Manitoba Hydro has a monopoly on the retail supply of electricity in Manitoba.2 As a Crown corporation, Manitoba Hydro is exempt from federal and provincial corporate income taxes. Yet it produces comparatively little profit for its government owner or for the people of Manitoba.3 Manitoba is squandering the potential of Manitoba Hydro to be an engine of economic growth. Manitoba Hydro is a Jurassic Crown, stuck in a bygone era.
Part of the problem relates to Manitoba Hydro’s mandate. Manitoba Hydro's mandate needs to be reviewed and clarified, including addressing the extent to which it includes generating a reasonable return to the provincial treasury. Manitoba Hydro is directed by legislation to supply energy to meet Manitoba’s needs and to promote economy and efficiency.4 Instead of promoting energy efficiency, Manitoba Hydro’s non-residential rate structure discourages conservation by rewarding heavy or wasteful users of power.5
Although the provincial government includes Manitoba Hydro’s net income for purposes of Manitoba’s balanced budget legislation,6 Hydro has rarely paid a dividend from its cash profits to its government owner.
The provincial government has also offloaded major public policy expenses onto Manitoba Hydro that should have been part of the provincial budget. Instead of the much shorter and cheaper route along the eastern side of Lake Winnipeg that Hydro initially favoured, at the government’s behest Hydro now plans to build its new BiPole III power line on the western side of the province. Hydro’s estimate of the added cost for the west side line over the east side route is $410- million,7 while critics assert that the cost could be as high as $1.75-billion.8 The east side route is also more environmentally sound, as it would not waste renewable energy that would be lost in transmission over the longer west side route. If for public policy reasons the Manitoba government wants Hydro to build its new power line on the west side route, the extra cost should be borne by the government, not Hydro. If the government has public support for such a major public policy expense, it should have no concern in making it part of its budget and subject to prior approval by the Manitoba Legislature.
Part of the problem relates to Manitoba Hydro's governance. While legislation applying to Crown corporations generally requires that their boards act in the best interest of the company, it would be useful for the Hydro Act itself to specifically recapitulate this responsibility. Other governance issues should be addressed in a modernized statute. For example, Hydro’s board is appointed by the government. The process is not transparent. Though its board is supposed to provide strategic oversight and direction to Hydro management, board appointees are not required to have any particular industry expertise. The disclosure of Manitoba Hydro’s governance practices in its annual report does not measure up to standards expected of publicly traded corporations.9 Despite having over $12 billion in consolidated assets at March 31, 201010, Hydro publishes no return on equity targets.
Manitoba Hydro states that its shareholders are the public of Manitoba,11 but no shareholder in a publically traded company would tolerate such treatment. Neither should Manitobans.
Manitobans deserve better.
There should be a thorough review and clarification of Manitoba Hydro’s mandate and governance. Among the reforms that would improve Hydro’s governance, transparency and accountability are:
• Amending Manitoba Hydro’s legislation to make it clear that its board and management have a fiduciary responsibility to act in the best interests of the corporation;
• Requiring Manitoba Hydro board appointees to have relevant financial or industry expertise;
• Giving the provincial government explicit legislative authority to issue written directives to override or substitute for decisions made by the Manitoba Hydro board. The directive and the government’s reasons for issuing it should be public, as would Hydro’s impact analysis, including any material financial, environmental, labour or system implications. A directive would not take effect until after Hydro’s impact analysis is made public;
• Ensuring that the rate structure for non-residential users promotes energy efficiency and economy;
• Periodic evaluation of Manitoba Hydro by independent experts to determine whether its board and management have maintained or enhanced the market value of the public’s investment;12
• Ensuring that Manitoba Hydro’s public financial accountability documents such as its annual report and quarterly updates meet or exceed standards for publically traded corporations; and,
• Ensuring that the extra costs of any public policy activities carried out by Manitoba Hydro that a publically traded corporation would not undertake without compensation are first approved and appropriated by the Manitoba Legislature.
Manitoba Hydro is a key component of the provincial economy. It touches the everyday life of every Manitoban. It is a major employer. With a better defined mandate and improved governance, Manitoba Hydro could help reform Manitoba from a supplicant society into a more vibrant one, but Manitoba Hydro itself needs to be reformed. In the meantime, the Jurassic Crown remains an obstacle to a rejuvenated society.