BC Hydro rates will go down 1% in April 1, and increase 2.7% next year, if a new rate applications are approved by the BC Utilities Commission (BCUC).
Overall, rates will increase 6.2% over a five-year period, which is much lower than the 13.7% originally proposed before the NDP government ordered a review of BC Hydro.
A phase 1 report on the review that came out last year said the reduction in required increases was accomplished mainly from a $1.1 billion write-off of BC Hydro debt by the NDP government, and the curtailment of power purchase agreements with independent power producers for power it won't need.
An interim phase 2 report, which came out last week, contemplates a number of changes to the way BC Hydro does business, in part to help facilitate the aims of the CleanBC plan.
For example, BC Hydro appears to be considering changes to the way it charges for power, although there is some question whether the two-tiered system now in place is up for review. The report seems to suggest that the two-tiered system may no longer be justified.
"This two-tier rate structure made sense when BC Hydro was in deficit and when the marginal cost of additional electricity supply was much higher than it is today," the report states.
While that seems to suggest that the two-tiered system may no longer make sense, the Ministry of Energy, Mines and Petroleum Resources insists that proposals for new "optional" rate plans would be additional, and would not replace the two-tiered system.
The two-tiered system that BC Hydro has was intended to encourage conservation. Beyond a certain threshold, customers get bumped into a higher tier and pay higher rates for power.
But in an era when the government wants to discourage the use of natural gas for home heating and industrial uses, and encourage more use of electricity, a two-tiered system that actually discourages greater use of electricity use may be at odds with that aim.
BC Hydro is now contemplating some changes, including an optional rate design, in which customers could chose different rate plans, such as a “time-of-use” option.
The report – which is now open for public feedback – cites the example of a homeowner who owns an electric vehicle opting for a rate designed for nighttime power use for vehicle charging.
The report also suggests smart metering could be harnessed in such a way that BC Hydro customers could chose plans that allows BC Hydro to control things like water heaters.
A customer could, for example, opt into a plan that would allow BC Hydro to remotely turn the heat down on hot water tanks and baseboards during the day when people are at work.
“That was the promise of the smart meter investment and I don’t think it’s been fully realized,” Bruce Ralston, B.C.’s new minister of Energy, Mines and Petroleum Resources, told Business in Vancouver.
BC Hydro has been criticized for over-estimating B.C.’s future demand for power. When the new Site C dam begins producing power in 2025, for example, it is expected to produce a surplus of power for years to come.
There are some wild cards at play, however, that could see an increased need for power in B.C.
One is electric vehicle adoption, which last year exceeded all expectations, with EVs reaching 10% of all new car sales in B.C.
If EV adoption were continue at the current pace, it could soak up some of the Site C surplus, although it would also require additional investments in power infrastructure. Whether EV adoption continues at the 2019 rate will depend to a great extent on the continuation of government rebates.
Another wild card is just how much power BC Hydro may need to generate for industry. That sector’s draw is difficult to project long-term with great certainty.
There could be significant new draws through the electrification of northeastern B.C., where the plan is to electrify the natural gas sector. But all it takes is for one large mine or pulp mill to shut down to blow forecasts out of the water.
“Significant decreases in load would mean that more of BC Hydro’s existing system costs would need to be recovered by other customers, which could have rate impacts,” the interim report warns.
As for energy trading, the report suggests the increased build-out of wind and solar power in the Pacific Northwest – notably California – may present increased opportunities for clean power trading.
The idea would be that B.C. could buy more clean power at low prices when it is being produced at surplus in the U.S., and sell back hydro power when the demand and prices are high.
“Given that Washington, Oregon and California are very progressive jurisdictions when it comes to electrification of their economy, there are opportunities for electricity trading,” Ralston said. “There are synergies down the west coast with the electricity regimes of Washington, Oregon and California.”
David Austin, a lawyer specializing in energy for Stirling LLP, said that would result in British Columbia using its hydro power resources to support the independent power industry in the U.S., to the detriment of local independent power producers.
“There’s far too much emphasis on importing electricity, which would be to the overall detriment of investing in generation in British Columbia, with the resulting taxes, jobs and other economic domestic benefits,” he said.
“There’s no evidence that there’s going to be an overall economic benefit to British Columbia by importing electricity. The jobs and investment and taxes end up in the United States, not British Columbia.
“We need our existing system to back generation in British Columbia to meet our greenhouse gas reduction objectives.”
(This story has been updated to fix errors in the original version. The original story stated that a 1.8% rate increase was proposed for April 1. In fact, that was the rate increase last year. This year's application to the BCUC is for a 1% decrease. Also, a proposal to add optional rate schemes would be in addition to the current two-tiered rate system, not a replacement of the two-tiered system, according to the Ministry of Energy, Mines and Natural Resources.)
