Rate Design Application
BC Hydro filed its first general Rate Design Application (RDA) since 1991 with the BC Utilities Commission (BCUC) on March 15, 2007, to seek approval on changes to our tariff. As a regulated utility, we are required to do a periodic review and updating of rates. The goal of this application was to ensure that our rates promote energy conservation and are fair to all customer classes and as simple as possible.
The RDA also includes a review of our existing Electric Plus rate.
Purpose of the RDA
Overall, BC Hydro will not be generating more revenue as a result of the changes in the Rate Design Application, which are aimed at rebalancing and restructuring the rates paid by different customer classes. We aim to ensure that the rates paid by a given customer reflect the costs of providing service to that customer, so that classes of customers are not unduly subsidizing one another.
There is a gap between electricity supply and demand in B.C. and that gap is growing. The first and best way of meeting our province's growing electricity needs is to conserve more, and we must make sure BC Hydro's rates are designed to meet that goal. This application is a step in the development of a long-term rate strategy that will align rate design with our overall strategic direction, including the promotion of energy conservation. We are also reviewing, planning or implementing a variety of other measures such as the Conservation Research Initiative Time-of-Use residential pilot program, advanced metering technologies and commercial time-of-use studies.
Regardless of the rate you are on, the best way for all customers to keep electricity costs down and minimize the effect of the rate change is by adopting conservation and energy efficiency.
The Process
In January and February 2007, we sought input from the public, which we used to inform the Rate Design Application filed on March 15. We were interested in hearing from our customers to strike an acceptable balance among the goals of promoting fairness, simplifying rates and encouraging conservation.
We also held workshops during January and February to provide information and obtain feedback from customer groups, to help shape the application.
After BC Hydro filed the RDA in March 2007 with the BCUC, there was a three-and-a-half month regulatory review process directed by the BCUC which resulted in over 1,100 BCUC and intervenor information requests being issued. BC Hydro responded to all these requests within a period of six weeks.
We also consulted with stakeholders through workshops, letters, web feedback, focus groups, surveys and one-on-one meetings.
For more information on the review process for this application, visit the BC Utilities Commission's website.
Questions & Answers
Rate Design Application – General
What is a Rate Design Application?
A Rate Design Application is a proposal to update rate structures, rates charged to customer classes, and terms and conditions of service.
The RDA is based on the principles of fairness, simplicity and conservation. BC Hydro's goal is to:
- Provide rates that are fair, efficient and simple.
- Begin the development of a long-term rate strategy to align rate design with BC Hydro's overall direction, including the promotion of conservation and energy efficiency.
- Reduce cross-subsidies between rate classes.
What was the purpose of BC Hydro's 2007 RDA?
One of the primary purposes of the rate design application was to review the rates charged to our customers – residential, commercial, and industrial – and to rebalance these rates to ensure that classes of customers are not unduly subsidizing one another.
Why did rates need rebalancing at this point?
BC Hydro's rate design had not been comprehensively reviewed by the BC Utilities Commission (BCUC) since 1991. Over this period of time, the cost of servicing each customer rate class had changed and required realignment. In 2006, the BCUC mandated BC Hydro to file an RDA.
What does the BCUC have to do with our rates?
By law, BC Hydro rates must be established on a cost-of-service basis, and under the Utilities Commission Act, the BCUC has the authority to require BC Hydro to apply certain methods and formulas to determine the cost of providing service to each rate class, and to set rates on that basis.
Did BC Hydro consult with customers and stakeholders about these rate changes?
After BC Hydro filed the RDA in March with the BCUC, there was a three-and-a-half month regulatory review process directed by the BCUC which resulted in over 1,100 BCUC and intervenor information requests being issued. BC Hydro responded to all these requests within a period of six weeks.
We also consulted with stakeholders through workshops, letters, web feedback, focus groups, surveys and one-on-one meetings.
What did the BCUC decide?
The BCUC ordered BC Hydro to review the cost of providing service to each rate class and the revenue being collected from that rate class.
The result was a formula leading to a 3.6% rate increase for residential customers in each of the next three years, beginning April 1, 2008. Over the same three-year period, small commercial customers will now see a yearly decrease of 6.7%, large commercial customer rates will decrease 2.2%, industrial customers' rates will decrease 0.9%, street light rates will decrease 7.2% and irrigation rates will increase 6.4%.
When do the new rates take effect?
The new rates are effective April 1, 2008.
What was the BCUC decision regarding E-Plus customers?
The BCUC rejected the proposal to phase out the E-plus rate over the next 10 years. Instead, the rate is to be phased out through attrition, i.e., the E-Plus rate will be discontinued when there is a change of customer at an E-Plus premise (the premise could be a rental property).
How many E-Plus customers does this affect?
There are approximately 13,000 customers on E-Plus (96% are residential). Two-thirds are on Vancouver Island, 10% on the North Shore or Sunshine Coast, 8% in the Okanagan/Kootenays, 7% in the Thompson/Shuswap, and 5% in the North.
How much more money will BC Hydro be making because of these rate changes?
The new rates are revenue neutral. BC Hydro will not be making any more money because of the rate rebalancing. All that has happened is that the total cost of providing electricity is being more fairly apportioned to each rate class so that no more and no less is paid for what is costs to provide service.
What effect will the rate increase have on annual residential bills?
For the vast majority of our residential customers [77%], the rate adjustment translates into a $1 to $3 monthly increase, or approximately three cents to 10 cents more per day.
Is there anything customers can do to mitigate the effect of the rate increase?
BC Hydro recognizes that any rate increase can be a challenge to customers, so in order to mitigate and even offset the impact of the rate increase, the following conservation habits are just five of the many possible ways for customers to conserve energy and save money on their bill:
- If households shut off their home computers when they are not being used, they would save about 6 percent to 10 percent off their electricity bill, compared with a computer that is not set to go into standby mode. Turning off associated printers, modems and monitors will increase the savings even more.
- If households changed their five most-used incandescent light bulbs to CFLs, they would save approximately $25-$40 every year off their annual bill.
- If households used their dishwasher without the dry cycle, they would save nearly $10 every year off their annual bill.
- If households changed from a top-loading washer to a front-loading washer, they would save approximately $38 every year off their annual bill.
- If households changed from an old, frost-free refrigerator to an ENERGY STAR® frost-free refrigerator, they would save approximately $36 every year off their annual bill.
For the vast majority of households, if they did just two of these things, they would save enough to completely mitigate the effect of the RDA increase.
Irrigation Rates
Who is affected by this? Who pays "irrigation rates"?
The Irrigation Rate is used mostly by municipalities, regional districts, golf courses, and agricultural operations.
Are irrigation rates going up?
The Irrigation rate class is the rate class furthest out of balance with respect to costs of service compared to costs recovered. Irrigation rates will increase by 6.4 per cent annually over the next three years.
