Proposed law could spike hydro prices for farms, processors

Advocacy groups worry with reduced oversight, large electricity rate increases could become the norm

Proposed changes to reduce oversight of hydro rates could cost farmers and other industrial power users big time if not amended, advocacy groups say.

“Industrial power users are extremely concerned about the timing and impact of the bill and the increasing likelihood that Manitoba Hydro and the minister may impose large, near-term rate increases,” wrote Manitoba Industrial Power Users Group (MIPUG) in a statement earlier this year.

Why it matters: Cheap hydroelectric power has been Manitoba’s calling card for some time. Advocates worry farms and agribusiness are about to lose that edge.

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Bill 35, introduced October 14, would amend various laws including the Public Utilities Board Act and Manitoba Hydro Act. It was initially introduced in March as Bill 44, but died when that session of the legislature ended in September.

If the bill passes as written, electricity rates and gas rates would come under the Manitoba Hydro Act. Electricity rates would be set by regulation until 2024 instead of being regulated by the Public Utilities Board (PUB). After that, the PUB would approve electricity rates every five years based on anticipated revenue needs.

General rate increases would be capped at four per cent or twice the rate of inflation, whichever is greater.

“This will protect taxpayer-ratepayers and clarify respective roles of government and the Public Utilities Board,” Finance Minister Scott Fielding said as he introduced the bill in the legislature.

“It will improve the structures, the governance and accountability of the PUB and improve the timing and cost efficiency of rate reviews,” he added, saying the changes would reduce costs and regulatory burdens.

However, MIPUG and Keystone Agricultural Producers are concerned that, with limited oversight, the province will raise prices significantly, and that the four per cent cap would become a de facto rate increase.

“This could significantly hamper the agriculture sector’s competitiveness at a time when farmers and producers are faced with increasing carbon tax and input costs, and an unpredictable global economy,” wrote KAP president Bill Campbell in a letter to Fielding on September 17.

“Our economy, disrupted by the effects of COVID-19, cannot withstand large-scale hydro rate increases,” he added.

KAP acted as an intervener in Manitoba Hydro’s 2017-18 and 2018-19 General Rate Application before the PUB where it emphasized the hit farms would take from large rate increases. The PUB eventually allowed a moderate rate increase, Campbell said.

Other than his gas barbecue, his farm is completely reliant on electricity, Campbell told the Co-operator. Hydro power runs the cattle watering system, heats the shop, powers block heaters on tractors, and runs aeration fans in grain bins.

His is not a large farm, said Campbell, but he estimated his hydro bill is in excess of $10,000 per year — $1,500 a month in the dead of winter.

“We don’t have alternative means of energy unless we want to go back to chopping wood to heat our homes,” Campbell said. “The infrastructure is set up to provide electricity to rural Manitobans. There is not widespread natural gas.”

David Wiens estimated hydro is about 6.5 per cent of his fixed operation costs on his Grunthal-area dairy farm.

“It’s a fairly significant monthly cost,” said Wiens, who is chair of Dairy Farmers of Manitoba.

He has access to natural gas, which heats a shop. His milk house is electric, as are feed mixers and unloaders, barn fans, and his milking system.

While rate hikes would bite into farmers’ bottom line, not knowing what those hikes might be makes planning more difficult, said Campbell.

Rising rates also reduce Manitoba’s competitive advantage when trying to attract new processors, said Campbell, in the letter to Fielding. It also doesn’t seem fair to reel in companies like Roquette, that has set up an enormous pea-processing facility in Portage la Prairie, only to jeopardize the low power rates it counted on.

“It’s like when you purchase a vehicle and all of a sudden your insurance doubles,” said Campbell.

MIPUG said the timing of the proposed changes poses a concern. Major Manitoba Hydro programs like the Bipole III transmission line and Keeyask generating station are coming into service. Meanwhile, Manitoba Hydro has not produced a long-term financial forecast for some time.

“This environment creates significant uncertainty for industrial customers needing to make long-term capital investment decisions,” the group wrote.

“Both the PUB and industrial customers have noted that Manitoba Hydro’s current financial condition is sound and can therefore allow for measured rate changes over time,” MIPUG wrote. “Instead, Bill 44 (or 35) establishes mandated financial debt-equity targets in legislation that will require material rate increases well above the current and projected rates of inflation.”

KAP understands that Manitoba Hydro faces a large debt burden, Campbell wrote to Fielding. He acknowledged that PUB proceedings are cumbersome and inefficient, but doesn’t believe reducing the PUB’s effectiveness is the solution to Hydro’s financial woes.

Campbell suggested moving to a five-year approval process (such as mentioned in the bill) would provide stability, and would be a good “first step” to balance both the proceedings and Manitoba Hydro’s financial needs.

About the author

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Geralyn Wichers

Geralyn Wichers grew up on a hobby farm near Anola, Manitoba, where her family raised cattle, pigs and chickens. Geralyn graduated from Red River College’s Creative Communications program in 2019 and was previously a reporter for The Carillon in Steinbach. Geralyn is also a published author of science fiction and fantasy novels.

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