The uncertainty over predicted BC Hydro rate increases has come to an end.
The Government of B.C. and BC Hydro have come up with a plan, striking a balance between trying to keep a handle on electricity rate increases while freeing up money for BC Hydro to make repairs to aging facilities and create new generation.
The provincial government on Tuesday announced a new 10-year-plan designed to keep electricity rates as low as possible while BC Hydro makes investments in assets and new infrastructure.
Bill Bennett, Minister of Energy and Mines and Minister Responsible for Core Review and MLA for Kootenay East, made the announcement Tuesday in Victoria.
Over the first two years of the plan, the province will set rate increases at nine per cent and six per cent. The BC Utilities Commission (BCUC) will set increases for the following three years within caps of four per cent, 3.5 per cent and three per cent.
In the final five years of the plan, rates will be set by the BCUC.
“We’ve capped rates in years three, four and five, but the BCUC will actually look at rates then, and if they can set rates lower than the cap, obviously they will,” Bennett told the Townsman on Tuesday. “And starting in year six, it will be up to the BCUC as to what rates will be. But we think that given everything we’re doing here to take pressure off rates, any rate increase will be quite minimal.
While there will still be rate increases over the 10-year period, the idea was to keep the increases gradual and predictable.
“That’s an important principle in having this 10-year plan,” Bennett said. “Business in particular, large industries especially — the pulp and paper companies, the mining companies, the chemical companies — they really need to know what it looks like in the future so they can budget and prepare.
“The average residential ratepayer will pay about eight dollars a month more in the first year, when you have a nine per cent increase. The average large industrial user in that first year will pay about $140,000 extra a month. You can see how big a deal this is to the industrial ratepayer.”
New measures in the 10-year plan will reduce the amount of money that government takes from the utility, free up additional cash to support investments in infrastructure and lower BC Hydro’s operating costs.
“Right now the government takes a lot of money from BC Hydro on an annual basis — in various ways, like the dividend, the return on equity, water rentals,” Bennett said. “We know we can take pressure off rates if they can keep a bunch more of their money and use that to invest, instead of having to borrow.”
The past four months have been spent on the process of reaching this point, Bennett said.
“This has been job number one for me,” he said. “I’ve spent more time on the BC Hydro file by far — it’s not even close — than any other part of my portfolio. And we’ve done an enormous amount of work with the utility internally. We found $391 million that they don’t need to spend from an operating perspective. They’re going to reduce spending in other ways, so they’re doing their part.
“And that to me was why it was so important for government to be seen to be doing its part as well. We take less money, they spend less money, we make some other changes and we end up with a 15 per cent increase over the first two years as opposed to 26 per cent, which was what was out there four months ago.”
Electricity is still a relatively inexpensive commodity in British Columbia, even with the upcoming increases, Bennett said.
“We’ve got the third lowest residential rates in North America. That’s the context for this. The other piece of context I think is important is that when you adjust for inflation we’re actually paying the same thing for electricity today that we paid in the 1960s. Even though no one likes rates going up, when you think about gas, or oil or gasoline, or cable fees, or just about anything else, this particular commodity is actually relatively inexpensive.”
BC Hydro will invest $1.6 billion in Power Smart programs under the 10-year plan.
In addition, a rate design review process will be launched to examine ways to provide industrial customers with more options to reduce their electricity costs, as recommended by the Industrial Electricity Policy Review Task Force.