Manitoba Hydro Rates
Public utilities such as Manitoba Hydro constitute natural monopolies, whereby market competition is difficult or nearly impossible due to the capital intensive nature of the business and economies of scale arising from such a business. Economies of scale mean that the more customers a public utility has, the cheaper it is to operate.
Manitoba Hydro is a provincially owned monopoly. As such, with no competitors, the rates it charges to Manitoba customers are based on costs incurred by Manitoba Hydro rather than the market forces of supply and demand in a competitive marketplace.
Rates are based on the cost to provide the utility service. The PUB determines the public interest in our decisions and recommendations; this is done by balancing the interests of ratepayers with the financial stability of the utility. Rates set by the Board must reflect prudent expenditures and must be just and reasonable for the ratepayer while maintaining the financial viability of monopoly utilities.
While all residential customers pay the same rates, Manitoba Hydro charges different rates for three different categories within the broad general service customer class. The Board sets rates applicable to all of these customer classes.
The following are the customer classes differentiated by Manitoba Hydro in its rate setting activities:
• Residential: These customers constitute the vast majority of Manitoba Hydro ratepayers. They consume limited amounts of electricity and pay comparatively low rates for electricity service.
• General Service small: These ratepayers are non-residential and utilize utility-owned transformers in the vicinity of their property. These customers maintain a billing demand that does not exceed 200 kVA.
• General Service medium: These customers are non-residential and utilize utility-owned transformers in the vicinity of their property. These customers maintain a billing demand that exceeds 200 kVA.
• General Service large: These customers are non-residential but they utilize their own transformation of electricity distributed to them. Such customers are divided into three sub-categories depending on supply voltage, namely exceeding 750 V to not exceeding 30 kV; exceeding 30 kV to not exceeding 100 kV; and those exceeding 100 kV.
The PUB considers many different factors when faced with a rate application. Its role in balancing the financial needs of the utility with the needs of ratepayers ensures that it must examine many different facets of Manitoba Hydro’s operations. While the PUB is precluded from examining capital spending on major projects, it must approve a utility's revenue requirement and then decide how the various customer classes will pay for the revenue requirement.