Wednesday, 22 February 2012

Something you might not know about BC Hydro rates


The usual job of a utilities commission is to protect consumers from high prices that might otherwise be charged by monopoly service providers.  The utility asks for an X% increase, and the regulator gives it something less.  So it was more than a little interesting when the BC Utilities Commission decided last week to increase electricity rates by nearly twice as much as BC Hydro had asked for (7.1% instead of 3.9%).
In this case, BC Hydro was acting on the express orders of a government trying hard to minimize the impact on consumers of the higher costs that flow from its capital investment program.  And so for the government, the BCUC decision could be seen as a setback, and that is certainly how it has been characterized in many quarters.
But I don’t need to be an armchair political strategist all the time.  What I want to know is whether my BC Hydro rates are fair.  Judged by at least one measure - comparisons with our neighbours - they most certainly are.
Every year, Hydro Quebec does a comparison study of North American electricity rates. BC Hydro then submits a public report to the BCUC showing how it stacks up. The most recent report, filed in January, shows our residential rates are the third or fourth lowest in North America, depending on how much a residential customer consumes. 
Sometimes you have to say something twice, just to make sure you were heard correctly.  So let’s say it again. BC Hydro’s residential rates are the third or fourth lowest in North America.
I’m almost tempted to say it one more time.
Now to be clear, the most recent report (filed January 5, 2012) takes into account last year’s rate increase but does not reflect last week’s BCUC decision.  But I have it on good authority that this new increase is not expected to affect the ranking significantly.  Most likely, once the increase is implemented, BC Hydro’s residential electricity rates will still be the third or fourth lowest in North America.  
In some other parts of the continent, residential consumers pay two to three times as much as we do per kilowatt hour for electricity.
There are two reasons our prices continue to be relatively low.  First, across North America all utilities are raising rates for the same reason – the need to reinvest in aging infrastructure.  Secondly, in BC, we continue to enjoy the enormous competitive advantage of our relatively cheap hydro system.
This of course is not a fact you are likely to hear very often from opposition political parties or other critics of government’s energy policies.  Unfortunately, in my view, we don’t hear it often enough from government, either.  But the simple fact is that after more than a decade of BC Liberal government, with all of its much-debated innovations in energy policy, British Columbians still pay among the lowest prices for electricity in North America.  
Clearly in the  present economic climate, it is hard to defend any price increase, even one urgently needed to support expensive infrastructure upgrades.  Embattled consumers are highly sensitized to any increase in the cost of living.  And the competitiveness of large industrial consumers would be seriously challenged by significant power price increases.  
But that does not detract from the main point.  Even with the next round of increases, our power prices are not something to complain about or apologize for.  And if we do not make the investments necessary to renew our energy generation, distribution and transmission system, we will have a much more serious problem in the years to come.



3 comments:

  1. Postscript: February 24. Here is the link to the BC Hydro rate comparison report referred to above: http://bit.ly/yLRugq

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  2. Geoff: I think you may have missed a major issue leading to the increase - the provincial government's use of Deferral Accounts. Such accounts allowed BC Hydro to spend tons of money, pay huge salaries, and still look profitable. BCUC's decision to allow the increase is really just a clean-up operation to avoid our children getting even bigger increases in the future. More important than just scanning the rates of other places is to see if they are also abusing deferral accounts to make their current rates appear lower than the rates should be.

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  3. Deferral accounts allow BC Hydro to continue with their profligacy, wastefulness, inefficiency, and "zero-risk gold plating" M.O., while avoiding scrutiny and a consequent change of corporate lifestyle.

    More serious than that is the $11.5 B of debt accumulated on assets. It is a fallacy for BCH to claim cost of power generation from its dams are 1 cent a kWh when it is paying 4 cents a kWh on interest on the same dam. Such blatant misinformation causes confusion among a lot of (lefty i.e. economically unsophisticated) electorate who think the cost of building a dam by public power is only 1 cents, while for private power it is 10 cents.

    Finally the irony is that given BC's massive paid-off and costless dams, why is BC not the lowest jurisdiction in power rates, by far? That is the question to be asked.

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