General Rate Application filed with PUB
May 5, 2017
Utility requests 7.9 per cent increase in each of the next two years
Manitoba Hydro today filed a Letter of Application for its 2017-18 General Rate Application (GRA) with the Public Utilities Board (PUB). The rate application includes a request to:
- confirm the previous 3.36 per cent rate increase approved by the PUB on an interim basis in 2016;
- an interim 7.9 per cent rate increase effective August 1, 2017;
- and an additional 7.9 per cent increase effective April 1, 2018.
The utility's long-term financial plan includes a total of five years of 7.9 per cent rate increases starting in 2017 after which it projects much lower increases of two per cent annually.
For the average residential consumer using 1,000 kilowatt-hours per month, the 7.9 per cent increase in 2017 will result in a monthly increase of $6.88 in their electricity bill. The 7.9 per cent in 2018 will result a further increase of $7.43 per month for the same customer.
Kelvin Shepherd, President and CEO of Manitoba Hydro, said the rate increases are absolutely necessary to protect the financial sustainability of Manitoba Hydro. Specifically, the rate increases will help address the corporation's large debt and cash flow issues during this critical period of major capital project investment.
"Without question, developing two major projects, the Keeyask Generating Station and Bipole III transmission line at the same time, has resulted in Manitoba Hydro taking on a significant amount of debt to finance the construction of those projects," Shepherd said. "The rates we are proposing today will help ensure that Manitoba Hydro's debt will continue to be self-supporting. This is critical as it protects both Manitoba Hydro and the province from the risk of higher borrowing costs and reduced access to capital.
"In addition, the best way to protect customers from even higher rates is to ensure we are financially strong enough to weather known risks such as a severe drought, rising interest rates or other scenarios that could have a major impact on our operations and our financial stability," Shepherd said. The proposed rate increases, coupled with an enhanced and accelerated cost-reduction program, form the core of a 10-year plan to restore Manitoba Hydro to a minimum level of financial strength, Shepherd added.
In its complete filing of supporting documents on May 12, the utility will explain how its business outlook has deteriorated since the last GRA in January 2015. In addition to the impact of developing two major projects concurrently, Manitoba Hydro has seen both projects increase in cost. As well, the utility is experiencing lower growth in Manitoba's demand for electricity and continued lower prices on the export market.
Without any rate increases, the utility will have negative cash flows in its core operations, which is unsustainable, Shepherd said.
"As part of our balanced approach to restore the financial health of the company and to protect our customers from more significant rate increases in the future, Manitoba Hydro is also accelerating cost-containment measures, including reducing our staffing by 900 and looking for additional efficiencies in our operations, such as improved asset management measures and new ways to streamline processes," Shepherd said.
"Our plan to become a leaner, more customer-focused organization is underway and forms an integral part of our efforts to address Manitoba Hydro's finances."
Shepherd said that the PUB will ultimately determine the final level of rate increase Manitoba Hydro customers will see. The PUB is an independent tribunal that has broad oversight in balancing various stakeholder perspectives to determine rates for Manitoba Hydro customers.
"When you consider Manitoba has amongst the lowest electricity rates in Canada — as well as potential rate increases that other jurisdictions will have to meet the needs of their customers, renew their infrastructure and move away from carbon-based generation — Manitoba Hydro will continue to offer excellent value for our customers' energy dollar by providing renewable, safe and reliable electricity for years to come," he said.