Hydro rates to increase by 3.36 per cent after larger jump denied

Manitoba Hydro's request to increase rates by almost eight per cent this year was denied Monday.

Instead, rates will increase by 3.36 per cent starting Tuesday.

The Crown corporation announced in May its intention to increase rates by 7.9 per cent in August 2017 and again in August 2018

The Public Utilities Board rejected itsrequest Monday following hearings earlier this month.Instead, the board awarded Hydro the more modest increase and stipulatedthat all additional revenue flow into the utility's Bipole III deferral account.

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Money in that account will be used to cover added costs when Bipole III comes into service next year, according to the board's decision.

"We are pleased that the PUB recognized the need for an interim rate increase," said Kelvin Shepherd, Hydro president, in a written news release.

"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."

Shepherd has said Hydro needs the revenue boost to offset rising debt and the cost of replacing and upgrading aging infrastructure.

"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," his statement reads.

Byron Williams, the director of the Public Interest Law Centre, said the PUB's decision demonstrates that's not the case.

"It sends a message that Hydro could not back up with evidence its claims of an imminent financial emergency," he said.

Williams represents the Consumers Coalition, formed by Winnipeg Harvest and the provincial branch of the Consumers' Association of Canada. The coalition was granted intervener status for the hearing.

He said the 3.36 per cent decision will still hurt customers already struggling to pay their Hydro bills, especially those who use electricity to heat their homes.

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Williams said Hydro needs to streamline day-to-day costs and suggested debt could be managed with a slower-pacedrepayment plan instead of placing the burden on customers.

"Before you come to ratepayers with this radical rate increase, get your capital planning up to snuff, up to well-recognized, international good planning standards," he said.

Decision not unanimous

The board's decision was notunanimous, the written order states.

One board member"was not satisfied that any interim rate adjustment should be made prior to the conclusion of the complete public hearing process that is well underway," the document reads.

The board wrote in the document that even if a unanimous decision isn't reached,"the public interest is best served by having all board members contribute their independent deliberations."

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The 3.36 per cent increase will come into effect on Aug. 1, 2017.

The decision only applies to interim rates, pending the PUB's decision on Hydro'sfull general rate application.

Hearings for the general rate application are set to begin in December.

$5 billion price tag for BipoleIII

Debt continues to mount for Manitoba Hydro, with two major construction projects cited as the main reason.

The provincial Crown corporation has pegged its long-term debt at $16 billion and says its climbing with ballooning budgets for the Keeyask generating station in northern Manitoba and the rerouted BipoleIIItransmission line, which is up $389 million to a largely debt-financed $5 billion.

While debt is up, the corporation's net income improved in 2016-17 to $59 million, up $20 million from the previous year.

In approving the 3.36 per cent rate increase, the PUB is requiring all additional revenue generated from the rate increase to flow into the Bipole III deferral account, to be used to fund some of the additional costs that will be incurred when Bipole III comes into service in a year's time.