Manitoba Hydro will cut 900 positions across the province and will increase rates by at least 10 per cent, the Crown corporation announced Friday.
The utility, which employs about 6,200 people, plans to offer voluntary buyouts starting later this spring. The reduction amounts to a 15 per cent cut to Hydro's total workforce.
"We care about our employees, so we're going to work and try to make this as smooth and as fair as we can," said Kelvin Shepherd, CEO and president of Manitoba Hydro. "I think our voluntary program will get some good results."
Starting immediately, the number of executive positions will be reduced by 30 per cent. Three vice-presidents have already been let go, Shepherd said.
The plan to reduce the workforce by 900 was first announced in September, but at the time Shepherd said the reductions would come through retirements and "continued management of vacancies."
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In the coming weeks, Manitoba Hydro will review and restructure middle management.
Eliminating 900 positions represents cost savings of $60 million to $65 million, Shepherd said.
"These types of programs are difficult for employees and families, they're difficult for communities, because it affects a pretty broad swath. But we wouldn't be going here if we didn't think it was an absolute necessity," he said.
Manitoba Hydro is the province's third-largest employer.
Economist Michael Benarroch, dean of the University of Manitoba's Asper School of Business, said the province's relatively small economy will feel an impact from the cuts.
"I think if you take 900 people who are well-paid out of the workforce, then you've got 900 families who are making different choices than they were the day before … and those choices are really to spend less on everything," he said.
Cuts to staff are necessary to protect the financial integrity of Manitoba Hydro, the chair of the Manitoba Hydro-Electric Board, Sandy Riley, said in a written statement.
Reducing costs will not only bolster Hydro's financial future but can help protect Manitoba from future credit downgrades, he said.
Hydro's debt was reported at $13 billion in October. Over the next three to four years, company debt could rise to $25 billion.
Manitoba Hydro, by the numbers:
- Manitoba Hydro was founded in 1961 but its roots date back to 1873.
- The Crown utility delivers electricity to 567,634 customers in Manitoba and natural gas to 276,858 customers.
- It generates 96 per cent of the province's electricity from 15 hydroelectric stations.
- Along with hydro dams, the utility also generates power from two thermal and four diesel-generating stations.
- Manitoba Hydro has about 6,200 employees: 1,235 are non-unionized, while four unions represent the majority of the remaining staff.
Paul McKie, director for Manitoba and Saskatchewan for Unifor, one of several unions at Manitoba Hydro, said labour groups were expecting staff reductions. But he said the 900 positions came as a shock.
"This is massive," he said. "We've never experienced anything like this.… This is bad news for Manitoba."
CUPE Local 998 president Chris Mravineck echoed McKie's surprise.
"We were aware that staff reductions were coming … but this number, approximately one-sixth of the workforce, is huge. It's aggressive," he said.
Shepherd and the Manitoba Hydro board said cost reductions at the utility will not be enough to restore the Crown corporation's fiscal outlook.
It is also planning "double-digit annual rate increases" for at least five years in order to re-establish "proper financial footing," Riley said.
Shepherd would not confirm the exact increase amount, but said the utility will be submitting a higher rate increase to the Public Utilities Board than the 3.9 per cent hike it previously requested.
"Look, we have to move forward with the best plan we can for Manitoba Hydro and for Manitobans," the CEO said.
Even with further rate increases, Manitoba will continue to have some of the lowest electricity rates in North America, Riley added.
Wages frozen for many workers
Manitoba Hydro wages are already frozen this year for more than half of the utility's employees.
Three of the four unions that represent about 2,100 workers negotiated new contracts in the past few months, which include a zero per cent wage hike for 2017. Non-unionized staff will also see a wage freeze this year.
Shepherd said the wage freezes, "combined with ongoing reviews of operating and capital expenditures, are all significant steps toward improving the financial stability of Manitoba Hydro."
"In the same way we pull together to restore service to our customers during a storm or other system emergency, I am absolutely confident that we will pull together as we move forward with our strategy to make Manitoba Hydro a stronger, financially stable, customer-focused organization creating value for Manitobans."
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Premier Brian Pallister and Finance Minister Cameron Friesen have warned that the province's public-sector wages aren't sustainable, and wage freezes and opening of contracts are options.
'Very difficult decisions today'
Crown Services Minister Ron Schuler said the government has become increasingly aware of financial difficulties at Manitoba Hydro in recent months.
"Serious problems, created by [the] political decisions and direction of 17 years of NDP government, have forced the board of directors of Manitoba Hydro to make some very difficult decisions today as they pursue finding efficiencies within the corporation's operations," he said.
The government will continue to monitor the Crown utility's efforts to improve its financial outlook, he added.
NDP labour critic Tom Lindsey said Hydro's board is "handpicked" by Pallister and is "undermining Manitoba's most important Crown corporation."
"This is a shocking and shortsighted move," he said. "Cutting 900 front-line workers — 15 per cent of Hydro's workforce — is a terrible blow to these individuals, their families and communities across this province."