MANITOBA HYDRO
RESTORING MANITOBA HYDRO
S oon the Public Utilities Board (PUB) will begin an important public hearing to review Manitoba Hydro’s rate application as well as its capital projects. This hearing will not be like previous PUB hearings, and this rate application is not like previous rate applications. As Manitoba Hydro is seeking rate increases which, if approved, will be significant for our customers, we would like to take the opportunity to tell you why we are doing this. It is important to understand Manitoba Hydro faces significant operating risks as a business — the risk of drought, the risk of further deterioration in export prices, the risk of rising interest rates, the risk of cost overruns on major capital projects, the requirement to spend capital
on refurbishing existing equipment, and no growth in domestic electrical demand. We’ve had years of good luck in these areas. But we can’t operate Hydro based on the hope that good luck will continue. Under the direction of the previous board and provincial government, Manitoba Hydro undertook more than $14 billion in major projects with no realistic plan to pay for them. If rates are not increased the business will continue to be cash-flow negative, needing to borrow hundreds of millions of dollars every year just to fund its core operations. More importantly, the debt of Manitoba Hydro, combined with existing provincial debt, will create a debt- to-GDP ratio for the Province of Manitoba of between 65 and 70 per cent — amongst the highest in Canada. In short, this is a combination that leaves
our customers, and the public finances of Manitoba, very vulnerable. As a Board we have a critical responsibility to address this. That is why we developed a new 10-year plan to restore Manitoba Hydro’s financial strength, and protect our customers from these risks. With the determined support and effort of Manitoba Hydro management and employees, action has already been taken to reduce operating costs and streamline the business. We have reduced the overall management structure at Hydro by 25 per cent, including a reduction of 30 per cent at the executive level. In addition, the company will have reduced its total number of employees by well over 800 by the end of January 2018. These cost reductions are important, but on their own can’t address the billions of dollars of debt coming
december 2017
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