Revenues are down, but we're keeping your rates low
We're spending about $2 billion a year on upgrades to meet future demand
The numbers are staggering:
- A million more people living in B.C. 20 years from now
- Over 80,000 new homes built in B.C. in the next three years alone
- An almost 40% increase in electricity demand in B.C. over the next 20 years
- 45 years is the average age our hydroelectric dams and generating stations
- Over 400,000 of our transmission and distribution towers and poles need renewal or replacement in the next 10 years.
With that picture of B.C.'s future comes a hard reality. At the same time that a drop in world commodity prices has slowed industrial sectors such as mining – cutting into BC Hydro's revenues – we need to keep spending about $2 billion a year to invest in our aging electrical system and build for future energy demand.
With forecast revenues down, we had a choice: instead of passing these issues on to customers, we gave careful thought to new measures to reduce our costs even further so we could stick to our plan to ensure low and predictable rates.
That plan is detailed in our recent filing of the Revenue Requirements Application (RRA), which determines the total amount of money we need to operate, and helps us to determine how much money we can collect from our customers through rates.
Keeping rates affordable and predictable is at the core of the plan
A 4% rate increase came into effect, as a result of an interim application filing in February, on April 1, 2016. It's equivalent to $4.65 per month for a family of four living in a single-family detailed home, $1.37 per month for a single person living in an apartment, or $2.88 per month for a couple living in a townhouse. And if the utilities commission approves our rates plan, we'll follow with rate increases of 3.5% in 2017, and 3% in 2018.
It's all about keeping rates affordable and predictable, while ensuring we're making the necessary investments in an electrical system that's showing its age. Our rates plan is designed to ensure that BC Hydro continues to offer among the most affordable rates in North America. We've been able to keep those rates low by finding cost savings in our businesses, including:
- Re-prioritizing capital projects to save about $380 million over the next three years
- A debt management strategy that locks-in low interest rates
- Replacing contractors with internal staff to save $20 million over the next three years
How do we know we'll need that much electricity in the future?
While the last couple years have seen a big shift in commodity markets such as mining, history shows that such a downturn is cyclical, and that we must plan for significant increases not just in B.C.'s population, but also in industrial growth.
Our forecasts for industrial growth are the result of extensive, customer-by-customer analysis. We look at the challenges each industrial customer faces, their production forecasts, historical billing and industry outlooks from third-party experts.
The evidence points to an almost 40% increase in electricity demand in 20 years. So while we have short-term surpluses of energy, if we kept our system as is and didn't build Site C or upgrade other facilities for increased generating power, in two decades we'd have an electricity deficit equivalent to what it takes to power more than 2 million B.C. homes.
And that's a risk we can't take.
Hydroelectricity a great weapon in the fight against climate change
Last year, 98% of the electricity generated in B.C. came from renewable or clean resources with minimal carbon emissions. The bulk came from our 30 hydroelectric generating facilities, with the balance coming from dozens of small hydro projects, almost 20 biomass facilities and a growing number of wind and solar projects.
Wind and solar play a growing role in B.C.'s future, but only hydroelectric dams offer a distinct advantage. Storing water behind dams is like putting money into a savings account – leaving more water to generate power when demand peaks, such as on a cold December evening when light and heating needs spike.
Reservoirs on the Peace and Columbia rivers provide the backbone of one of the least expensive and most nimble electricity generating systems in North America. BC Hydro is one of only four utilities on the continent like this, and not coincidentally, all four (including Manitoba Hydro, Hydro Quebec, and Seattle City Light) rank among the leaders when it comes to having the lowest rates in North America.