EDITORIAL: Static policy needed for electricity rates

Debate over how to apply the increases in what Fortis charges the city for electricity to what Penticton customers are charged begins.

The annual debate over how to apply the increases in what Fortis charges the city for electricity to what customers of Penticton’s electric utility are charged has started again.

Each year, the three alternatives are carefully set out. There’s the Grinch option of applying the percentage increase to the retail rate resulting in the biggest increase, especially to the commercial users, when the new rates take effect in the new year.

There is the Santa option applying the increase to the wholesale price, effectively passing through the increase to the consumer, without an increase in the cash coming into city coffers.

Then there is the middle ground of averaging out the increase between wholesale and retail. Let’s call that the sugarplum option, since it’s most often what council picks to do.

Penticton is one of the few cities operating its own electric utility and is able to plow the resulting profits generated back into city coffers, in terms of about $3 million annually for capital projects and more into the electrical surplus reserve fund, used to pay for improvements to the grid.

The Grinch option means more money coming in, and more the city can do with it. The benefits of the Santa option are obvious: more money in consumers’ pockets, especially when it comes to commercial and industrial customers who pay a higher rate, thus making Penticton a more attractive place to do business.

For an average industrial customer, the difference between the city being a Santa or a Grinch could be about $3,600 in power costs.

This question will occupy a significant portion of the budget talks in coming weeks as council seeks public input on Jan. 7, before making a final decision on Jan. 12. That, in itself, is costly. And it will be repeated next year, since the increases aren’t going to go away.  It’s time city council established a policy on how to handle this rather than going over the same ground each year.