Concerned about fairness and transparency, Manitoba’s Public Utilities Board (PUB) is recommending that it regulate the rates charged by Winnipeg’s water and sewer utilities.
In an order issued earlier this month, the PUB criticizes Winnipeg for using water and sewer fees to support other city services. The board maintains that about 20 percent of Winnipeg’s water and sewer revenue – almost $45 million per year – is not used for appropriate purposes. Instead, it is transferred to the city’s general coffers.
This cross subsidy is in effect “a hidden property tax increase that should be made explicit and transparent.”
Moreover, using utility revenue for other purposes limits the utilities’ abilities to fully perform their mandates. They lack the funds required to address significant infrastructure deficits – the $200 million needed for water-main renewal, the $300 million needed for sewer-main renewal, and the even greater sums required to separate the combined sewers that now discharge both raw sewage and storm water into Winnipeg’s rivers during rainstorms.
Independent regulation, the PUB argues, would bring transparency to the rate-setting process. It would allow for public participation and scrutiny, providing an opportunity to test information on utility operations, expenditures, and efficiencies in a public forum. And it would result in rates that are “just and reasonable” – high enough to ensure that utilities are self-sustaining and have the resources to meet government standards, and low enough to ensure that they are operating efficiently and that they are not subsidizing other municipal operations.
Such regulation is the norm elsewhere in Manitoba. The PUB regulates utilities across the province and approves water and sewer rates in most communities. However, Winnipeg’s charter authorizes the city to set its own rates. The PUB retains only a general supervisory jurisdiction over the city’s utilities.
Under this jurisdiction, the PUB held a hearing last December into the way Winnipeg finances, manages, and operates its water and sewer utilities.
The city resisted the PUB’s exercise of independent oversight, refusing to answer most questions about its rate-setting practices and to share its cost-of-service study. The city also refused to file a copy of its 30-year agreement with Veolia concerning improvements to its sewage system. The high-level summary that it did provide omitted projected construction and operating costs and the amounts to be paid to Veolia under the agreement.
Such secrecy exemplifies the shortfalls of municipal self-regulation. When left to municipalities, effective governance of utility operations and efficient rate setting are too often sacrificed to political expediency. Without independent regulation that provides for transparency and accountability, it is impossible to determine whether operations are effective and efficient and what utility rates should be. The PUB is right: It would be in the public interest for it to regulate Winnipeg’s water and sewer utilities. And other provinces should follow suit, establishing economic regulators for their own water and sewer utilities.