Member Article

On March 15, 2007 BC Hydro filed its first general rate design application in 16 years (after a lengthy government imposed rate freeze that ended in 2003, an enquiry into the allocation of the benefits of BC Hydro’s low-cost Heritage Resources, two revenue requirements proceedings and its first comprehensive longterm resource planning review in this year). In the application BC Hydro sought approval for rate changes based on its current cost of service analysis, including a small increase in residential rates and a significant decrease in small commercial rates. It also sought to eliminate a declining block rate structure for large commercial customers, amend its system extension rules to make the calculation of the utility extension allowance more transparent, and phase-out an interruptible residential incentive rate established for residential customers when BC Hydro had significant system surpluses.

• Despite the near-unanimous desire of intervenors and BC Hydro to attempt a negotiated settlement of the application, the BC Utilities Commission (BCUC), in light of the long hiatus since the last general rate design application, directed that the application should be reviewed in an oral hearing. That hearing was held in July, and on October 26, 2007 the BCUC issued its Phase I decision. (Phases II and III are still underway, and address rate issues in communities that are not connected to the high-voltage transmission system.)

As might be expected, the cost of service study received a great deal of intervenor and BCUC interest. In particular, BC Hydro’s proposal to allocate transmission and demand related generation costs on a 12 coincident peak (CP) basis was successfully challenged by industrial and commercial customers, as well as Terasen Gas. In rejecting BC Hydro’s proposal, and directing an allocation on a 4 CP basis, the BCUC has re allocated a significant portion of BC Hydro’s cost base to residential customers. The specific effect of this ruling, and other cost of service decisions, will be known when BC Hydro makes its compliance filing shortly, but is expected to result in significant increases to residential rates, and significant decreases to commercial rates.

Large commercial customers received a reprieve in the form of a BCUC rejection of BC Hydro’s proposal to re-structure the declining block rate they are currently served under, as did interruptible residential customers, whose discounted rate will not be phased out as proposed by BC Hydro. Regarding the large commercial customers, BC Hydro is to file a new restructuring proposal in sufficient time to be implemented in April 2009. Regarding interruptible residential customers, BC Hydro is specifically directed to exercise its tariff rights including, presumably, the right to interrupt those customers. As requested by BC Hydro, the BCUC declined to determine whether BC Hydro’s tariffs and rates should be designed to discourage the use of electricity in favour of natural gas for space and water heating purposes. 

This issue was raised by Terasen Gas, which proposed several changes to BC Hydro’s tariffs to effect that objective. The BCUC accepted BC Hydro’s submissions that this was an issue that, in light of recent provincial energy and GHG emission policies, ought to be left to government to resolve.