Nelson Hydro is proposing that rural rates reflect a true Cost of Service model that is standard for other regulated utilities such as FortisBC. Like all utility companies, this includes a rate of return as a way to generate revenue and a way for investors to make a return on their investment. For Nelson Hydro, the City of Nelson is the investor, as the owner of the electrical assets. Unlike a private utility, this return on investment doesn’t go into the pockets of an external investor, but rather it is re-invested in the community. It pays for things like parks, arts, the heritage street lights in the downtown, all for the benefit of everyone who lives, works or plays in and around the City.
With no industrial tax base and taxation only coming from residential and small commercial businesses, these things simply would not be provided at today’s levels if the City of Nelson was not making this return.
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To meet the rising cost of providing power, Nelson Hydro must adjust its rates for both city and rural customers. This rate increase is necessary to cover the 4.36% rate increase in our power purchase costs from FortisBC and includes other direct inflationary costs such as supplies and labour. These factors alone result in Nelson Hydro customers requiring a 3.32% general rate increase effective April 1, 2021. You can find the application submitted here.
The April 1 increase is done to reduce the impact on customers for any particular calendar year.
An increase on January 1st would coincide with most customers’ highest billing period of the year. By delaying the increase until April, when we see more moderate temperatures, it helps alleviate some of the pressure customers might feel from any increases. This also allows the BCUC time to review the rate increase application and grant its approval prior to the date of the increase.
The increase is the weighted average of the Jan-March period and the April to December period which in this case would be 0% for the first 3 months and 3.32% for the last 9 months.
In 2021, this results in a 2.3% for the calendar year as reported by the Nelson Star.
The COSA (Cost of Service Analysis) study is an intensive review to ensure that each customer class both urban and rural is paying its share of each service provided. This review looked at the hydro rates and services in detail and recommended an adjustment to rural rates in order to cover the additional costs incurred to provide service to these areas. Based on the 2019 data, Nelson Hydro collects $1.5 million less from rural customers than it costs to service the rural areas.
Nelson Hydro has also filed a Cost of Service Analysis (COSA) and Rate Design Application with the BC Utilities Commission (BCUC) requesting, among other items, approval to increase rural residential rates. You can find the report submitted here.
Rates would be increased by 5.72% on September 1 in 2021, 2022 and 2023. This adjusts rural rates to those recommended in the cost of service analysis report which indicates current rates do not recover the full costs of serving the rural customers by approximately $1.5 million per year.
To ease the impact of rate rebalancing, rate increases are being phased in over three years to help reduce the impact on our rural customers. With the full phase-in of rates, the typical rural residential customer’s power bill would be approximately 4.4% lower than the 2020 FortisBC rate. FortisBC has typically had higher rate increases than Nelson Hydro, so the rural residential rate should be even lower after the 3-year phase-in.
There are 25 kilometres of transmission lines, 233 kilometres of distribution lines, and more than 5,000 power poles in the rural service area, more than double what is in the City. Therefore, it takes more resources to supply safe, reliable power to our rural customers than to our City of Nelson customers.
Our extensive Vegetation Management Program works year-round to reduce the impact of fallen trees and branches during windstorms. In the past 4 years, we have spent $2.6 million, 86% of which was in the rural areas. This in turn reduces power losses and the cost to repair, as well as safety.
If the BCUC application is approved, rural residential customer rates would be increased by 5.72% on September 1, 2021, September 1, 2022, and September 1, 2023.
With the full phase-in of rates, the typical rural residential customer’s power bill would be approximately 4.4% lower than the 2020 FortisBC rate. FortisBC has typically had higher rate increases than Nelson Hydro so the rural residential rate should be even lower after the three-year phase-in.
Rates for our customers vary, depending on their use. For example, homes that have access to natural gas for heating would pay less for hydro and more for gas.
Based on an average use of 850 kWh/month, a typical rural customer’s annual Nelson Hydro bill was $1,179 in 2019 a or $98 per month. In 2023, this same customer’s bill would be $1,393 or $116 per month. In 2023, the typical customer would pay less than $4 per day for all of their electrical use.
Once the COSA recommendations for the city residents are also implemented, the city electrical rates will reflect where they had been historically, which is 6% less than the rural area.
Nelson Hydro reviewed rates and service with a Cost of Service Analysis (COSA) as required by the BC Utilities Commission. This review looked at the hydro rates and services in detail and recommended an adjustment to rural rates in order to cover the additional costs to provide service to these areas.
Learn how to save up to 30% or more on your energy bills. Lower energy use benefits everyone. By reducing your energy use, you not only lower your hydro bill, but you also reduce the amount of power Nelson Hydro needs to purchase.
Check out Nelson’s EcoSave Program for energy saving tips, energy evaluations, energy consumption monitors, infrared camera kits, and an infrared heat map of your home and learn how to save 30% and more on your energy bills. By using less energy, your personal impact on climate change is lessened.
With the full phase-in of rates, the typical rural residential customer’s electrical bill would be approximately 4.4% lower than the 2020 FortisBC rate. FortisBC typically has higher rate increases than Nelson Hydro, so the rural residential rate should be even lower after the three-year phase-in.
And the end of the three-year phase-in period, rural residential rates are projected to be approximately 6% higher than city residential rates which are in line with the differences in the cost to service the rural areas that have historically existed.
Nelson Hydro was established in 1892 and expanded to service rural area customers in 1922.
Revenue and profits go directly back to the City of Nelson to provide safe, reliable electricity at a lower cost than the alternative of FortisBC. It also funds ongoing capital improvements such as the construction of the submarine cable connection for Harrop and at Lakeside to the Northshore, and into those many services that both rural and city residents enjoy such as parks, arts, and heritage street lights in the downtown.
Rates have always been higher in the rural area for commercial and street light customers as compared to the City of Nelson. The rural residential rates were also higher for almost 75 years until 1995 when City Council chose to raise city rates to equal rural residential rates to generate additional funds to begin a long-term capital renewal program.
This was at a time when the cross arms on the Hydro poles that hold up the live wires, were literally falling off the poles and lying on the street in the city. The increase in 1995 was meant to be a temporary increase, but the need for capital renewal funds necessitated City Councils to continue with these higher city rates to generate those needed funds. The impact of the capital program on rates in both the City and Rural areas was not quantifiable until the COSA was completed.