A recent approval by the BCUC of a cost of service analysis filed almost two years ago identified that rural residential customers were underpaying for the services they received from Nelson Hydro.
Nelson Mayor John Dooley commented that the B.C. Utilities Commission approval this week of the City of Nelson-owned utility’s cost of service analysis (COSA) means 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 in a release.
That does not mean the rural rates will be going up. 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.
“It is too early to be able to comment on the impact of the changes directed by the commission on the COSA as it regards rates,” said Dooley. “Our staff will be completing that work over the next several weeks.”
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.
It was 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, he added.
“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 had said.
Earlier in 2021 former city chief financial officer Colin McClure said the rate design application with the BCUC was actually a lesser cost for rural customers than moving to FortisBC.
“Nelson Hydro recognizes that the rate increases proposed in the applications before the BCUC represent a potential hardship to its customers, which is why it has endeavoured to mitigate the impact by spreading the increases out over almost four years,” he said.
“(E)ven after the proposed rate increases, rural customers will still be paying less than their neighbours in the region supplied by Fortis BC.”
Urban commercial ratepayers were found to be over contributing to capital reserves and urban residential ratepayers were under contributing, with the matter (rate rebalancing) expected to come back to council at some point.
The BCUC is an independent agency of the Government of British Columbia and is responsible for regulating British Columbia’s energy utilities.
Timothy Schafer, Local Journalism Initiative Reporter, The Nelson Daily