Manitoba’s PC Government Half Billion Annual Hydro Heist

Commentary, Crown Corporations, Energy, Graham Lane

Before a NDP government and it’s politically appointed Manitoba Hydro board faded out after the Pallister Conservatives won in 2016, it was generally accepted by all political parties, and the media, that Hydro’s then ultra-low electricity rates were “Manitoba’s Advantage”. In truth that ‘advantage’, then touted as a beacon light for industries and companies coming and expanding in the province, was already in ruin.  The Pallister government had a chance upfront to ‘cut and run’, and drastically dial back a costly and unnecessary NDP ‘build’ program that would burden Manitoba’s current and future Hydro customers, instead they let it rip, and Hydro’s finances were scotched.

Manitoba’s Progressive Conservative government, now under a new leader (after Brian Pallister’s unceremonious departure), has recently tabled a bill that, if passed and acted on, would serve the interests of their party rather than Hydro’s suffering customers.  , When the Stefanson PC government tables it’s 2022-23 provincial budget on April 12th, don’t expect relief for Hydro and their ratepayers; instead, expect the continuing raid on Hydro’s revenues.

Hydro’s financial situation is dire, the result of a series of provincial governments (New Democratic, then Progressive Conservative) that pushed a foolish capital expansion program. One that ended up with bills coming in $10 billion over initial cost estimates.  Now, we have expensive, surplus power which does not benefit Manitoba’s industries and home owners.   Rather, Hydro is forced to sell the excess power at a third the cost of production to American and Canadian utilities and their customers’ government. Ultimately, it’s a cost borne by the debt holders – the Manitoba taxpayer.

Oddly, given the topsy-turvy world of government crown corporation accounting, the other ‘winner’ from the foolish and foolhardy expansion beyond Hydro’s export customers, is Manitoba’s provincial government finances.  In normal circumstances when a government blunders in such a colossal way, you would expect the government to admit it and represent it in its own operating budgets.

Not in the case of this provincial government, each year it drains about $500 million from Hydro’s revenues through questionable government levies on Hydro’s capital expenditures, loans, including a so-called ‘water’ levy.

If these ‘paper’ charges against Hydro’s revenues were stopped, two positive outcomes would arise.

First, Manitoba Hydro’s financial situation would be positive.  Instead of being as drastically under-capitalized as it is now, Hydro’s would be well on the way to being properly capitalized.  And it’s current and future customers would not be looking at annual rate hikes well above the rate of inflation for decades.

Second, if the  government of Manitoba was not able to use the $500 million from these questionable levies to cut its deficit on the operating side of government services, it would finally be forced to deal directly with excess government spending in the general ledger that drags down the provincial economy with over-sized bureaucracy and operations.

Removing the excess levies would transform Hydro’s books from one of losses (despite future high rate hikes) to one with a positive income statement and a stable balance sheet.  Then, a truly ‘conservative’ government could properly reform Hydro and Manitoba’s power markets. The stalled natural gas division which never fit into Hydro’s hydro dam electric culture would be sold so it could grow again.  Ending Hydro’s monopoly would allow innovative, new competitors into the market

Ultimately selling Hydro with its electricity and gas entities would bring ‘billions’ to Manitoba’s treasury, and annual income taxes on future operating operations.

 

Graham Lane, Chair of the Public Utilities Board from 2004 to 2012, is a member of the Frontier Centre’s expert advisory panel.