Hydro’s unpredictable fortunes

Hope for rain. Or snow. Or both.

There’s a truism buried deep in a financial outlook in Manitoba Hydro’s 2025-26 annual report, released in late September: “Manitoba Hydro’s net income is highly dependent on several uncontrollable factors.”

Those factors include the risk of drought reducing hydroelectric production and sales (a situation that means the utility will have to purchase more power, especially in winter), the rate of inflation, the actual cost of purchased electricity and increased interest rates that would mean Hydro will have to spend more servicing its $26.55 billion debt.

The report outlines that several of those factors came together during the utility’s last full fiscal year — along with huge costs to replace equipment damaged in a long, dry summer of forest fires.

The end result? For the year, Hydro, instead of making the $220 million profit it had forecast in its budget, wound up losing $442 million — in all, a $662-million turnaround from its modest expectations. And the losses could have been even larger — recent legislative changes by the provincial government meant the utility paid a smaller dividend to the province in 2025-26 ($138 million instead of $302 million), as well as saving Hydro $131 million in capital taxes. Those two items together saved the utility $295 million.

Of all the factors involved with the 2025-26 losses, drought was the biggest.

And this is not the first year in recent memory that drought’s been a problem. Four of the last five years have seen water flows lower than the statistical average, with 2025-26 being the worst example, with water flows being just 65 per cent of the annual average.

What’s coming? Well, just as Hydro says, it’s uncontrollable.

Scientific modelling in 2022 argued that climate change could see more intense spring precipitation in the watersheds that Hydro depends on to generate power, but up to 37 per cent less precipitation in winter periods — the problem then being the ability to hold peak amounts of spring rainfall in the watershed without also causing flooding.

So, mixed results. But with the kneebone always connected to the thighbone.

There have been drought cycles before and also cycles of high precipitation. But four out of the last five years delivering drought conditions does feel like something of a trend.

So far this fiscal year — with only the first quarter results for the utility in hand — the company is doing better this year than last, losing only $15 million in the three months ending June 30, 2026, compared to losses of $55 million during the same period last year.

And water levels in the spring did show improvement over 2025-26.

It’s important to note, though, that the financial improvement was almost exclusively driven by more money coming out of the pockets of Manitoba electrical consumers. A four per cent electrical rate increase, a 4.5 per cent natural gas rate increase and an increase in electrical demand due to unpredictable spring weather saw domestic revenue rise by $38 million — meaning 95 per cent of the cash driving the quarter’s improved financial picture came directly from increased costs to Manitoba customers.

And that’s the other truism about Manitoba Hydro.

In the end, we pay — especially when low water levels mean we don’t have power to sell outside the province, and, even worse, when those same low water levels mean we have to buy ever-more expensive power from outside the province to backstop winter demand.

Hope for fall rain. And snow. Plenty of rain and snow.

And then perhaps some rain.

Or expect to see the result trickle down into your power bill.