Proposed Rate Change for BC Hydro Large General Service Customers

BC Hydro submitted an application to the B.C. Utilities Commission (BCUC) on October 16 2009 that we believe may have an impact on your work as an independent contractor or engineer.

The purpose of this rate restructuring application is to encourage customers in the Large General Service class to conserve and become more energy efficient and to encourage them to engage in even more energy-saving measures. We hope it will also increase support for the work you do in helping businesses move to energy-efficient equipment, products and systems.

Who Will Be Affected

The changes we propose in our application will affect approximately 13,000 current BC Hydro Large General Service customers, who hold approximately 25,000 separate accounts.

These customers include small retail stores, manufacturing plants, supermarkets and office buildings, as well as B.C. municipalities, regional districts, schools, health authorities and airports.

Current Rate Structure

Currently, our LGS customers pay rates based on a “declining block” structure, where customers pay more for the first block of electricity (Step 1) they use per month, and less for any electricity over that amount (Step 2). This structure does not encourage energy conservation. In fact, it effectively rewards customers who use more.

Proposed Changes

BC Hydro has proposed the following rate structure changes in the application:

1. Splitting(segmenting) the existing Large General Service Class into two separate classes and restructure the energy rate structure for each:

Medium General Service (MGS) customers, whose annual maximum demand is 35 to 150 kilowatts of electricity, and
Large General Service (LGS) customers, whose annual maximum demand is more than 150 kilowatts of electricity.

2. Bill MGS customers on a flat rate structure, where each unit of electricity the customer uses costs the same amount. The flat rate would be gradually phased in over 6 years to 2016, providing time for customers to implement energy saving initiatives.

Under this new rate structure, we estimate that about 70 per cent of our MGS customers will pay less than they do currently. These are the customers who today pay an “average” price–the combination of energy used at Step 1 and Step 2 prices–that is higher than the proposed flat rate.

To help the remaining 30 per cent, who currently pay an “average” price that is lower than the proposed flat rate, we are planning to phase-in the new flat rate by gradually closing the gap between the current Step 1 and Step 2 prices over six years.

3. Bill LGS customers on a two-part rate structure where:

Part One is a monthly charge for a baseline amount of historic energy consumption at prices under the existing rate structure. The historic baseline is the average amount of energy used by the customer during the same month over the past three years. That average is rolling and would be updated annually. So if a company used the same amount of energy in July that they used for the past three Julys they would pay the same amount.
Part Two kicks in only if a customer’s actual usage does not match their historic baseline. If a customer’s actual usage is below their historic baseline, they receive a credit for the month. If the customer’s actual usage is above their historic baseline, there is an additional charge for the month. The Part 2 charge or credit will reflect what it costs BC Hydro to build or buy new energy supplies (called the “long-run marginal cost of new supply” or LRMC.) This rate will be higher than the rate we charge for using our existing electricity supplies. Through part two, this rate provides a strong price signal to customers to conserve and a significant credit for conservation action to reduce energy consumption.

To prevent extreme bill changes and help protect customers whose businesses are growing or who have limited control over increased energy use, we will apply the Part 2 charge or credit to the first 20 per cent of energy used above or below the baseline only. We will apply the Part 1 price to any use beyond that 20 per cent.

BC Hydro also proposes to phase-in the new Part 2 rates over three years. This will mean a lower credit to those customers who conserve, but also a lower charge for customers who go over their baseline–giving these customers the time to implement new conservation measures.

Note: The proposed rate changes apply only to the “energy charge” portion of a bill. The “demand charge” portion of the bill would remain the same.

Next Steps

The BCUC is responsible for reviewing the application submitted by BC Hydro and for approving any new rate structures. Filings with BCUC are part of a public process that allows individuals to become involved in many different ways. You can find out more information about how to become involved and register as an Intervenor or Interested Party, and view the Preliminary Regulatory Timetable at www.bcuc.com .

For More Information

Please visit the LGS website for further details about this application.

More information about Power Smart funding and resources to help you and your customers conserve both at work and home visit our Residential, Commercial or Industrial web pages.