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This article was published 31/7/2017 (1145 days ago), so information in it may no longer be current.

Manitoba Hydro has received permission to boost consumer electricity rates by 3.36 per cent — less than half the increase it sought.

The Public Utilities Board ordered the interim rate hike late Monday afternoon. It takes effect today.

Manitoba Hydro, which is facing a huge debt due to the ongoing construction of the Keeyask Generating Station and the Bipole III transmission line, had requested a 7.9 per cent increase.

The PUB rejected the request and tied strings to how the increase it is permitting can be used. The regulator said the added revenues must be placed in a deferral account established a few years ago to cushion future consumer rate hikes because of the $5 billion Bipole project.

In a 29-page order, the PUB said its decision was not unanimous. One board member, who was not named, objected to any increase at all for Hydro until the PUB conducts public hearings this fall and issues a permanent order.

The PUB noted that Manitoba Hydro’s financial situation for the current fiscal year and the next fiscal year has improved by $119 million compared with what it forecast in 2016.

"We are pleased that the PUB recognized the need for an interim rate increase," said Kelvin Shepherd, president and CEO of Manitoba Hydro.

"However, we are concerned that the PUB has not taken quicker action to begin to address the serious financial challenges and risks facing Manitoba Hydro. This order gives the PUB more time to review our full rate application and consider all the evidence on some very important issues that we believe need to be addressed in any final rate decision."

Byron Williams, a lawyer representing the Manitoba branch of the Consumers Association of Canada, said it’s clear the PUB listened to the wishes of thousands of Manitobans who voiced their opposition to Hydro’s request.

"Certainly from our client’s perspective, the interim order provides independent confirmation that Hydro’s claims of imminent financial catastrophe are materially overstated," he said.

At the same time, the 3.36 per cent increase "still imposes significant hardship on stressed household budgets, including our most vulnerable citizens" and those who use higher amounts of electricity and have no other means of heating their homes, Williams said.

He said Manitoba Hydro has to come to grips with "new market-place realities" and bring "modern, rational management" to its day-to-day spending and its large capital expenditures. "Manitoba consumers should not have to pay the price for poor hydro management decisions," he added.

On Friday, Manitoba Hydro reported a $71-million profit for the fiscal year ending March 31, 2017. It said $20 million of that total came from a land sale to the City of Winnipeg for the construction of the southwest transit corridor.

The Crown corporation is also projecting a $92-million profit for the current fiscal year.

The PUB said it did not consider the 2016-2017 Hydro financial statements in setting the interim rate; however, it will take them into account when it decides on a permanent rate.

The PUB noted that since its last interim rate order in 2016, the cost of the Bipole III transmission project has escalated by $389 million.

"This capital project is largely being debt financed," the PUB said in its order. "There will be significant annual financing costs in addition to annual depreciation expense after Bipole III comes into service in July of 2018."

Shepherd explained that Manitoba Hydro needs additional revenue to fully fund its operations, including investing in the replacement and upgrading of its aging infrastructure. Additional revenue would also help the utility withstand the risks of rising interest rates and drought.

"With our debt already having increased to $16 billion and scheduled to grow by another $8 billion over the next five years, it’s imperative we increase our financial capacity to fund our ongoing operations, rebuild equity in our company, and have sufficient free cash flow to ensure that our debt is considered self-sustaining," said Shepherd.

In addition to seeking a 7.9 per cent hike for the current year, Hydro has also let it be known it wants to see rates go up by just under eight per cent for the next four years.

The PUB, in its ruling, seemed to question Hydro management’s timetable for improving the corporation’s debt-equity ratio. Hydro is seeking to achieve a 25 per cent equity level within 10 years, while the PUB noted that in the past it set a 20-year target.

larry.kusch@freepress.mb.ca

jane.gerster@freepress.mb.ca