The BC government has announced a 10 Year Plan for BC Hydro in which the province
aims to minimize rate increases while allowing BC Hydro to reinvest
in its aging assets and infrastructure. As we noted in a prior blog post, Bill Bennett, Minister of
Energy and Mines and Minister Responsible for Core Review,
previously indicated that BC Hydro rate increases were imminent in
view of the ongoing refurbishment of BC Hydro's heritage
Among other things, the new 10 Year Plan for BC Hydro
The BC government will direct the British Columbia Utilities
Commission (BCUC) to set rate increases for the initial two years
of the plan at 9% and 6%, respectively. The impact of the 9%
rate increase is estimated to be about $8 per month for residential
customers, $20 per month for small commercial customers, and
$139,000 per month for average industrial customers.
The BCUC will set increases for the subsequent three years
within caps of 4%, 3.4% and 3% for such years.
The BCUC will set rate increases independently for the final
five years of the 10 Year Plan. Actions to be taken by BC
Hydro and the BC government pursuant to the 10 Year Plan are
intended to keep these rate increases to a minimum.
BC Hydro will keep its existing 5% rate rider in place.
BC Hydro applies the rate rider to all billed electricity charges
before taxes in order to recover additional and unpredictable costs
in its regulatory accounts.
BC Hydro will invest $1.6 billion in Power Smart programs over
the term of the 10 Year Plan in an effort to reduce electricity
consumption and mitigate the impact of rate increases.
The BC government will initiate a review of the BCUC through
the Core Review process. The province intends to increase the
BCUC's effectiveness and, as such, the commission will not
begin setting rates until the third year of the 10 Year Plan to
allow the review and any recommendations to be carried out.
Currently, 80% of the balance of BC Hydro's regulatory
accounts are being recovered under amortization schedules approved
by the BCUC. Under the 10 Year Plan, BC Hydro will begin
paying down the remaining accounts in Fiscal Year (FY) 2015.
Also, a new regulatory account will be created in order to amortize
costs that occur in earlier years of the 10 Year Plan over the
entire term of the plan.
The BC government will reduce the dividend that it collects
from BC Hydro over a five-year period beginning in FY2017.
After FY2021, the dividend will be suspended until the
utility's debt to equity ratio reaches 60/40. BC
Hydro's debt to equity ratio is currently 80/20.
Tier 3 water rentals will be eliminated in FY2018. OIC
No. 787 (approved November 22, 2007, effective January 1, 2008)
created a third tier of water rental rates for energy production
above 3000 GWh/year. The third tier of water rental rates are
about 20% higher than the water rental rates applicable to the
second tier. With the elimination of the more expensive third
tier, BC Hydro will pay reduced water rental charges to the BC
government and, correspondingly, BC Hydro will no longer need to
pass the increased costs associated with tier 3 water rentals
charges onto its ratepayers.
It is estimated that by the end of the 10 Year Plan, BC
Hydro's contributions to government revenue will be $512
million less per year than under the current structure. Also,
the government estimates that it will reduce its revenue from BC
Hydro over the 10 Year Plan by $2 billion.
The Burrard Thermal Generating Station will be shut down for
generation purposes in 2016 in order to save an estimated $14
million per year. The BC government previously directed that
the Burrard Thermal facility was to be relied on for emergency
purposes only, but the 10 Year Plan calls for its complete
BC Hydro recently completed another round of consultation on its
Integrated Resource Plan (IRP) and re-submitted it to cabinet for
consideration. The IRP was approved by the BC government on
November 26, 2013. Most notably, the IRP includes a new chapter on BC Hydro's Clean Energy
Strategy. We will follow up shortly with another blog
post discussing the implications of the approved IRP.
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The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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