Higher energy rates for Fortis customers: study

A recent study is shedding light on the energy rate disparity between Fortis BC and BC Hydro.

A recent study is shedding light on the energy rate disparity between Fortis BC and BC Hydro.

A report commissioned by the Lower Columbia Community Development Team Society (LCCDTS) determined that Fortis consumer rates are, on average, 20 per cent higher than its counterpart, BC Hydro.

“Through our energy committee a study was done to compare energy rates in the Fortis service area with those of BC Hydro,” explained Mike Martin, LCCDTS chair.

Martin said that the report sought to identify the reason behind the erosion of historic low rates that Fortis customers enjoyed 10 or so years ago.

“On average, the Fortis residential rate is 19 to 26 per cent higher,” he said.

Although the report was completed using a limited sample size and budget, it did uncover some of the primary drivers behind the rate differences.

One reason, is that Fortis has essentially completed upgrades to its distribution systems; improvements which BC Hydro has not been allowed to  do.

“Fortis had a very aggressive program over the last few years to complete system upgrades,” said Martin.

“By government intervention, BC Hydro has not been allowed to do that.”

Additionally, Martin said that a distinct advantage BC Hydro has over private utility is access to lower cost of capital through the government because every loan is backed up by taxpayers in the province.

However, the rate disparity results are marred by what BC Hydro has done “artificially” to keep its rates lower, said Martin.

“A major element is the practise of a deferral account, which is a complicated accounting process,” he added.

He explained that when BC Hydro’s request for a 4.5 per cent rate increase was turned down, and allowed only 1.5 per cent, (by the provincial government), the other three per cent was rerouted into a deferral account.

The deferral accounting practise is where the asset or liability is not realized until a future date.

“Customers don’t see the rate increase but it actually shows up in the BC Hydro books as an asset.”

Currently, the deferral account is sitting at a $5 billion mountain of debt that awaits ratepayers.

“Our concern is that this account will have to be paid off or written off,” said Martin.

“Our point is that it should be to the account of the rate payers of BC Hydro who have enjoyed lower rates, not every tax payer in British Columbia.

“We as residents of the Fortis service area will be burdened not only with the higher rates that we pay but we will get another hit through taxation to pay off the Hydro debt.”

The LCCDTS report will not be released until after a meeting of area mayors in June.

Martin said that with support of the area mayors, through their political connections; and by aligning with with other mayors in the Fortis service area, it is hoped the group will jointly lobby the government to ensure that the handling of BC Hydro’s mounting debt will be dealt with appropriately.

“We don’t believe, as a Society, we have much influence to change this,” said Martin.

“But we are prepared to convene that meeting and do whatever is asked of us through that mayor’s council.”

After the meeting of the mayors, a recommendation may be for regional mayors to present the information to the BC Ministry of Energy and Mines, said Trail councillor and board member, Rick Georgetti.

“This is something that we need to address, and we need to address soon.”

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