Manitoba Hydro released its second quarterly report for the first six months of the 2021-22 fiscal year today showing the utility forecasts an approximate $400 million reduction in net export revenues due to the ongoing drought.
As a result, Manitoba Hydro now anticipates a potential loss of between $190 million and $200 million for the current fiscal year. Manitoba Hydro had initially budgeted a positive net income of $190 million for the 2021-22 fiscal year, as noted in its 2020-21 Annual Report.
Late fall and winter precipitation, as well as the effect of the rate increase Manitoba Hydro receives – once reviewed and approved by the Public Utilities Board (PUB) – have the potential to impact the range of potential loss for the 2021-22 fiscal year. Manitoba Hydro is currently preparing a rate application to file with the PUB Nov. 15, 2021.
The revised forecast continues a trend noted in the Corporation’s first quarter report issued in September. The lack of significant precipitation across much of Manitoba Hydro’s watershed over the past year and lower water flows – water inflows to the southern portion of the system are the lowest in 40 years – have weakened the utility’s ability to generate and sell surplus energy on spot markets in the United States and Canada.
“Drought is one of the major risks for any utility that is predominantly hydroelectric,” said Jay Grewal, President and CEO of Manitoba Hydro. “For Manitoba Hydro, anytime we have average to above-average water flows, we take advantage of that by running that water through our turbines and selling that excess energy on the opportunity or spot market, rather than simply spilling it downriver.
That additional revenue is money we use to help keep rates for our customers here in Manitoba lower than they would be otherwise.”
The quarterly report said Manitoba Hydro’s consolidated net loss (electrical and natural gas operations) was $90 million for the first six months of 2021-22, compared to a $41 million loss for the same period last year. The increase in net loss was attributable to higher finance expense and depreciation expense largely due to the first four of seven units of the Keeyask Generating Station being placed into service, as well as decreased spot market sales, offset to a degree by higher firm energy sales tied to Keeyask.
Keeyask is a 695-megawatt (MW) hydroelectric generating station that is being developed in a partnership between Manitoba Hydro and 4 Manitoba First Nations: Tataskweyak Cree Nation, War Lake First Nation, York Factory First Nation, and Fox Lake Cree Nation.
Despite the drought, Manitoba Hydro’s customers can rest assured that their energy needs will be met throughout the winter months when heating loads kick in. The utility is managing its system to maintain energy security and reliability to ensure it can continue to meet all domestic and firm export commitments. This includes purchasing energy at night to conserve water and allow for increased generation during periods of peak demand during the day.
