Temporary drought ‘rate rider’ surcharge impractical measure, Manitoba Hydro says

Manitoba Hydro has dismissed calls for a “rate rider” — a temporary surcharge that would change rates in times of drought, saying it needs compounding rate increases to recover from low-water losses.

The Crown corporation that’s seeking an electricity rate hike of nearly 11 per cent over three years told the Public Utilities Board that a rate rider “would not be a practical approach in the circumstances and would not support rate stability or predictability.”

Manitoba Hydro’s written response to final arguments presented by interveners at its rate application hearing was made public by the PUB Tuesday.

In it, the provincially owned power company said it’s been asked during previous rate applications about using a “rate rider” to address the uncertainty of drought conditions that impact its bottom line.

Generally, a rate rider is meant to be a temporary charge, separate from the base rates charged to customers and typically for the purposes of recovering a specific amount. Manitoba Hydro said the financial impact of drought years is not a temporary problem.

“Low water conditions have resulted in significant cumulative net losses over four of the last five years and the financial impacts will endure through the forecast horizon,” it said.

“These impacts are not temporary.”

The utility is projecting a net income loss of $409 million in the current fiscal year due, in part, to drought and export prices.

Hydro’s final submission to the PUB said increased borrowing requirements, finance expenses, and a reduced level of retained earnings will take time to recover from and that it needs the annual, compounding, 3.5 per cent rate increase.

“Treating a portion of the rate increase as a temporary rider eliminates the compounding effect from future base rates which is a key and underlying aspect of financial recovery,” the submission said.

Future rates can be adjusted “to reflect any positive impact of favourable water conditions,” it said.

Any new rate changes approved by the PUB would take effect Jan. 1.

Manitobans understand there is a cost to maintaining a safe and reliable energy system in the province, hydro spokesman Peter Chura said in an email Wednesday.

“The challenges we’re facing, including droughts that reduce our revenues, the need to replace aging equipment, and the need for new sources of electricity, may not be as well-known but awareness is increasing.

“We’ve made a strong case to the Public Utilities Board for stable, moderate rate increases that will allow us to meet these challenges, continue to provide safe and reliable electricity now and into the future, and maintain the financial health of the corporation.”

The Consumers Coalition representing four Manitoba non-profit organizations intervened at the PUB hearing and accused Hydro of unreasonable operating and administrative cost increases and failing to reduce spending in response to drought.

Hydro rates were frozen this year by the NDP government. The last increase was one per cent in April 2024. Finance Minister Adrien Sala, the minister responsible for Manitoba Hydro, did not respond to an interview request Wednesday.

carol.sanders@freepress.mb.ca

Manitoba Hydro General Rate Application - final argument reply