City should not go on power play with hydro increase to build its utility reserves: councilor
By Timothy Schafer
The city’s electrical utility should not be building its reserves through a general rate increase, says one city councilor.
Janice Morrison said a recent council-approved 4.28 per cent increase to Nelson Hydro’s rates to its customers in order to build its reserves, among other things, was too high.
Although she claims she is a very big advocate of reserves and making sure they are adequate for services like water and sewer, in terms of hydro, she noted, because it is a utility and generates money the increase was larger than it needed to be.
“I see the need for a big reserve there as less important because we can easily go out and borrow money against the utility,” she said. “We get very good financing rates (with a utility).”
Morrison was in favour of a much lower rate increase for Nelson Hydro during city council initial budget talks. With a smaller increase it would take longer to build up the reserves, she explained.
“But when we are increasing other things, and there was a feeling that there was an increase in taxes over where we wanted to be and try to hold them, that perhaps that this year this might have been the thing we tweaked a little more,” said Morrison.
The city is looking to add to its longer-term capital requirements for the utility through the increase. A 4.28 per cent general rate increase effective in April 1 will result in a revenue increase of about 2.96 per cent to the utility for 2017, read a city staff report to council.
Although Nelson Hydro has not received final approval for its electrical rate increase by the provincial regulating body, city council officially approved the rate bump last week.
The city announced it would be hiking the amount Nelson Hydro customers pay for power for all electrical rate classes by 4.28 per cent in April, even though the B.C. Utilities Commission has not approved the increase.
The rate increase is comprised of inflationary increases in the operating budget (wages and materials) and increased power purchase costs. It is prudent that these increased costs be recovered through a general rate increase, said Mayor Deb Kozak.
Nelson Hydro isn’t the only electrical utility increasing this year. In January 2017, FortisBC began implementation of an interim general rate increase of 2.76 per cent to all rates including the Nelson wholesale and FortisBC residential rates.
Nelson Hydro’s operating expenses for 2017 are $4.826, up from 2016’s $4.647 million. In 2017 there is an increase of $204,000 for the Regional Energy Efficiency (REE) program proposed to the Regional District of Central Kootenay, said Nelson Hydro general manager Alex Love in his report to council.
“As this would be funded by the RDCK there is an offsetting contribution of $204,000,” he said.
The utility base operating expenses (before the REE proposal) are decreasing by 0.5 per cent, Love added.
The budget also includes $55,000 in 2017 for studying water flow at possible new hydro generation sites (Grohman Creek) and $126,000 in 2018 for install of PRV station generation unit.
