Manitoba Hydro faces tough choices to battle massive debt

Manitoba Hydro is billions of dollars in debt and must make tough decisions toreturn the Crown corporation to a healthier position, executives saidat a public meeting Tuesday evening.

That means, among other things, instituting a hiring freeze and increasing electricity rates.

Sanford Riley, chair of the Manitoba Hydro-Electric Board, spoke about the company's current debt, which sits at $13 billion. That's expected to climb to $25 billion over the next threeor fouryears.

"That's an extraordinary increase and a huge concern for the board," Riley said.

"The question everyone asks me is, 'How are we going to get out of this mess?' There's going to be pain, relative to where we are today, suffered by everybody. Clearly,Hydro's operations are going to require a significant restructuring and that will not be pleasant for the people at Hydro."

Certainly, it's been messaged for the last number of years that Hydro rates will likely beup 3.5-4 per cent ayear over the next 15 to 20 years. If I had to bet, it'll be higher than that- Sanford Riley,Manitoba Hydro-Electric Board chair

Riley,CEO and president of Richardson Financial Group, was one of the people appointed to the board by Manitoba's Progressive Conservativegovernment in May.

Compared to prior Hydroboardsappointed by the former NDP government, the current one has strong representation from people with financial and business backgrounds, Riley said. As such, the operation of Hydro is being scrutinized through that lens.

The purpose of Tuesday's open house was to share thefindings of an in-depthHydro review ordered by the PC government shortly after it won the election in April.

"Hopefully you will understand the conclusions that we were drawing as we went about our work. This was not an easy undertaking," Riley said.

About 100 people gathered at the Victoria Inn near the airport to listen to Riley and Kevin Shepherd, CEO of Manitoba Hydro. It was the first of four planned meetings with the public.

"It's great to see so many people. It's an indication how important Manitoba Hydro is to the province," Riley told the crowd.

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Shepherd discussed how the company will lookat reducing its operating costs, taking a harsher look at capital projects and focusing on completing projects with the funding they already have.

The company has taken immediate steps to freeze hiring and has plans not to fillvacant positions whenever possible, he added.

"Together with the board, we're going to have to make some important decisions. It will be decisions about rates charged to our customers, about how we're going to go about significantly reducing ourcosts at Manitoba Hydro, and really about how we can return Hydro to a stronger and healthier position," Shepherd said.

Riley said he's been asked by people what the rate changes will beand how customers will be affected. The answer to that is not an easy one, he said.

"It reallydepends onhow fast we feel we have to get ourselves back on track, and it will depend on how well we do in our restructuring efforts at Hydro and how much equity we put into the business. Then we'll make a determination on rates," he said.

"Certainly, it's been messaged for the last number of years that Hydro rates will likely be up 3.5-4 per cent ayear over the next 15 to 20 years. If I had to bet, it'll be higher than that."

The board has decided the best approach is to move ahead with Bipole III and Keeyask, he added.

"We're going to do our best to complete those projects as quickly as we can and as low a cost as we can," Shepherd said."It's not going to be easy and realistically, the costs are going to be higher than the previous budgets."

The 20-minute presentations were followed by a Q&A session with those in attendance.

David Grantwas in the crowd and was pleased that the meeting was offered to the public.

"I think more public utilities and other entities like regulators should engage with the public. I'm glad they did this. It has been absent from Hydro," Grant said.

The nextpublic sessions take place Oct. 25in Winkler, Nov. 3in Thompson and Nov. 9 in Brandon.