Manitoba Hydro’s financial forecast is far worse than the former NDP government let on, according to a recently released ministerial briefing document.

In fact, customers could see rate increases exceed 3.95% a year over the next decade, the amount Hydro had previously said it needs to pay for expensive capital projects, like new dams, aging infrastructure, and the controversial Bipole III transmission line.

According to Hydro, the 3.95% annual rate hike it plans to seek over the next 12 years is now just a “minimum” increase required to pay the bills and stay afloat financially. It could be higher.

“In the next 10 years there is significant financial risk and potential for rate volatility as (Hydro’s) financial ratios deteriorate due to the large capital investment program and associated borrowing requirements,” Hydro said in the Crown Services ministerial briefing document released by the Pallister government under its new proactive disclosure policy. “If Manitoba Hydro does not maintain its financial strength, there is significant risk to customers that rate changes will become more volatile and there will be a need for sudden or large rate increases in the future.”

Yikes.

It’s not exactly the rosy financial picture the former NDP government painted of Hydro just a few short months ago when they were still in office. While the former government acknowledged the need for Hydro to raise rates modestly and gradually, they left Manitobans in the dark as to how vulnerable the Crown corporation is, including how even small shifts in electricity export prices, water levels and interest rates could send rates soaring.

Hydro, which approved its 20-year financial plan in December of last year, said it’s already lowering its financial targets — including its debt-to-equity ratio — in an effort to stave off even higher rate increases for domestic customers. Its debt-to-equity ratio, for example, was 79:21 in 2015. It’s expected to fall to 88:12 by 2021, an extraordinarily weak financial position.

But even that may not be enough. The Crown corporation says any further cost increases — including for capital projects — or falling revenue, could mean much higher rates for Hydro customers.

“(Hydro) is relaxing its adherence to its key financial targets over this period in order to alleviate rate increases in excess of 3.95% to the extent possible,” Hydro said in the briefing document. “Due to the deterioration in Manitoba Hydro’s financial ratios, any further increase in cost or reductions in revenues increases the risk of higher rate increases to customers.”

Doesn’t sound very good.

Hydro said its long-term financial forecast will see rates rise by 3.95% from 2016 to 2028, at which point they will fall to 2% a year. But that’s only under a best-case scenario that includes stability in export electricity prices — which have been falling — and no further cost increases in capital projects. The 3.95% rate increases also rely on average water levels over the next 10 years. Which means Hydro is only one or two droughts away from tossing its entire financial plan out the window.

“As well, there could be negative impacts to the credit rating of the province of Manitoba if credit rating agencies were to deem Manitoba Hydro to no longer be financially self-supporting,” Hydro said.

Oh, great.

Hydro is mired in debt, not only to pay for new dams like the Keeyask Generating Station, but also to finance the $4.65-billion Bipole III transmission line. Hydro had originally decided to build the line on the shorter, less expensive and more reliable east side of Lake Winnipeg but were directed politically by the former NDP government to switch to the more expensive west side (for reasons that still remain a mystery).

That decision has caused Hydro’s bottom line to deteriorate even further, with no net benefits to show for it. Hydro now says its carrying costs will nearly double over the next 10 years.

“The majority of Manitoba Hydro’s capital investments will be funded through greatly increased levels of debt financing which will need to be funded through higher rates, while placing pressure on the corporation’s financial strength and also result in deterioration of certain key financial ratios,” Hydro noted in its gloomy analysis.

Manitobans are already paying the price for this political blunder with rate increases that far exceed inflation.

And we now find out they may have to dig even deeper into their pockets.