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Manitoba Hydro rates will rise four per cent on Jan. 1 as part of an interim general rate hike the Public Utilities Board says it has ordered “on an urgent basis because of a severe drought.”

The province’s independent energy regulator ordered Hydro to raise all of its rates except for diesel charges in 2026 at the maximum allowable annual increase, even though the provincial Crown corporation only sought the first of three consecutive annual rate hikes of 3.5 per cent.

“The increase is necessary, on an urgent basis, to protect the financial health of Manitoba Hydro in light of the current drought,” the Public Utilities Board stated in an order published Tuesday afternoon.

“Water inflows into Manitoba Hydro’s watershed are currently near the second-lowest level in 112 years.”

When Manitoba Hydro filed an application for three annual rate hikes of 3.5 per cent, it was expecting a net income of $218 million for the fiscal year that ends on March 31, 2026, the PUB noted in its order.

Now, Hydro expects to lose $409 million during this fiscal year, which represents “a deterioration” of $625 million, the PUB stated.

The board stated it may adjust this increase in a final rate order for Manitoba Hydro’s next three fiscal years. That final order is expected in March 2026, the board stated.

Rate hike will prove challenging: consumers group

In March, when Manitoba Hydro filed sought permission for three annual rate hikes — a compound rate hike of nearly 11 per cent by 2028 — the Crown corporation said it needed the additional funds in order to fix aging infrastructure, increase generating capacity and mitigate the effects of both drought and debt.

In its application to the Public Utilities Board, Hydro said it must spend $31 billion over the next two decades to improve the reliability of its existing infrastructure and expand its capacity to generate electricity to avoid the possibility of winter power shortages.

Some of the infrastructure along Bipole I and Bipole II, two of Hydro’s three main transmission lines, is more than 50 years old, which is “one to three decades past the industry expected service life,” and will alone requires billions worth of upgrades in the coming decades, the corporation wrote in its rate application.

The Consumers Coalition, which represents four Manitoba non-profit organizations, said in a statement a four per cent Hydro rate hike is understandable given the drought conditions but will still prove challenging for many ratepayers.

This fall, the coalition asked the PUB to set a rate hike below 3.5 per cent this year because Hydro failed to show it’s making difficult choices in the face of drought, coalition lawyer Katrine Dilay said.

“Hydro’s costs continue to escalate at rates well above the rate of inflation, and our clients strongly believe Hydro must examine its own costs before seeking increases from its customers,” Dilay said in a statement.

Hydro spokesperson Peter Chura said the four per cent rate hike will cost the average Manitoba household that only uses electricity as a power source an additional $50.40 in 2026, compared to an additional $44.28 for a 3.5 per cent hike.

Chura said the four per cent increase will cost the average Manitoba household that uses electricity for power and to heat their home an additional $96.60 this coming year, compared to an additional $84.60 for a 3.5 per cent increase.

Urgent rate hike follows ‘rate freeze’

Hydro did not seek a rate hike at all for 2025 in a move the NDP government called a “rate freeze.” Dilay and the Progressive Conservative Opposition criticized the decision to forgo additional revenue because of the financial pressures facing the Crown corporation, which is also carrying $25.3 billion in debt.

Drought conditions across the Lake Winnipeg watershed preceded the “rate freeze” and are continuing this winter.

According to Manitoba Infrastructure, the water level on Lake Winnipeg on Monday stood at 712.1 feet above sea level, which is below the water level on this date during 90 per cent of the years since 1981.

Adrien Sala, the minister responsible for Manitoba Hydro, said in a statement the NDP government respects the role the PUB plays “in setting fair rates that maintain Hydro’s affordability while keeping the utility strong through wet and dry years.”

On Instagram, PC Leader Obby Khan taunted the NDP for the rate hike.

“So much for your rate freeze,” the Opposition leader wrote.

WATCH | Manitoba Hydro rates to rise 4 per cent on Jan. 1:

Manitoba Hydro rates to rise 4 per cent on Jan. 1

Manitoba’s provincial regulator says it has ordered an urgent interim increase to help the Crown utility contend with drought.