A powerful lobby group representing the province's largest industrial electricity customers has warned Premier Brian Pallister that political interference in the setting of Manitoba Hydro rates has already forced them to reconsider capital investments that could lead to cutbacks in production.
In a strongly worded submission to the Public Utilities Board that has not been made public, but was obtained by the Free Press, the Manitoba Industrial Power Users Group said its members are concerned about the province's attempts to subvert the independent regulatory oversight of electricity rates.
Most of the concern surrounds Bill 35, which would limit Hydro General Rate Applications at the PUB to just once every five years. Until that bill is passed into law, Pallister is setting electricity rate increases by cabinet directive.
In its submission, MIPUG argued that "a lack of transparency" in the rate-setting process means that its members are "presently operating with an unprecedented lack of confidence" about future increases.
MIPUG also expressed concern Hydro had not appeared before the PUB in more than two years and had not produced a public Integrated Financial Forecast since 2016. Taken together, the concerns have caused group members to reconsider their future plans in Manitoba.
"Conditions related to rate competitiveness in Manitoba are opaque and important decisions regarding capital investment by industry and post-pandemic production scheduling are already beginning to direct critical resources elsewhere," the submission stated.
NDP Leader Wab Kinew said he was not surprised by MIPUG's reaction to the bill, given that it completely undermines the PUB and a regulatory process that has served Manitobans well over the years. It's one of the reasons why the NDP delayed debate on the bill until the fall legislative session, he added.
Kinew said it's a "big red flashing light" for businesses that rely on large amounts of electricity.
For the political gain that Mr. Pallister thinks he's getting out of Bill 35, there's going to be a lot of economic pain for this province," Kinew said. "This puts thousands of jobs and up to 30 per cent of Hydro's revenues in jeopardy. That's a big chunk of the Manitoba economy.
A spokesman for MIPUG declined to comment on its submission. The organization represents most, but not all of Hydro's industrial customers. Together, the industrial class generated $380 million for Hydro in 2020, which is equal to 22 per cent of all the utility's domestic revenues.
According to recent PUB filings, the group's members include: Canada Kraft Paper Industries Ltd. (The Pas); Chemtrade Logistics Inc. (Brandon); Integra Castings (Winkler); Koch Fertilizer Canada ULC (Brandon); ERCO Worldwide (Virden); Maple Leaf Foods (Brandon); Gerdau Long Steel North America (Selkirk); Amsted Rail/Griffin Wheel Co. (Winnipeg); Enbridge Pipelines Inc. (Southern Manitoba); TransCanada Keystone Pipeline (Southern Manitoba); and Winpak Ltd. (Winnipeg).
Pallister declined an interview request. In an emailed statement, a government spokesperson said Bill 35 will strengthen the PUB process by broadening the scope of issues it can consider in setting rates.
The spokesman also said government has met with MIPUG to hear its concerns and remains committed to "growing Manitoba's economy and creating jobs" through low electricity rates and financial stability at Manitoba Hydro.
Manitoba Hydro also declined to comment on the submission.
MIPUG's submission was made in response to recent application to the PUB by the Consumers Coalition, a group that includes the Consumer's Association of Canada (Manitoba), Harvest Manitoba and the Aboriginal Council of Winnipeg.
The coalition has asked the PUB to convene a special hearing on Hydro electricity rates based on a number of factors that have materially impacted the Crown utility's financial position, including the creation of a new long-term strategic plan that has not yet been made public, the fact that the Keeyask generating station has started to come online and with it, the start of a $5-billion power export agreement with Saskpower.
MIPUG has been a regular presence at PUB hearings in the past. Given its members operate large-scale businesses in many Tory-held ridings in the province, it carries considerable weight with the Pallister government.
For some time now, Manitoba has been successful in attracting industrial companies that require huge amounts of cheap electricity for manufacturing or processing plants. Although these businesses do not employ huge numbers of people, they represent a critical domestic revenue stream for Hydro.
The MIPUG submission should come as no surprise to the premier or his government. Government sources confirmed the group sent a letter to Pallister and Finance Minister Scott Fielding some months ago raising the same concerns and warning them that failure to restore some certainty to the regulatory process could jeopardize their future presence in Manitoba.
The sources also noted that representatives of MIPUG-member companies have actively lobbied Progressive Conservative cabinet ministers and MLAs, expressing their displeasure about Bill 35 and their concerns about how it could ultimately affect the level of production here in Manitoba.
All of the MIPUG members are branch operations of larger national and multinational companies that operate similar plants in other jurisdictions. Typically, these plants compete against each other for production contracts; if input costs increase significantly or without warning in one plant, then work is shifted to other plants where the cost of production is lower.
Government sources said MIPUG-member companies have not yet threatened to leave the province, but there was a clear message that if rate uncertainty continues and the role of the PUB remains limited, there is a possibility that individual plants could be shuttered.