Oh, you won't find anyone official to say it. Yet.
Like relatives trying to appear cheery and optimistic around a loved one that's been diagnosed with terminal cancer, the people in power are in the first stage of grief -- denial.
The prognosis for Hydro was delivered three weeks ago at hearings before the Public Utilities Board where the utility was seeking punishingly higher rates for customers in Manitoba.
It took us this long to read through the hundred-plus pages of transcript, to decipher the coded language of the witnesses, to interpret what they were getting at, and, finally, to understand the terrible conclusion. We couldn't believe it, just as, we're sure, you can't--- so we did it all again, to get a second opinion, so to speak.
Hydro conceded to the PUB that it undertook a massive expansion program--- involving three (it was once four) new dams and two new major powerlines (one in the United States)---which it could not afford.
Bipole III, the outrageously expensive power line ($5 billion and counting) that was built to bring electricity from the new dams south to customers in the United States, will be hooked up and operating in July, 2018. That's when Manitoba Hydro is supposed to start paying back the money it borrowed to build the line and the accumulated interest.
The problem is that Hydro doesn't have the money to pay for Bipole III !
We'll repeat that slowly in case you still don't understand:
Three years later, in 2021, the even more expensive Keeyask dam ($8.7 billion and counting) will go into service. You guessed it...
How much money are we talking about?
* Hydro CEO Kelvin Shepherd told CJOB just this month that the utility needed $300 million a year to pay for Bipole III.
The utility needs a rate increase of 15-20 percent just to cover Bipole. The bill for the Keeyask generating station will be almost double, meaning that Hydro would need another rate hike, of 30 percent or more, which they want to apply in annual increments rather than all at once.
But it still means your hydro bill with go up more than 50 percent, and likely much more, within four years.
Hydro told the PUB that it would already be in a financial crisis if it wasn't for two factors--low interest rates and high water.
"The project's (Bipole III) mostly complete.Regardless of accounting conventions, Manitoba Hydro is today borrowing cash for interest annually on the debt being borrowed to build the project. It's a huge number. We're talking 150 million, 175 million."
"... Manitoba Hydro has $12 billion to borrow over the next five (5) years. Extremely modest increases in borrowing costs against plan can quickly reduce Manitoba Hydro's income by fifty (50) to even a hundred million dollars per year."
Manitoba Hydro plans to save $500 million over the long-run by a new debt management strategy.
" Manitoba Hydro changed its debt management strategy to target a twelve (12) year term to maturity on new issuances instead of twenty (20) years."
Manitoba Hydro's submission to the Public Utilities Board included a recognition that its debt rating was in danger. The province of Manitoba has had its credit rating cut twice within a year and now stands two ranks above junk bond status. Hydro's debt rivals the provincial debt.
Two years ago Hydro defiantly defended its plan to keep borrowing money for expansion even if its debt-to-equity ratio dropped to 90-10, with the risk that a drought would devour even that last 10 percent of equity, leaving the utility insolvent.
But Hydro was much more contrite before the PUB in 2017, stressing how it needed the large rate hikes to plump up the debt-to-equity ratio and satisfy skeptical credit rating agencies. The goal now is to keep the debt-to-equity ratio at 75-25.
But, but, but... if the Public Utilities Board knows all this, why did they grant a small (3.36 percent) interim rate increase, and put off dealing with the big problem until December's hearing?
The answer lies in Hydro's opening gambit in the July hearing.
Hydro lawyers came in telling the PUB it had no choice but to grant Hydro's application for a 7.9 percent interim rate hike.
They even had a higher court ruling to back them up. Citing that court decision they declared that the financial health of Manitoba Hydro had to be preserved at all costs. And that meant that other considerations, such as the impact of the rate hike on the poor, the elderly, and those unfortunate enough to use electricity to heat their homes, had to be overridden.
Hydro's message was unmistakeable: If a 50 percent jump in hydro rates was going to make the poor and elderly suffer, then that's their tough luck.
The members of the PUB must see the brinksmanship at play. They decided to pass the buck to December and give the province time to decide what to do.
In the meantime, the writing is on the wall.
Mene, mene, tekel, upharsin