Manitoba Hydro argues for 'exceptional' 7.9% rate increase
Crown corporation says ‘today’s ratepayer is not paying their fair share’
A 7.9 per cent Manitoba Hydro rate increase will have a disproportionate effect on First Nations communities, which have already paid a high cost for Manitoba's electricity, the Public Utilities Board was told Monday morning.
"Poverty hits First Nations communities hard, much harder than non-Indigenous communities," said Senwung Luk, a lawyer representing the Assembly of Manitoba Chiefs.
The Public Utilities Board (PUB) is reviewing an interim rate increase from earlier in the year and a requested 7.9 per cent increase in April 2018. The PUB regulates rates for a number of public utilities in the province.
Many homes on First Nations are not up to code and their electricity use tends to be much higher than urban areas, Luk said. That means "this increase could mean the difference of being able to pay their Hydro bill or not."
The nearly eight per cent increase is exceptional, but Manitoba Hydro is facing "exceptional circumstances," the Crown corporation's lawyer told the PUB.
"We cannot avoid or defer coming to terms with the realities of Manitoba Hydro's situation today and its outlook," said Patti Ramage, Manitoba Hydro's legal council, on Monday. "If we do that, we are only going to make matters worse."
Ramage, sitting beside Hydro president and CEO Kelvin Shepherd and chief finance and strategy officer Jamie McCallum, acknowledged the request is higher than the PUB has historically given to the Crown corporation.
Manitoba Hydro has already indicated it would seek annual increases of 7.9 per cent until 2023-24. If they are allowed, the successive increases will raise current rates by close to 60 per cent, which means a $1,000 Hydro bill would reach almost $1,600 in 2023-24, and it would hit $1,650 the following year.
Manitoba Hydro's latest quarterly report in November showed losses of about $89 million from March to September of this year. The Crown blamed restructuring and the PUB's denial of the full 7.9 per cent increase in August.
Earlier this year, Manitoba Hydro pegged its long-term debt at $16 billion, and construction of the Keeyask hydroelectric development and the Bipole III transmission line are the main reasons for the increasing debt.
The stark reality is Manitoba Hydro has been "borrowing money just to meet current obligations," Ramage told the PUB.
At today's rates, Manitoba Hydro does not have enough money coming in each day to pay operating costs, interest owed and business costs that will undoubtedly arise, she said.
For every $1 Hydro currently gets from ratepayers, 40 cents goes toward servicing debt, she said. If action isn't taken, Hydro estimates that will go up to 63 cents by 2024.
Hydro is not trying to shift the burden of debt onto Manitobans, but "today's ratepayer is not paying their fair share," Ramage said.
"It's critically important that we, all of us, we get this right," she said. "Because if we don't, rate increases will be higher in the future and result in greater overall increase to customers' bills."
The steep rate increase is too much too fast, interest groups with intervenor status, including those representing First Nations, argued in their opening statements in front of the PUB.
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In a submitted statement, Grand Chief Arlen Dumas said Manitoba Hydro has made billions of dollars and generated most of the province's electricity on the lands and waters that have been home to First Nations for thousands of years.
"Hydro's request for unprecedented, massive increases to their rates will have a disproportionate impact on First Nations people living on reserve," he said.
"Hydro's rate increases will hit our people the hardest."
In a statement submitted on behalf of Manitoba Keewatinowi Okimakanak Grand Chief Sheila North Wilson, the board was told any Manitoban with a light on should thank a First Nation.
George Orle, legal counsel for Manitoba Keewatinowi Okimakanak, said First Nations worked with Manitoba Hydro so the Crown could build on their traditional lands and impact waterways, in hopes that it would benefit all Manitobans, but the rate hike will force Indigenous families to take food off their tables to pay for the increases.
"First Nations were promised this would be for the greater good," he said.
While there have been conversations about ways to help First Nations after a possible rate increase, Orle said there's no solid plan.
Costs will be passed on, interest groups say
The impact won't only be in First Nations — people in cities will see a twofold impact, said Darryl Ferguson, City of Winnipeg legal council.
People will see their own Hydro bill increase and the extra costs on the city will impact them as well.
"All businesses in the province of Manitoba, not just the City of Winnipeg … pass those costs on to their customers, their residents," he said.
Byron Williams, director of the Public Interest Law Centre speaking on behalf of the Consumers Coalition, which includes Winnipeg Harvest and the Consumer Association Canada Manitoba branch, said there's not enough evidence to show that the increase is even needed.
While Hydro spouts "doomsday scenarios" it's important to focus on "the empirical evidence of how the markets are actually reacting," he said.
He questioned whether Hydro's current estimate of capital costs are reasonable or biased.
The Consumers Coalition would support a smaller rate increase but what is being proposed is unreasonable and will impose "rate shock," Williams said.
The PUB hearing is expected to continue for two months.