For the first time in over 10 years, Nelson city council has requested a review of the rates Nelson Hydro charges a variety of its customers.
The city-owned electric utility will complete a Cost of Service Analysis (COSA), which looks at the costs required to supply electricity to its customer base. A preliminary review was recently completed. Now, council has requested a full review by May 31.
Nelson Hydro general manager Alex Love explains that a COSA is conducted to determine if various rate classes are paying their fair share of the cost the local utility spends to provide them with electricity.
City manager Kevin Cormack says that council requested the review for a number of reasons.
“Nelson Hydro hasn’t completed a comprehensive review of its rates for a long time,” says Cormack, “and the utility has been facing some significant cost pressures over the past five years due to major infrastructure investments by both the City and FortisBC. These cost increases affect various customers differently.”
Cormack explains there are a variety of customer classes, some regulated by the City of Nelson and others by the BC Utility Commission (BCUC). The City governs rates for Nelson Hydro customers within city boundaries. The BCUC governs rates for Nelson Hydro customers in the rural areas around town.
Power purchases through FortisBC have the biggest impact on rate differences between the customer classes. They make up 58 per cent of the cost of delivering power to rural customers, but only 28 per cent for municipal customers. Cormack explains that internal operating and infrastructure costs are higher for municipal customers. Nelson Hydro’s residential rate is currently 89 per cent of the FortisBC rate.
He adds that Nelson Hydro’s rural customer rate structure is very similar to other BC municipal electrical utilities such as those in Penticton, Summerland and Grand Forks, where the local utility provider purchases power wholesale from FortisBC, then distributes it to customers through those communities’ municipally-owned distribution system.
“Based on the preliminary review,” Cormack explains, “it’s clear that Nelson Hydro is not recovering the full cost of electricity delivery in the rural areas around town, and some rate adjustments are required.” Cormack says more work needs to be done to determine what the final rate change needs to be. That work will be completed over the next few months.
Nelson Hydro customers will be given an opportunity to learn all about the review’s findings, and offer their input at an open house. Any proposed rate increase will have to be approved by both city council and the BC Utilities Commission.
These rate adjustments will be phased in and won’t exceed 2.5 per cent per year. For a typical residential household, an increase of 2.5 per cent would total just $2.60 per month. Cormack says Nelson Hydro is confident it will still be able to provide energy to its rural customers at a price point competitive with what FortisBC charges its rural customers.