Now is a good time to take a closer look at your energy bills as starting April 1st, BC Hydro made changes to their rate structure and implemented a 3.5% rate increase. The 3.5% rate increase can’t be seen in any one line item on your bill, rather it has been woven into the new structure. The good news is the new, simpler rate structure will make it easier to plan and budget for electricity costs and to determine the benefits of energy efficiency projects.
The low down on the 2017 BC Hydro rate structure changes
Starting on April 1, 2017, Medium General Service (MGS) and Large General Service (LGS) rates changed from a baseline rate system to simpler flat rate system. Under the new rate system, there’s no tiered pricing for energy and demand charges, and baselines aren’t required.
For Small General Service (SGS) there have been no such major changes to the rate structure. The basic charge increased slightly to better reflect BC Hydro’s fixed costs of services for things such as metering and billing. However, to offset this increase, there was a smaller increase to the Energy Charge than anticipated.
Key changes to the MGS and LGS rates
Baselines have been eliminated. Your electricity usage will no longer be compared to historical consumption - no more Part 2 credits or charges.
You will be billed at the same flat rate for electricity used (measured in kWh) - not on tiered rates.
You will be billed at the same flat rate for your peak demand (measured in kW) - not on a tiered rate structure.
Energy charges are slightly lower and demand charges are slightly higher when compared to the previous baseline rate structure. The slight increase to the demand charge is to better reflect costs to service customers with high demand. The corresponding decrease in the energy charge offsets this higher demand charge.
New rate summary
Our analysis on the 2017 BC Hydro rate structure changes
Our energy specialists analyzed the new rate structure and overall found it to be generally positive, or at least no worse, for the majority of growing BC businesses. We did however discover that the new structure has had varied impacts on the total bill value for each BC Hydro customer it’s not as clear-cut as a 3.5% increase for each customer’s monthly bill.
The elimination of the baseline has left some organizations with dramatically higher or lower bills. We did a before and after comparison for a sample of our clients and found total bill values had decreased up to 29% for some, and increased up to 37% for others under the new rate structure. What caused this significant variance was the elimination of the baseline charge which has inadvertently penalized companies that have lowered their energy consumption in the past year.
Let us explain: An energy baseline is a business’s average energy consumption for a rolling 13-month period. An energy baseline is a reference tool, it allows you to compare energy performance before and after a change is made to your site or system. The old rate structure incentivized energy savings by offering a discount when consumption went below the baseline, and charging a penalty when consumption went above the baseline. The removal of these financial discounts and penalties has had some significant impacts for some organizations.
Example 1: One of our LGS clients, a print company, has been doing well in reducing their energy baseline with ongoing energy efficiency improvements. In March, they enjoyed a $5,600 discount on their BC Hydro bill for being below baseline. Under the new system there is no discount, leaving their April energy bill to be almost 10% higher month-over-month.
Example 2: One of our LGS clients, a pet food manufacturer, recently increased their production which resulted in energy consumption above their baseline. Their March BC Hydro bill had a charge for $8,600 for being above baseline. Under the new system there is no charge, leaving their April energy bill to be almost 29% lower month-over-month.
While there are some who will win or lose more than others, the new rate structure makes it easier and more transparent for businesses to review their energy consumption and plan energy projects which we see as hugely beneficial for businesses.
As for future rate increases?
An April, 2017 Business in Vancouver Insights column had this perspective:
We are already in the middle of a 28% rate increase over five years with a promise of five more years of annual increases to follow. All that before we even start to pay off the massive $8-billion-plus Site C debt or the $5.9 billion deferral accounts through which Hydro is delaying paying off its current obligationsa.
- BC Hydro’s 4% rate increase is 2.6% above inflation and compounding to a 55% increase for businesses
In 2013, the province announced a 10-year rate plan for BC Hydro. BC Hydro announced that electricity rates would increase by 28% between 2013 and 2018. Electricity rates rose 9% in 2014, and another 6% last year.The BC Utilities Commission (BCUC) has capped price increases for 2016, 17 and 18 at 4%, 3.5% and 3% respectively. The 10-year plan creates rate certainty for BC Hydro customers until the end of fiscal 2019. Beyond that, additional rate increases are predicted but exact rates and rate caps are yet to be decided.
- BC Hydro General Service Business Rates
- New Large General Service And Medium General Service Rates