Large General Service Rate Design Project

On October 16, 2009, BC Hydro submitted an application to the British Columbia Utilities Commission (BCUC) asking the Commission for approval to:

  1. Divide our current Large General Service customers into two groups:
    • Medium General Service (MGS) customers, whose annual maximum demand is between 35 to 150 kilowatts of electricity (they do not require more than 150 kWs at any given time), and
    • Large General Service (LGS) customers, whose annual maximum demand is more than 150 kilowatts of electricity.
  2. Charge our MGS customers a flat rate, where each unit of electricity the customer uses costs the same amount. Our MGS customers will move to the flat rate gradually, over six years, to allow them time to implement energy-saving measures and keep the impact on their BC Hydro bills to a minimum.
  3. Charge our LGS customers a two-part rate, where the cost of electricity goes up or down depending on how much electricity the customer uses each month, compared to the same month in the past three years. Our LGS customers will feel little or no impact on their BC Hydro bills with this change, provided they keep their energy use at the same levels as the previous three years.

This proposed rate structure change will affect approximately 13,000 current BC Hydro customers, who hold approximately 25,000 separate accounts. These customers include retail stores, manufacturing plants, supermarkets and office buildings, as well as municipalities, regional districts, schools and health authorities.

Related documents:

Project FAQs: What You Need to Know about BC Hydro's Proposed Changes to the Large General Service Rate

Why are you asking the BCUC to make this change?
We are asking for this change to encourage our customers to conserve energy. Since 1996, our LGS customers have paid rates based on what we call a "declining block" structure: that is, they pay more for the first block of electricity (to 14,800 kilowatt hours) they use per month, and less for any electricity over that amount.

This structure does not encourage energy conservation. In fact, it rewards customers who use more. The new MGS and LGS rate structures will reward customers who use less.

The proposed rate structure change will not increase BC Hydro's revenues.

Why do we need to conserve energy?
The demand for electricity in British Columbia is growing. We are meeting this demand by conserving more, buying from renewable power producers here in B.C., and building more through investments in BC Hydro's heritage assets.

The first and best way to help meet future electricity demand is through conservation and energy efficiency–it's the simplest, cleanest and least expensive option. The average unit cost of conservation is approximately $40 per megawatt hour (MWh), compared to $120/MWh for new supply.

Why are you proposing to change LGS rates now?
The BCUC has already approved rate structure changes for our two largest rate classes–large industrial (2006) and residential (2008)–to encourage energy conservation across British Columbia.

The Large General Service class is our third largest rate class.

How did you decide to divide the current LGS rate class into two, each with different rate structures?
We propose dividing the current LGS rate class into two because the customers now within this class tend to be very different in both size and energy need: for example, the top 10 per cent of our current LGS customers uses about 30 times more energy than the smallest 10 per cent.

By dividing current LGS customers into two groups, we will be able to apply the rate structure that we believe–through our own research and consultation with a number of LGS customers–will encourage the most conservation action from both larger and smaller customers, while keeping bill impacts minimal.

How did the consultation process with LGS customers work?
We invited all interested LGS customers to participate in a two-phase consultation. The first phase, in late 2008, included a series of Town Hall meetings that attracted 370 LGS customers representing a broad cross-section of businesses. Among the results:

  • 75 per cent of consultation participants supported BC Hydro using rate design as a tool to encourage conservation.
  • 64 per cent of consultation participants supported the concept of offering different rate designs to different segments of the current LGS class.
  • Participants generally preferred a flat rate structure for customers with maximum demand of less than 150 kilowatts, and an inclining rate structure for customers with maximum demand greater than 150 kilowatts.
  • Some participants were concerned about the potential impact of new rate structures on their BC Hydro bills.

Next, we held further group and one-on-one information sessions in June and July 2009, where we asked LGS customers to comment specifically on the idea of moving to a flat rate for MGS customers and a two-part rate for LGS customers, with both structures carefully designed to lessen the impact on our customers' BC Hydro bills.

Two-thirds of the participants in this second phase of the consultation supported the new rate structure, and their response helped shape our final proposal to the BCUC.

This project has also received input from a BC Hydro Stakeholder group called the Rates Working Group. Since its formation in 2007, they have provided feedback to help BC Hydro understand how rates–when used as a conservation tool–may impact customer interests. This group is informed about design options under consideration and has provided direct input into the customer engagement for this project.

When will the proposed new rates come into effect?
We have applied to the BCUC with these proposed new MGS/LGS rate structures; it is now up to the BCUC to review our proposal.

The BCUC will hold public proceedings on our application, starting in November 2009. After hearing from the public, the Commission will then make the final determination on our proposal. They may decide to accept our proposal as it stands, or to make changes. They will also determine when new rates will come into effect.

To find out more about this process, please visit www.bcuc.com

How much energy will these proposed rate changes save?
By 2015, we expect to save about 1,730 gigawatt hours of electricity per year by encouraging our current LGS customers to conserve energy. To put that in perspective, that's enough energy to power 400 large office buildings.

I'm not sure what our annual maximum demand is. How do I figure out whether I will be an MGS or an LGS customer?
To help you determine in advance whether you will be MGS or LGS, we suggest you look at your monthly bills over the past year or so. The column on the left-hand side of your bill will indicate your peak demand for the month.

You might also think about subscribing to BC Hydro's Your Account, where you can find historical information about your bills quickly and easily, any time of day or night.

Please remember, though, we do not know if this proposal will be approved or when it will be approved.

How can I find out more about the proposed rate changes?
More information [PDF, 40 Kb] on the proposed new Medium General Service rate.

More information [PDF, 45 Kb] on the proposed changes to the Large General Service rate.

Use the Account Tools [MS Excel, 463 Kb] for MGS or LGS customers, to estimate changes in energy cost under the proposed rate structures. The tools allow you to choose from a variety of business examples or enter your actual consumption.

Who do I contact for more information?
To find out more about the application process, please visit www.bcuc.com.

If you have questions or comments you would like to share, please email lgs@bchydro.com.

Power Smart assists business and residential customers to conserve energy and reduce energy costs through a wide variety of resources and financial incentives. To find out more, visit our industrial, commercial or residential pages.

For more info

If you have any questions or would like to be added to our mailing list, please email us.