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Fortis defends rate hike
The private power company which sells electricity to the City of Penticton’s electric utility is responding to criticism from members of the municipality’s council and residents.
Penticton council is upset with FortisBC over its apparent plans to raise the rates in which it sells wholesale power to the municipality, anticipated by the city to total 11.6 per cent in 2011.
The first increase will be about 6.6 per cent effective on power sold since Jan. 1, with additional increases expected in the spring and fall. Potentially those increases will be followed, complained Mayor Dan Ashton, by additional double-digit rate increases likely planned for both 2012 and 2013.
Frustrated with the British Columbia Utilities Commission for approving the increases, council seems like it is heading towards engaging in a public and political campaign to pressure the provincial government to force the BCUC to reserve or suspend the increases.
But first, council will hold a special public meeting this Monday at 6 p.m. at City Hall to gather residents’ feedback on how to deal with the upcoming increases, as the city utility will likely run a deficit of $1.26 million this year. And to rally its citizenry around the cause.
“What do these corporations do with the millions of dollars of net profit that they have made over the years?” asked Coun. John Vassilaki Monday night, referring to dividends totaling $14.5 million in 2009, $13.4 million in 2008, $11.8 million in 2007, $10.2 million in 2006, $8 million in 2005, and $9.7 million in 2004.
“Why didn’t they put some money aside in order to cover part of (the upcoming infrastructure upgrades), instead of filling their shareholders. pockets?”
But FortisBC’s corporate communications manager Marnie Douglas said that unlike municipalities who use fund accounting, regulated utilities like Fortis are typically not allowed to pre-collect from customers in order to build reserve funds for future infrastructure costs.
“We are sensitive to the challenges customers face with rising energy costs,” she said. “While FortisBC remains committed to minimizing rate increases and carefully managing costs, rate increases can be necessary to ensure we can continue to safely and reliably meet our customers’ future electricity needs.”
There are three components, explained Douglas, that make up the upcoming 2011 rate increases in Penticton: FortisBC’s costs; Penticton’s share of those costs compared to other customers; and BC Hydro’s costs, as Fortis purchases a portion of its power requirements from the Crown corporation.
FortisBC’s electricity rates, explained Douglas, are set by the BCUC through an annual revenue requirements review, an extensive public assessment process that includes public input from intervenors and other stakeholders including the City of Penticton and other municipalities.
“Revenue requirements are the generation, transmission, distribution and customer service costs incurred by a utility to provide electrical service to its customers,” she said. “The primary driver of the 6.6 per cent rate increase is capital investment in new and upgraded infrastructure and power purchases to meet customers’ increased electrical demand.”
The second component of Penticton’s rates, said Douglas, will be determined by a cost of service analysis and rate rebalancing.
According to Douglas, the revenue neutral rebalancing process, anticipated to begin in April, could make up approximately 2.5 per cent of the expected cumulative 2011 rate increase for certain customer classes, while reducing rates for others.
“The goal is that each customer pay their fair share and no classes of customers — residential, wholesale, industrial, etc — are unduly subsidizing one another,” she said.
The last component in the overall rate is an increase in BC Hydro’s rate to Fortis, which, in turn, passes onto its customers.
That rate will not be set until spring, thus making the overall rate increase for 2011 still unknown, although Douglas said it will definitely be less than the 11.6 per cent increase quoted by the City of Penticton.
“At the most, the cumulative rate increase for 2011 might be 11.1 per cent, but a lower amount is more likely,” she said.
And, as for the rumored double-digit increase for 2012 and 2013, Douglas said Fortis has not yet applied to the BCUC for its 2012 and 2013 revenue requirements, although she did not rule out an application containing such rates.