Note: The provincial government continues to ignore its responsibility for Hydro’s distress and could lessen its take from the boondoggle and cover much of the capital loss.
We invite you to read this article by Nick Martin published in the Winnipeg Free Press:
Manitoba Hydro projects $92 million in profit, coalition wants rate hike spiked
‘We think the imminent catastrophe Hydro is alleging is overstated’: lawyer
The same high water that cut Churchill’s rail line may also have contributed to Manitoba Hydro’s bottom line — so much so, a consumers coalition argues Hydro doesn’t need its proposed rate increase.
Not with a projected net income of $92 million.
The Public Utilities Board will sit today and Wednesday to hear a 7.9 per cent interim rate application from Hydro, which would take effect Aug. 1. (Hydro wants a similar 7.9 per cent increase each of the next five years, but that marathon hearing won’t start until at least December.)
“We think the imminent catastrophe Hydro is alleging is overstated,” lawyer Byron Williams, representing the Consumers Association of Canada and Winnipeg Harvest, said in an interview on Monday.
Deep within the appendices of lengthy documents Hydro will table today is a net income forecast requested by the PUB, which shows the impact of no interim increase, Williams said.
Hydro’s own figures show it is forecasting a net income of $92 million for the current fiscal year — even without the 7.9 per cent rate hike.
Williams said the Crown corporation is benefiting this year from high water levels, particularly on the Nelson River, allowing it increased power generation.
“Hydro’s had a really good water year, as people in Churchill have found out to their cost,” he said.
The projection also reflects Hydro’s having followed the orders of Premier Brian Pallister to cut 15 per cent of managers, and its own decision to reduce its workforce by 15 per cent, or 900 jobs.
Williams said the cost of severance and buyouts, and the reduced payroll, are part of the $92 million.
“All the expenses are in,” he said.
Hydro didn’t argue Monday the $92-million figure is accurate, but corporate communications director Scott Powell said Manitobans can’t gamble on weather.
“It wouldn’t be prudent to plan for higher-than-average flows. We must base our financial forecasts on average flows. Otherwise, we are essentially putting our financial health fully in the hands of Mother Nature,” Powell said.
“Significantly above-average water flows and record storage, resulting in much higher generation, are allowing us to sell substantially more energy on the short-term opportunity market, thereby mitigating the impact of lower pricing and, in fact, providing almost all of that total of $92 million. If we were to have started the year with normal reservoir levels and then experienced even average flows, our net income estimate would be essentially break-even at best, without any rate increases,” Powell said.
Powell said Hydro’s finances are volatile and dependent on weather, water supply and export prices. The Crown corporation has been fortunate thus far in 2017, but there’s no guarantee that will continue.
But Hydro’s challengers maintain such fears have nothing to do with an interim increase.
Williams said whether the benefit of high water levels for electricity production is sustainable is not at issue in the two-day hearing.
“In terms of sustainability, we’ll be fighting that out in December, January, February,” he said.
Hydro president and chief executive officer Kelvin Shepherd told the Free Press in May Hydro really needs 14 per cent a year, but recognized that wasn’t going to make it past the PUB.
Shepherd said the 7.9 per cent could cost the average homeowner an additional $6.88 a month, but also acknowledged northern Manitobans could consume four times as much power in winter.
Meanwhile, the Manitoba Industrial Power Users Group will argue today that Hydro’s long-term forecasts are unduly pessimistic, and debt on the Bipole III and Keeyask generating megaprojects has nothing to do with an interim rate increase two weeks from now.
The users believe Hydro’s financial situation has not changed — rather, a new board has a different attitude towards paying down debt quickly and is taking “unconventional” approaches to Crown corporations, which again are not relevant to an interim increase.
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