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Rate hike proposed by Nelson Hydro could reach nine per cent

Timothy Schafer Local Journalism Initiative Reporter
By Timothy Schafer Local Journalism Initiative Reporter
September 28th, 2023

Nelson Hydro is proposing a customer rate hike of up to nine per cent for the coming year, according to its recent budget presentation to City council.

On Sept. 25 the City-owned utility revealed — during a special budget presentation in City council chambers — it would be pursuing a seven to nine per cent rate hike to the amount it currently charges its rural customers for 2024.

Nelson Hydro general manager, Scott Spencer, said two thirds of the rate increase is due to the forecast cost of purchased power. The rural rates are based on the output from the 2024 cost of service analysis, which the utility had submitted to the B.C. Utilities Commission for approval last year.

There is a predicted 4.83 per cent FortisBC rate increase coming down for next year, Spencer claimed, coupled with an inflationary increase of 5.62 per cent. There is also an increase of 4.21 per cent expected to IBEW union wages which Nelson Hydro has to cover.

The urban rate for Nelson residents is expected to be slightly lower, he predicted, with no definitive rate having been set. The urban rate will be set to maintain a healthy capital reserve, Spencer stated.

At the end of his presentation, Spencer noted that Nelson Hydro staff would “continue to refine the budgets and rate design to reduce the impact to ratepayers.”

Cost of service

In July 2022 the BCUC approved Nelson Hydro’s cost of service analysis (COSA) — filed almost two years ago — identifying that rural residential customers were underpaying for the services they received from Nelson Hydro.

The mayor at the time, John Dooley, commented that the B.C. Utilities Commission approval of the cost of service analysis meant the commission recognized “rural rates must stand on their own” and the city retained full authority to set urban rates.

According to the BCUC decision, the city was entitled to a fair and reasonable return on its asset (Nelson Hydro).

“Our goal, all along, was to ensure Nelson Hydro was able to recoup its expenditures, provide a fair return to the city as the owner of the electric utility and finally provide fair and competitive rates to customers,” he said.

Source: The Nelson Daily, July 2022

Rate design

Approving the COSA did not mean rural rates will automatically be going up every year.

The BCUC did not approve the utility’s rate design proposals, instead indicating that it will not do so until the revised COSA was filed.

Nelson Hydro had a rate design application (RDA) before the BCUC proposing an 18 per cent increase over almost four years for rural Nelson Hydro customers to account for the rising costs and the delivery of service to rural areas.

The BCUC had 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, said Nelson Hydro general manager Scott Spencer in December, 2021.

The city maintained the rate-setting authority for Nelson Hydro’s urban service area and could adjust rates using a standard bylaw adoption process.

Beginning with the 2023 rate application, Nelson Hydro is submitting a rate application to the BCUC based on the costs of only the rural portion of the utility.

“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,” Spencer said at the time.

Source: The Nelson Daily, July 2022

Categories: General