FortisBC’s 1.6 per cent rate increase this month will have a small effect on Nelson Hydro customers, but not immediately.
General manager Alex Love said the rates Nelson Hydro established this year won’t change until 2016 but because they buy wholesale power from Fortis, “an increase in costs will put upward pressure on our rates when we’re setting them.”
Nelson Hydro is coming to the end of a five-year contract with Fortis which spells out the terms of service, but is not on a fixed price, allowing for periodic increases.
Love said since Nelson Hydro buys about half its power from Fortis, the 1.6 per cent increase would translate into a roughly 0.8 per cent increase for its customers. The actual amount, however, would be even less because it took effect mid-year — although FortisBC has not ruled out a further increase in January.
Nelson Hydro generally adjust its rates on April 1.
“Extra costs we carry this year will roll into revenue requirements for next year,” Love said.
Nelson Hydro spends about $6 million per year buying power from FortisBC at a rate approved by the BC Utilities Commission. Love said while FortisBC has many rates for differing customer classes, the 1.6 increase applies to all.
Nelson Hydro will begin looking at its 2016 budget in October and should have a “pretty good sense” of its next proposed rate increase by December, Love said. He previously indicated that a revised rate structure may charge in-town and out-of-town customers differently.
Rate increases in the last few years have averaged between two and three per cent, although a few years ago customers were hit with a 9.6 per cent increase.
Love said those hikes are determined by capital requirements, wholesale power purchase costs, and labour costs.
BC Hydro rate increases also have a trickle down effect as FortisBC buys power from the crown corporation and in turn sells to Nelson Hydro.
Nelson Hydro provides power to the city as well as Blewett, Taghum, the North Shore, Balfour, Harrop, Procter, and Queens Bay. BC Hydro serves the Arrow Lakes, Lardeau Valley, and upper Slocan Valley.
FortisBC serves the rest of West Kootenay.