Hydro 'windfall' helps Manitoba shrink deficit by $346M, to less than half of spring projection

The unpredictable fluctuations of Manitoba Hydro's finances was a drain on Manitoba's books last year — but now appears to be benefiting the province to the tune of hundreds of millions of dollars.

The government's finance officials are now projecting Hydro's revenues at the end of the fiscal year will jump from the initial $120 million forecast to an estimated $585 million, which it attributes to higher water levels and increased export prices. 

The "one-time financial windfall," as finance minister Cameron Friesen put it, will help the Manitoba government cut its forecast deficit to $202 million by March 2023 — less than half of its spring projection, $548 million.

Speaking on Thursday after releasing the first-quarter financial report, Friesen stressed Manitoba must still be cautious with its finances, especially on the heels of a potential economic downturn. 

"This is a half-billion dollars of unanticipated revenue. No guarantee it'll be there next year. No guarantee that spot markets will behave in the same way they have for the last six months or 12 months," Friesen said.

The unexpected financial boon is a marked departure from last year when a severe drought weakened Hydro's ability to generate and sell surplus energy. The Crown utility, which forecasted a profit, reported a net loss of $248 million for the 2021-22 fiscal year.

Friesen said significant pendulum swings in Hydro's revenues are a cause for concern.

Financial boost should help ratepayers: Friesen

"That's volatility and volatility equals risk and we want to be reducing risk and not increasing it," he said.

Friesen said the government would work with the corporation's board to explore ways to stabilize Hydro's finances and benefit ratepayers. He wouldn't say what that could look like.

Otherwise, Manitoba's financial books have also been improved by a one-time federal transfer increase of $72 million to address the surgical backlog, and continued growth in tax revenue.

The gains are offset by an extra $191 million in expenses, mainly the result of increased health-care spending and cheques to help seniors and families with children cope with inflation, the province said.

While Friesen says the economic indicators are encouraging, the province is bracing for a slowdown resulting from several factors, including inflationary pressures, rising interest rates and continued supply chain disruptions.

It projects that Manitoba's real GDP will grow by 1.9 per cent in 2023, compared to 4.1 per cent growth in 2022.

Finance officials say they've accounted for those economic challenges in the first-quarter forecast.

The Opposition New Democrats said the lower-than-expected deficit should prompt the government to put more money into health care. Emergency room wait times ballooned this summer and the demand for intensive care beds has remained above pre-pandemic levels.

"What I heard today is that there are resources available to help with the health-care crisis unfolding in emergency rooms and at hospitals across Manitoba," NDP Leader Wab Kinew said.

Manitoba Liberal Leader Dougald Lamont cautioned the government from treating Hydro as a "cash cow" it can take money from, considering the public utility carries a debt of $24.8 billion.

In other figures released Thursday, Manitoba reported its deficit for the fiscal year that ended in March hit $704 million, which is down from the $1.6 billion originally forecast.