Environment, Energy & Climate Action

BC Hydro to cut proposed rate increase in half following government review

 BC Hydro to cut proposed rate increase in half following government review
Aug. 11, 2011

Ministry of Energy and Mines

VICTORIA – Energy and Mines Minister Rich Coleman and BC Hydro CEO Dave Cobb announced today the Crown corporation intends to file a 50 per cent reduction to its rate increases over the next three years.

The reduction, which will be determined by the BC Utilities Commission (BCUC), is designed to strike a balance between keeping rates down for B.C. families, and enabling BC Hydro to invest in the future infrastructure needs of the business. BC Hydro will make a revised application to the BCUC later this year.

The Province and BC Hydro have agreed to ask the BCUC to lower the earlier proposed annual rate increase of 9.73 per cent a year for the next three years to the current interim eight per cent increase, followed by a 3.9 per cent increase for each of the following two years. This would reduce the cumulative impact of BC Hydro’s proposed rate increase by almost 50 per cent. The interim rate increase was added to BC Hydro’s customers’ bills earlier this year.

BC Hydro will achieve the reduction by lowering its costs, as recommended in a comprehensive financial and administrative review of BC Hydro by a provincial government panel of senior officials that was released today. BC Hydro intends to fully implement the panel’s recommendations by accelerating cost-saving initiatives that are already underway, as well as other efficiencies identified during the review process.

As a result, BC Hydro will decrease expenditures by more than $800 million over three years in the areas of operating costs including a downsized workforce, deferred capital expenditures, updated trade income forecasts, and changing the amortization period for demand-side management programs.

According to the panel, BC Hydro has generally done a good job of providing electrical services to British Columbians at low rates, but the utility’s operating costs have been increasing. They recommend BC Hydro reduce rates through efficiencies and improvements in capital asset planning and management, as well as stronger procurement processes.

In the area of policy, the panel recommends the Province and BC Hydro evaluate alternative definitions and timelines for government’s self-sufficiency policy, which requires BC Hydro to obtain sufficient electricity supply from sources within British Columbia by 2016.

The panel also recommends further work be undertaken on objectives for cost allocation and rate design. Rate design is the process used to allocate costs to customer classes (such as industry, small business and residential and determine rates.) As the economy improves, the Province and BC Hydro will further examine its capital structure and dividend policy, as well as water rental rates.
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