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Editorial: Rate rejection

The public utilities board just rejected a proposed rate increase for electricity. The problem is, it was the Manitoba public utilities board that rejected a Manitoba Hydro rate increase.

But the reasons behind the rejection are worth thinking about here — and it has to do with interim rate increases.

Manitoba Hydro, just like Newfoundland and Labrador Hydro, is faced with ballooning construction costs on new projects, lower than expected demand and declining values for electricity in export markets.

As a result, the Manitoba utility has said that it plans to ask for rate increases of 7.9 per cent in each of the next five years. But the first rate increase has run into — at least as far as Manitoba Hydro is concerned — an unexpected hiccup.

The PUB in that province rejected the first 7.9 rate increase, allowing the utility only a 3.36 per cent increase, with all of that money going to mitigate cost overruns on a single transmission project. Manitoba Hydro had asked for the 7.9 per cent to be imposed on an interim basis, while the utility went through the full general rate application.

The Manitoba utilities board made a simple argument in rejecting Manitoba Hydro’s request for interim rate relief: that the process for obtaining interim rates and the evidence provided for those rates, are far less rigorous than a full review.

They put their concern concisely. “A General Rate Application process involves a fulsome public review, including notice of the process to interested parties; the testing of Manitoba Hydro’s case through an evidentiary written information request process and a public oral hearing involving direct evidence and cross-examination; and the filing of expert evidence by approved Interveners and/or Board-retained Independent Expert Consultants and the testimony and cross-examination of experts in the oral hearing. Through this process, which takes place over a number of months, the Board scrutinizes the evidence before it on the range of issues that are relevant and in scope and arrives at a final decision with respect to the rates that the Utility can charge for its electricity services. In contrast, interim rates are ordered on a provisional or temporary basis, pending full and final adjudication in a General Rate Application process.”

The Manitoba PUB simply wasn’t prepared to rubber-stamp an interim increase.

If anything, it’s a shot over the bow by Manitoba’s regulator that as costs rise, so will the level of scrutiny.

What makes that interesting here is that Newfoundland and Labrador Hydro is asking for a roughly 13 per cent increase across two years, 2018 and 2019. Of that, the 2018 portion, which would be a 6.6 per cent increase, is, like Manitoba Hydro’s, also an interim increase while the utility’s full rate increase goes through the PUB process.

Let’s see if our PUB is paying attention to what’s happening in other jurisdictions.

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