Rural rate rise sought by city-owned utility
A new rural rate increase has been proposed by Nelson Hydro that, if approved, would see the city-owned utility rural rates rise over six per cent, and a cumulative 16 per cent for the last two years.
Nelson Hydro presented its 2024 budget to City council on Nov. 7 at its regular meeting and proposed a bylaw that implements a 6.2 per cent annual general rate increase for the rural service area, effective Jan. 1.
The bylaw passed the first three readings by council and now awaits adoption. However, on Oct. 31 Nelson Hydro submitted a rate application to the B.C. Utilities Commission (BCUC) requesting approval for the rate increase.
The rate increase has basis in the cost-of-service analysis within the 2024 budget, attributed to the 6.74 per cent general rate increase sought by Nelson Hydro’s power supplier, FortisBC.
“Beyond that, the utility’s capital renewal plans add some rate pressure as well,” said Nelson Hydro general manager Scott Spencer in his report to council. “In an effort to moderate the impact of the 2024 rate increase on ratepayers, staff have carefully scrutinized controllable costs within the 2024 budget to try and reduce rate pressure where possible.”
He added that some cost savings were found under vegetation management after a few years of an aggressive approach — creating a corresponding improvement in service reliability.
“The utility believes this is an appropriate balance for 2024 as the utility is in a good position to maintain the service improvements with the reduced budget, which will in turn alleviate rate pressure,” Spencer said.
Rate setting in Nelson Hydro’s rural area is regulated by the BCUC and, before the rate can be implemented by bylaw, the BCUC must first approve of the requested rate change.
On the down low
While a 6.2 per cent rate increase is significant — in light of the 2023 rate increase of 9.87 percent — Nelson Hydro’s rural rates remain competitive when compared to FortisBC and B.C. Hydro, said Spencer.
“(F)or all consumption levels at the 2024 proposed rate, Nelson Hydro’s rural residential rates result in a lower bill amount than FortisBC’s rates, and a lower bill amount that BC Hydro’s rates above a consumption level of approximately 1,350 kWh,” said Spencer.
On Nov. 23 Nelson Hydro will hold its annual open house at the Nelson Innovation Centre. Nelson Hydro staff will discuss relevant topics including the annual general rate increase and the reasons for the proposed increase.
The 2024 Nelson Hydro revenue requirement application also seeks approval for the creation of four deferral accounts.
Three of the deferral accounts are temporary, designed to capture one-time costs: the participant assistance/cost award (PACA) deferral account; the cybersecurity audit deferral account; and the provincial cost of living credit deferral account.
Spencer said Nelson Hydro is also seeking approval for a flow-through deferral account that will “allow the utility to capture the annual variances between the approved and actual amounts for those expenses and revenues which are included in rates on a forecast basis and are uncontrollable in nature.”
These would include: revenues; power purchase expense; amortization expense; and regulatory costs.
Approval is still pending for the revenue variance deferral account to allow the utility to track revenue it may be entitled to, depending on the outcome of the utility’s other pending regulatory applications and the BCUC’s generic cost of capital proceeding.
“Additionally, the utility is also awaiting approval for a permanent storm regulatory deferral account to allow the utility to smooth the impact of major storm costs,” said Spencer.
Source: City of Nelson agenda, Nov. 7