Letter exchange illuminates details on two-tier hydro pricing

Two-tier hydro pricing system explained by Minister of Energy and Mines Bill Bennett



A recent exchange between a pair of valley residents and provincial Minister of Energy and Mines Bill Bennett shed a bit of light on the province’s two-tiered hydro rate, and its impact on areas without natural gas, such as the Upper ColumbiaValley.

Windermere couple Karl and Yvette Adam sent Bennett a letter late last year stating BC Hydro is falling short of its duty toprovide hydro to families at the lowest cost possible, expressing dissatisfaction with the two-tier pricing system.

“Maybe older homes could be grandfathered into different Tier One to Tier Two transition levels, i.e. moving to Tier Two athigher consumption of levels,” the retired couple wrote in their letter, after outlining that they live in a 36-year-old househeated entirely by electricity, that they have little other option than to completely rely on electricity given the lack of naturalgas in the area, and that “over the course of a year, the power bill is a significant expense.”

The couple lives on a pension and said that, in dialogue with BC Hydro, it has become apparent that “the only way we canreduce power costs is to replace all our appliances, all our windows and double wrap the outside of our house plus re-insulate.”

Under the two-tier system, hydro use is charged at a lower rate until the monthly use passes a certain threshold (675kilowatt hours per month); then a higher rate kicks in.

“Throughout all of this, nowhere do we have the opportunity to reduce our costs, except by replacing all my appliances,etc… ; nowhere can we reap the benefit of turning our heat down during the night, running our dishwasher after 8 p.m. ordoing our laundry after midnight,” wrote the Adams. “Yes, all those things help to keep us in Tier One longer but during thecold months, we barely get through half the billing period before we get stuck with the higher rates. We’ve heard tell thateven affluent people in Phoenix get the benefit of lower rates if they don’t turn their air conditioners on between noon and7 p.m.; if they do, they pay a higher rate, which is as it should be during prime time.”

The couple pointed out that since BC Hydro has smart meters that measure electricity use accurately enough to allow thecompany to send emails to users informing them almost instantaneously when they have crossed into Tier Two, thecompany also has the capability to determine who is using how much power during peak and off-peak hours.

“Seems to us that we have the technology in place to permit BC Hydro to ‘reward’ savvy users for not using power at peaktimes of the day,” they wrote.

Bennett wrote a letter back, detailing that the Step One threshold was “based on 90 percent of the median consumption ofresidential customers, which include customers with different housing types, heating types, household sizes and locations.Heating type, along with all the other residential customer attributes, were carefully considered when BC Hydro calculatedthe Step One threshold and the Step One and Step Two pricing.”

He added that Step 1 accounts for overall usage up to the threshold regardless of the time of usage, and pointed out “thatmany customers that have consumption at the higher Step Two rate are still better off than under the old flat rate system.Currently, if residential customers were billed based on a flat rate, it would be about 10.2 cents per kilowatt hour.Customers with annual billing of about 13,900 kilowatt hours 8,100 kilowatt hours in Step One and 5,800 kilowatt hoursin Step Two would be indifferent between a stepped or flat rate. About 80 percent of customers consume less than thisamount. Put another way, reverting to a flat rate would result in 80 percent of customers getting a bill increase, with someas much as 24 percent.”

Bennett also said that in July 2015, he requested that the British Columbia Utilities Commission (BCUC) examine the impactsof the residential inclining block rate and, in particular, the impacts of this rate on low income customers and those withoutaccess to natural gas, and that this process is currently underway.

He also outlined that in September 2016, BC Hydro submitted a rate design application to BCUC, and that this applicationincluded a thorough review of the residential conservation rate, informed by input from different customer groups andcustomer focus groups.

BC Hydro concluded, based on the review, that its existing rates were widely understood, accepted and achieved thecompany’s conservation objectives, and proposed keeping its current two-step rate for residential customers.

“A time-of-use rate is not being considered at this time. This rate structure is based on higher rates for customers duringperiods of peak demand. These rates are effective for utilities whose peak demand exceeds their ability to supply electricity,reducing the need to buy expensive electricity in order to meet their customers’ needs,” wrote Bennett. “Approximately 95per cent of BC Hydro’s power is generated by hydroelectric generators. BC Hydro can effectively manage the generators tomatch supply to demand. For this reason, it can more easily meet peak demand.”

Bennet advised the couple to review BC Hydro’s Income Qualified Programs, which includes the Energy Saving Kit andEnergy Conservation Assistance Programs, which can help people reduce their electricity bills.

To learn more about these programs, visithttps://app.bchydro.com/powersmart/residential/ps_low_income/energy_saving_kits/esk/ApplicationStep1.aspx or call BCHydro at 1-800-224-9376.


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