagues to reconsider their campaign promise. With the latest numbers revealing that Hydro’s revenues are expected to be even lower this fiscal year than predicted just a few weeks ago, the argument is even more compelling now.

It is far from surprising that Sala has apparently arrived at the same conclusion we reached and articulated a month ago. Indeed, a number of media reports over the weekend indicated that the province is now reconsidering the implementation of a rate freeze at this time.

That said, we wonder why it has taken the government so long to move toward a conclusion that has been obvious to many Manitobans for weeks, if not months. The rate freeze promise was a campaign gimmick that Manitoba Hydro could never shoulder now or in the foreseeable future.

It’s time for Sala and premiere Wab Kinew government to acknowledge that fact, abandon their reckless rate freeze promise, and start taking steps that will strengthen, not harm, Hydro’s financial future.