The chair of Manitoba Hydro's board didn't mince words in describing the financial problems facing the utility, in the wake of a workforce reduction of 900 staff and potential double-digit rate increases.
"We want to make people understand, this is a big problem. It's not a small problem. We take that position not only from Manitoba Hydro's perspective, but from the perspective of the government of Manitoba and the people of Manitoba; Hydro is a ticking time bomb," Sandy Riley told CBC News.
The board of the utility has been signaling for some time the situation at Hydro is dire.
- Manitoba Hydro faces tough choices to battle massive debt
- Manitoba Hydro to shrink workforce by roughly 900 positions
Riley said the financial picture became increasingly clear as the relatively new board of directors (appointed in May 2016) worked through the company's books. He said the board had a completely different view of the health of the crown corporation from that of the previous appointees. For example, Riley said, on keeping requests for electricity rate increases to below four per cent.
"They were wrong. just simply wrong...we don't agree with them. We don't agree with what they did, we don't agree with the conclusion," Riley said.
Riley said the crown corporation has a fiscal hole in the range of $4.5 billion to $5 billion and wants the provincial government to step up with an injection of capital to help fill the gap, alongside rate hikes and staff cuts. He didn't say exactly how much that cash injection might be, other than it wouldn't be all of the multi-billion dollar shortfall.
Massive capital projects such as the Keeyask dam and Bipole III transmission line have put pressure on the company as they run over budget.
The financial picture at Hydro is in such rough shape, Riley said, that rate increases to improve the situation could actually run a few points above 10 per cent.
"We have absolutely no margin for error. No cushion," Riley said.
Provincial funds could ease rate hikes
Riley said an equity injection from the provincial government could ease the financial situation at Hydro and bring the needed rate increases down.
"If we have an investment from the owner of Hydro, which is us, the people of Manitoba, it will allow us to moderate increases overtime that will allow less of an impact on consumers," Riley said.
Riley said a proper capital injection from the province could lower the rates "well below" the double-digit increases they currently believe are necessary to balance the books. That could help lower-income rate-payers and businesses that use large amounts of power.
The Public Utilities Board approved a 3.36 per cent rate increase for all customer classes last August. Hydro, under the previous board, had asked for a 3.95 per cent hike.
Riley said he hasn't yet had a conversation with Premier Brian Pallister on the need for an equity injection by taxpayers but he said it will very soon. Yesterday, Pallister was repeatedly asked if he would consider such a move, but he was noncommittal.
The premier was not available for a interview today, but his office sent a statement blaming the previous NDP government for the current state of Hydro's finances and expressing concern for families and businesses that may face increased Hydro bills. It's too soon, Pallister said, for a decision on an equity injection.
"It would be premature to comment on other plans being considered or developed by Manitoba Hydro," Pallister said in the statement.
Impact on province's credit rating
Another compelling reason for the province to step-in and help with Hydro's finances and its fiscal future lies with credit rating agencies, Riley said.
The businessman and board chair said some agencies are moving to combine the provincial debt with Hydro's, potentially triggering a downgrade for the province that would cost hundreds of millions in added debt servicing costs.
"If that's the case Manitoba quickly becomes a province with the highest debt per capita of any in Canada... Those are worrying numbers, because if you get a rate increase of one per cent because of a change in the ratings, on $50 billion worth of debt, which is where you'll be with Manitoba combined [with Hydro's debt], that's $500 million of additional costs that are going to go year after year to people who are lending us money," Riley said.
That is unsustainable for the province, he said.
The crown corporation's fiscal plan could restore the company's financial health and make it a key asset for the province, but the time to act is now, Riley said.