On October 14, 2020, the BC Utilities Commission approved a new optional rate pilot program designed to incent large customers to increase their consumption of clean electricity.
The Incremental Energy Rate is an optional rate available to customers that receive electricity from BC Hydro at transmission voltages (aka industrial customers). The new rate applies only to electricity that is over and above a participating customer’s historical usage. The price under the new rate can be attractive because it varies with the price of electricity on the wholesale market, which is usually lower than BC Hydro’s regular rates for transmission service customers. The price under the new rate is somewhat higher than the actual market price so that other BC Hydro ratepayers benefit too. The Incremental Energy Rate was approved as a pilot program effective January 1, 2020, to March 31, 2024.
The BCUC’s written proceeding on Hydro’s application was focused mainly on the complex details of the rate design with a view to ensuring that non-participating customers (including residential and commercial customers) would be financially neutral or better off under a variety of future market pricing scenarios. Each participating customer’s historical usage pattern is defined by a Commission-approved set of 36 baseline figures: monthly energy in High Load Hours, monthly energy in Low Load Hours, and monthly reference demand, for 12 months of the year.
BCSEA supported the approval of the Incremental Energy Rate as a pilot project. It concluded that the new rate could be reasonably expected to help reduce rate increases for all BC Hydro ratepayers and that this would be evaluated after four years.
Under the Incremental Energy Rate, a participating customer pays the usual industrial rate for all the power it uses up to its historical baseline; and it can choose to buy additional (incremental) power at ‘market plus’ prices for energy. Specifically, the energy price under the pilot rate is the wholesale market price plus an energy charge adder of $3/MWh in freshet months (May to July) and $7/MWh in non-freshet months (August to April). The idea is that if the Incremental Energy Rate participant had not purchased power under the new rate then BC Hydro would have sold the power on the market at market prices (because BC Hydro has surplus electricity.) By selling incremental power to the participant, BC Hydro ‘breaks even’ on the market price but also receives the energy charge adder (for the benefit of all customers) that it wouldn’t have received if it just exported the power.
The volumes of energy supplied under this tariff are expected to be small, in the order of two percent of the load of Hydro’s large industrial customers. Expected incremental net revenues are also expected to be small.
BCSEA has participated in the Commission’s proceedings regarding BC Hydro’s rate design applications since 2008.