Nelson Hydro rate rise will electrify New Year for urban, rural customers
The New Year will hopefully bring glad tidings and an end to the pandemic, but it will also bring an increase in Nelson Hydro rates.
City council did not deliberate at all Tuesday night in its regular business meeting when it stamped its approval on a 2.5 per cent general rate increase to the city-owned utility’s residential urban rates.
Nelson Hydro has also applied to the B.C. Utilities Commission (BCUC) for a similar increase to rural rates, with an effective date of implementation of Jan. 1.
Although a final decision on rural rates will not be rendered by Jan. 1, Nelson Hydro requested interim rate approval to allow the requested rates to be implemented by Jan. 1. On Nov. 23 the BCUC issued an order approving the interim rate request.
The rate increase will help the city-owned utility to recover its operating costs and “earn a fair return on its assets” from urban ratepayers, said Scott Spencer, Nelson Hydro’s general manager, late last month.
“This increase is in reaction to a 3.46 per cent rate increase from FortisBC which is our primary wholesale power supplier,” he said.
The FortisBC forfeiture represent 50 per cent of Nelson Hydro’s operations budget, Spencer added.
The rate hike will also cover inflationary increases in general operational expenses, he noted, as well as increases in the vegetation management budget — as directed by the BCUC — and the storm response budget to improve service reliability.
The city maintains the rate-setting authority for Nelson Hydro’s urban service area and can adjust rates using a standard bylaw adoption process.
General rate application
In July BCUC approved Nelson Hydro’s last application for the recently approved general rate increase came with a caveat.
The BCUC directed Nelson Hydro to resolve confusion for rate payers over payment. With a year-long rate having to be approved for Jan. 1 instead of April, the earlier date eliminated the need to have a higher monthly percentage to account for nearly four months of backdated increases.
This precipitated the need for Nelson Hydro to move up its budget submission to the city and the earlier open house on the rate rise proposal.
As well, the city-owned utility was asked to establish a five-year vegetation management plan and a capital plan that addresses reliability, which it has.
Spencer said the BCUC also asked them to work with FortisBC on finding a solution to the loss of supply outages that Nelson Hydro frequently endures — a conversation that is underway.
More of the same
Several pieces are still in play that will determine the course of future cost increases, Spencer explained to council.
The cost of service analysis (COSA) and rate design (RD) application that was filed with the BCUC on Nov. 27, 2020 is still awaiting a decision from the provincial body.
Spencer anticipated a decision would be issued by March 2022.
“Until the COSA and RD application is resolved, the BCUC has directed the utility to continue submitting rate applications for the utility costs as a whole (rather than only for the rural portion of the utility),” he said.
As a result, the 2022 general rate increase application follows the requested format.
It is anticipated that beginning with the 2023 rate application, Nelson Hydro could begin submission of a rate application to the BCUC based on the costs of only the rural portion of the utility, Spencer said.
“Rural rates at this time are not adequate to fund their share of the revenue requirement for the utility and this matter is being addressed through the COSA and RD application,” he said.
He said urban commercial ratepayers are over contributing to capital reserves and urban residential ratepayers are under contributing, with the matter (rate rebalancing) expected to come to council soon.
Source: Nelson Hydro