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Are BC Hydro's Rate Hikes Enough? Maybe Not.

The Energy Minister, Bill Bennett, has recently approved BC Hydro’s Integrated Resource Plan (IRP), and announced a series of major price hikes for BC Hydro customers: up to 28% over five years: 16% in the next two years; and an 11% cap on rate increases for the next three years. Compounded it comes to 28%.

The response from many has been to complain, especially about the impact on people on low incomes, on BC’s schools and hospitals, and on a cooperative such as Catalyst Paper with its huge, multi-million dollar electricity bill, which is already tight to the bone financially.

 

The BC Sustainable Energy Association has long argued that a major decision of this kind should go before the BC Utilities Commission, where it can be subjected to independent, non-political scrutiny and analysis. It has been clear to us for many years that BC Hydro’s rates needed to rise. Our own analysis in 2012 showed the need for a 53% price rise by 2017, leveling off at an annual 2% to cover the price of inflation.

 

 

So is the current rate hike high enough? Almost certainly not. BC Hydro’s deferral account balances are growing, and sooner or later there will have to be higher rate increases to pay back the growing debt. When the rate is set too low to cover BC Hydro’s expenditures, even after serious staffing cuts, it creates a disincentive for people in homes, schools, hospitals and businesses to bother whether they leave the lights or the heat on, and it creates a psychological disincentive to invest in an efficiency upgrade even if it pays for itself over a number of years.

 

 

Similarly, when the true value of the electricity we use is underpriced, we are shunting the additional cost down the road to younger people, expecting them to pick up the bill for our energy-use today. Because of our price-denial today, we can expect another round of price increases after the next provincial election in 2017, again starting at 9% and falling to 3% in convenient time for the 2021 election.

 

So what should a financially honest rate increase be? It was precisely to answer this kind of question through a thorough, cross-questioned analysis that the BC Utilities Commission was established as an independent regulatory agency.

 

The same argument applies to the proposed Site C Dam, on the Peace River near Hudson Hope. By approving BC Hydro’s Integrated Resource Plan on Tuesday the government gave its blessing to BC Hydro’s $8 billion cost estimate for the dam.

 

If the dam goes over budget, as every mega-project does these days by an average of 25%, the additional burden will fall on BC Hydro’s future ratepayers. When the Wuskwatim dam in northern Manitoba was at a similar stage of planning in 2005 its estimated construction cost was $988 million. When it was complete, the actual cost was $1.8 billion, almost 82% higher.

 

And yet the lurking financial realities of the Site C Dam are also being protected from public scrutiny by the government’s refusal to allow the project to go before the Utilities Commission.

 

Would it be cheaper and make more sense to obtain the power we need from wind turbines in the northeast? Maybe. Do the Site C assumptions allow for the explosion of solar power that can be expected after 2020 when solar prices will have fallen far enough to make it a self-financing option? Maybe.

 

But without an independent, impartial third-party analysis by the BCUC, however, we have no means of knowing.