Rural Nelson residents may see an up to a nine per cent rate increase on their Nelson Hydro bills in 2024, but the utility is trying to find a way to lower that figure.
Nelson Hydro’s 2024 capital budget planning has been underway, and an annual rate increase is inevitable, according to general manager Scott Spencer who explained that Fortis BC has applied for a minimum 4.83 per cent rate increase for next year, which will affect Nelson Hydro rates.
Spencer says they are trying to cut costs elsewhere to avoid significant rate increases to rural and urban residents, however he says rural residents should be aware that a possible nine per cent increase was projected using their rate allocation model.
If approved, the rural increase would be the second consecutive year rural residents would see an over five per cent rate increase on their power bills. The reason for the rural increase for 2023 and 2024 is due to the power allocation model that Nelson Hydro adopted this year.
Spencer explained that rural usage is monitored using a cost-of-service allocation model which determines how much of Nelson Hydro costs need to be allocated to rural customers
“Essentially we take the budget, put those numbers into a model that divides out the costs between urban and rural and then it spits out a number. The rural side doesn’t pay for any of the capital investments, only the city does because it’s the city that invests in the assets and gets a return on those assets from the rural side.”
Additionally, Spencer said urban rates are set by city council, whereas rural rates are set by the BC Utilities Commission. Because urban rates are set by the municipality, they can be negotiated with more flexibility, whereas when rural rates are approved by the commission, they’re set in stone.
The urban rates for next year are yet to be finalized, and Spencer wasn’t comfortable giving an estimate for urban customers, but rurally the rate model recommended between a seven and nine per cent hike.
City council was uncomfortable with the rate hike, and so was Spencer, which is why he said his team is looking into other areas where cutting costs to reduce the rate increase could be appropriate.
Even if they can cut costs in the budget elsewhere, Spencer warns customers that they won’t be able to cut to the increase lower than five per cent.
“It’s not going to go down to two per cent, I can tell you right now. If I can match Fortis BC’s purchase of power rate increase of around five per cent, that will be awesome. To get below that means we’ve got to really bare bones everything in the operation and that’s going to impact reliability and service.”
Power purchases are projected to make up about 50 per cent of the 2024 annual budget. In the 2023 budget power purchases went over the $7.69 million budget by five per cent.
Spencer suspects power purchases went over budget last year because of December’s cold snap that the budget hadn’t accounted for. Additionally, this spring’s freshet was unusually short. Usually the spring run-off allows Nelson Hydro to generate the necessary 16 megawatts of power at a low cost.
This year’s freshet only lasted about 25 days, said Spencer, which is half of the average for the last five years. As a result, Nelson Hydro had to purchase extra power from Fortis BC which resulted in over $500,000 in additional charges that weren’t allocated for in the 2023 budget.
Spencer suspects Fortis BC will bump their rates beyond 4.8 per cent but assures the community they are working to avoid significant rate increases in the new year.
The 2024 budget is not finalized, and further public consultation is being held throughout October before it is submitted on Oct. 31. If approved, the budget terms would come into effect on Jan. 1.