Hydro rates set to rise by three per cent

VICTORIA – B.C.’s independent energy regulator has denied the NDP government’s request to freeze B.C. Hydro rates this year, instead approving a three per cent increase to electricity rates as of April 1.

The NDP had campaigned in the 2017 election on a one-year Hydro rate freeze, and then in November prematurely announced it was honouring that promise.

But the B.C. Utilities Commission ruled Thursday that “there is not sufficient regulatory justification for approving real rate decreases – unless cost reductions justify those decreases, and that is not the case here.”

The commission was worried about Hydro’s ability to cover the $140-million cost of the rate freeze, as well as noting it “would pose an additional material risk to the 10-year rate plan.”

It suggested if the government wanted rates reduced, it could have forgone some of its economic return from Hydro, rather than sticking the Crown power corporation with the costs.

“The Panel acknowledges the issue of affordability caused by real rate increases,” the BCUC wrote in its decision.

“We further agree that freezing the rate for one year increases the affordability of electricity for that year, thereby reducing the hardship that may otherwise be faced by some customers.

“However, under the current legislative and regulatory framework, the Panel is unable to consider the economic circumstances of individual ratepayers. Simply stated, a utility is entitled to recovery of its prudently incurred expenditures and utility owners are entitled to a fair return on its invested capital.

“These costs should be reflected in rates to customers who benefit in that period and must not be deferred to future periods in the absence of a statutory or regulatory justification. We note that if a utility owner is willing to forego some or all of their return on investment, rates could potentially be reduced accordingly.”

Hydro insisted the commission give strong weight to Premier John Horgan’s public comments, and mandate letter to the energy minister, that Hydro freeze rates this coming year. Hydro argued to the BCUC that Horgan’s assertions were “substantive regulatory justification for the rate freeze.”

But Hydro’s arguments were undermined by the fact it had already spent months, and submitted hundreds of pages of written documents, arguing why it needed at least a three per cent rate increase to cover its costs. It also had no answers to commission queries about how it would cover the cost of the rate freeze, or how it would affect the 10-year rate plan the Liberals set for Hydro and the NDP are now revising.

The NDP campaigned in the 2017 election on a one-year freeze of Hydro rates. Energy Minister Michelle Mungall announced in November she was following through with that plan, moving to cancel a three per cent rate hike set for April 1 while the government launched an operational review of Hydro.

“We committed to British Columbians to make life more affordable for them,” Mungall said at the time. “This is going to be a big saving in their pockets.”

On Thursday, Mungall said she was “very disappointed” in the decision.

“I’m very disappointed today obviously with the B.C. Utilities Commission’s decision to approve essentially the B.C. Liberal rate increase rather than go with our request for a rate freeze,” she told reporters.

“But I appreciate their rationale. They were very clear in a nutshell that there’s a mess at B.C. Hydro. It needs to be cleaned up and I hear that. We’ve already stated in that cleanup. We’ve made some significant changes at the top of the public crown utility.” The NDP fired former Hydro CEO Jessica McDonald from the job last year and shuffled the report.

Opposition Liberal leader Andrew Wilkinson said it’s another example of the NDP failing to live up to its promises.

“The same NDP that found it so easy to make big promises during an election campaign finds itself, once again, unable to deliver on them when in government,” he said in a statement.

“The hydro rate freeze now joins the renters’ rebate, the 114,000 new units of affordable housing, $10-a-day child care and massive tax hikes on the NDP’s growing pile of broken promises.”

Mungall said the government would move forward with other programs to compensate for the decision.

“I know this news is going to be quite disappointing for a lot of British Columbians,” said Mungall. “So I want to ensure them we’re going to move forward with implementing a lifeline rate.”

Mungall announced Hydro would develop a “lifeline rate program” to help lower electricity bills for low-income British Columbians and those in need. She also said Hydro will create a new program in May to provide grants toward power bills for customers who find themselves in an emergency involving unemployment, eviction or medical expenses.

The freeze would have cost Hydro $140 million in planned revenue. Government wouldn’t kick in any cash in compensation, meaning Hydro would have to defer the costs into a rate-smoothing account that delays repayment of debt until some time in the future.

Growing those type of Hydro deferral accounts was something the NDP heavily criticized in opposition, as has B.C.’s Auditor General. Both of whom have noted Hydro can play games with its finances by deferring costs to the future to give the illusion the corporation is profitable.

They were very clear in a nutshell that there’s a mess at B.C. Hydro. It needs to be cleaned up and I hear that.

— Minister Michelle Mungall