B.C.’s electrical utilities regulator has ordered Nelson Hydro to reimburse its rural customers $19,222 plus interest before Dec. 31.
The BC Utilities Commission (BCUC) has ruled that Nelson Hydro must roll back its rural rate increase of 2.94 per cent that took effect in April of this year, to the 1.5 per cent rate increase that it applied to its customers within the city limits.
Electrical utilities in the province must submit their proposed rate increases to the BCUC for approval. But the BCUC has no jurisdiction over municipally owned utilities operating within a city.
So this decision applies only to Nelson Hydro’s rural customers. Nelson Hydro’s service area extends from its power plant on the Kootenay River up Kootenay Lake to Coffee Creek north of Queens Bay, and along Highway 6 past Perrier Road.
Procter resident David Okros intervened in the commission’s deliberations about Nelson Hydro’s rate increase application.
He argued the application did not explain how the proposed increase was justified. He gave examples of how Nelson Hydro’s service is less reliable in the rural areas than in the city and asked why rural customers should pay more.
In addition, the commission received 28 letters from residents critical of the rate increase.
“The panel believes these comments may reflect insufficient engagement by Nelson Hydro with its rural ratepayers,” the decision states, “and recommends that the utility consult more fully with its rural customers before it files any application for differentiated rates.”
Okros told the Star that the commission’s response to his intervention “hits the nail on the head.”
The commission agreed with Okros that the increase was not clearly justified, and stated that a proper rationale for the difference between rural and urban rate increases would require an analysis of whether “power purchase costs, energy supply costs, capital reserve transfer, water license reserve transfer, community complex contribution and the dividend transfer” are being properly attributed to rural customers.
The BCUC decision directs the city to file permanent rural rates for 2019, and the calculations used to arrive at them, by Dec. 7.
The commission has also asked the city to submit a “cost of services analysis” by the end of 2019, and for all those issues to be covered in it.
The panel was also critical of Nelson Hydro’s late filings of its rate applications to the commission. Applications are supposed to be filed 30 days before the beginning of the calendar year they are to take effect, according to the commission decision. But the most recent application was filed in March of this year and the previous year’s was filed on Dec. 8, 2017.
Nelson’s city manager Kevin Cormack says the BCUC decision reflects changing expectations on the part of the commission that are new and complex.
“They should have put more rigour into regulating it a long time ago and unfortunately they did not, and we accounted it on a municipal accounting basis. Now we have to convert the rural part to [another accounting system] and that has taken some time and it is complicated.”
He said the equivalencies the commission expects between rural and urban rates are “mathematically impossible. I don’t know if they have fully wrapped their head around that. I think they are struggling a bit with how that works.
“The bottom line is we want to get it right, and not try to rush something through,” Cormack said. “We will meet their requirements.”
The commission also ruled on the dividend Nelson Hydro pays the city each year, referred to by the commission as “allowed return.” It asked again for information that it states it requested for the past two years. The dividend for 2018 was $2.7 million.
“This filing must include detailed supporting calculations on the issues including, but not limited to: an assessment of the utility’s credit rating and risk profile, the ability of the utility to attract capital at reasonable costs and any impact to the utility’s financial integrity,” the ruling said.
“Nelson Hydro must also include a discussion on how any future application for an allowed return will impact and/or reconcile with the current method of the dividend transfer.”