What’s known is energy rates are on the rise. By how much and who’s picking up the tab, however, have yet to be decided.
Penticton’s operations director Mitch Moroziuk detailed the various options the city has to address rising energy costs during Monday’s council meeting, and all of them include increases to residential energy rates.
Six choices were presented for consideration, and Moroziuk said staff recommend the sixth alternative — meaning electric rates be rebalanced between residential, commercial and primary to more closely match the rates offered by Fortis B.C. and incorporate the provincial rate increase at 3.29 per cent at the retail level.
That means a residential consumer currently paying an average of $90.30 each month would increase 6.24 per cent to $95.94 in 2012. Commercial customers will see a 0.07 per cent increase, which will see the average utility cost to them go up to $597.17 from $592.57. Primary users, who typically originate from the industrial sector, would see no increase and maintain an average $18,068.54 monthly bill.
Confirming some of the figures, Coun. John Vassilaki said it seemed “Residential people would be paying the bulk of the utility increase.”
Moroziuk said the move would align themselves with their competitor’s offerings. “It would be rates closer to Fortis rates.”
The operations director explained that Fortis B.C. is set to increase its retail rate for selling power by an approximate four per cent in the new year. After conducting a cost of service adjustment (COSA) in 2010, Fortis reallocated costs between various customer classes, causing some rates to increase and others to decrease. Penticton will see a 1.5 per cent rate increase effective Jan. 1, 2012 as part of Fortis’ revenue requirements, coupled with a COSA increase of 2.5 per cent.
Typically the city has handled provincial increases in one of two ways: applying increases at the retail or wholesale level. Those affect various power consumers differently.
When reviewing the Fortis rates effective in the new year, Moroziuk explained, staff found some city users would be paying much more than their provincial competitor. While Penticton’s residential users pay on average 8.6 per cent less than Fortis residential users, local commercial and industrial users are paying more. The commercial rate offered by Fortis averages 91.5 per cent of what Penticton commercial users pay, and primary rates for industrial users averages 84 per cent of city rates.
Coun. Andrew Jakubeit asked if, given energy cost increases over the last several years, the city has seen delinquency rates rise.
“Eight to 10 per cent of customers do not take advantage of the discount,” said Doug Leahy, chief financial officer. Although customers are “penalized for not being timely with payment,” those who withhold payment altogether see outstanding utility charges tacked on to their annual tax notices. Those rates have held steady through the years, he added.
Coun. Helena Konanz asked how much the rate increase was for 2011, and was informed that it was 11 per cent, done in two stages.
While Fortis is the reason behind a large portion of the increase, Moroziuk added that there are several factors affecting electric utility expenditures that have to be part of the equation. Negotiations with IBEW workers are ongoing to name but one.
“We have increases that are going to be increasing through our labour side, equipment side, material side and the contract side,” he said, adding projects can also pose financial challenges. “That exposes us to risk on the capital side to get this project completed.”
Capital budgets for the utility are pegged at $4.96 million in 2012 and $3.14 million in 2013, which is approximately 1.5 to 2.5 times greater than traditional expenses. Local constraints mean a portion of capital work must be done through third-party electric contractors.
“It’s a profit-making venture for the city, and we definitely fix the roof when the roof leaks,” said Coun. Garry Litke. “Will the business be put in jeopardy if some of these capital projects wait?”
Moroziuk said an electrical utility master plan showed Penticton could struggle with capacity given its dual-voltage system and its inability to switch between substations when upgrades are required. “We need to deal with these security issues,” he said. “It’s also aiming to provide a bit of a buffer in terms of anything that might come our way, like IBEW negotiations.”
Add to this challenge, there is a one-month lag between Fortis’ rate increase and the city’s ability to bump up its own rates to match it. Moroziuk said staff are recommending a premium to account for revenue loss be absorbed into the new rate structure.
Leahy informed council that the city ideally would want to pass third reading of whatever structure the rate increases will have by Jan. 17 to ensure there is enough time to hit the billing cycle, given Fortis will have already increased the city’s rate.
Litke suggested council defer the decision on which increase alternative until after hearing from the public, and his motion received unanimous support.
The public input session is scheduled for the first meeting of council in the new year, slated for Monday, Jan. 9.