Prepared by MPA Morrison Park Advisors Inc
On May 5, 2017, Manitoba Hydro applied to the Manitoba Public Utilities Board for electricity rate increases of 7.9% for both 2017/18 and 2018/19. In support of this application, Manitoba Hydro provided a substantial body of information on the company’s financial performance, forecasts, and financial targets and goals. In particular, the application referenced that the Manitoba Hydro Electric Board has set a goal to achieve a target Debt to Equity Ratio of 75:25 by March 31, 2027. In order to achieve this goal, a series of substantial rate increases would be required over the coming years.
This Report addresses three critical issues:
Why are financial targets relevant to rate-setting for Manitoba Hydro?
Should the Debt : Equity Ratio be the primary financial target that is taken into account when setting rates for the future?
Assuming the Debt : Equity Ratio is the primary target, should rates be set so as to achieve that target by March 31, 2027?