Allow me to provide the facts about electricity and B.C. Hydro that Adrian Dix did not include in his commentary (“10-year B.C. Hydro plan is a massive miss,” Aug. 11).
B.C.’s electricity is 98 per cent clean and renewable, the envy of the world. We have the third-lowest residential electricity rates in North America, also the envy of the world. Our 10-year rates plan provides certainty about rates and will keep rates predictable for the duration of the plan. Rates remain competitive, even though B.C. Hydro is investing, on average, more than $2 billion per year to upgrade aging dams, powerhouses and transmission lines to meet rising demand for power.
The NDP’s consistent failure to recognize that our economy and population are growing is not surprising. When the NDP had their opportunity to manage B.C. Hydro, they took the politically expedient route of freezing rates and removing Hydro’s capacity to invest in the maintenance and replacement of aging infrastructure, leaving a pent-up demand for investment that Hydro is now making.
When you’re investing $2 billion per year in infrastructure, it’s going to have an impact on rates. The 10-year rates plan was introduced in 2013 to impose a discipline on the public utility and on government, and to ensure that Hydro operates as efficiently as possible. The plan sets forth a schedule of rate increases that we are sticking to, despite cyclical lower commodity prices and warmer weather that have lowered Hydro’s forecast revenue. We’ve made tough decisions and taken prudent actions to reduce costs so that, despite these fluctuations, customers will see the rates we promised.
The regulatory accounts that Dix loves to criticize are part of the plan and are standard operating procedure for large utilities. The rate-smoothing regulatory account keeps rate increases as gradual as possible by spreading Hydro’s current capital costs over a longer period, just as any business would amortize the cost of equipment that lasts for decades.
Without this account, the increase in hydro rates for 2014-15 would have been 13.7 per cent. That would have meant an extra $3.50 on the average monthly bill.
Dix uses typical NDP logic in judging the rates plan by just one year. He ignores the fact that the balance in the rate-smoothing account is lower than forecast and will be down to zero by the end of the plan. He fails to mention that B.C. Hydro has a reasonable, responsible plan that is recovering 88 per cent of the balance in the accounts. In fact, by the end of 2024, the total balance of regulatory accounts is forecast to decrease by about 40 per cent from the end of fiscal 2016.
Dix also criticizes something he had a hand in creating. He takes aim at the dividend B.C. Hydro pays to the province. But that practice began under the NDP. At the time, then energy minister Moe Sihota said: “We have placed a challenge in front of B.C. Hydro saying that, yes, there are some dividend obligations to the provincial Crown … we’re proud of initiating that kind of reform with respect to rate restructuring in British Columbia.”
B.C. Hydro had to borrow money to pay the dividend in a number of years during the 1990s, including fiscal 1999, when Dix himself was advising the government of the day as chief of staff to then-premier Glen Clark.
Unlike the NDP, we recognize that the practice of taking a dividend from B.C. Hydro based on the formula introduced by the NDP is unsustainable at a time when Hydro must make historic investments to upgrade our electricity system.
To allow Hydro to make business decisions around the management and timing of its capital projects in the best interest of ratepayers, we have established a floor for the dividend — $259 million, the same number in Budget 2016. And we’re doing something the NDP never did — starting next year, we are reducing the dividend by $100 million per year until it reaches zero, improving Hydro’s debt-to-equity ratio.
Demand for electricity is growing in B.C. and we need to meet it. Our population is set to increase by more than a million people over the next 20 years — like adding a city the size of Surrey and Vancouver combined. Our economy is growing faster than any other province in the country. If we did nothing, we’d have a power deficit equivalent to the needs of two million homes within the next 20 years. That’s a risk our government will not take.
Contrary to the NDP’s negative and short-term view, the 10-year rates plan is on track, keeping rates relatively low and predictable while B.C. Hydro makes investments in infrastructure to ensure British Columbians continue to enjoy clean, affordable, reliable power to run their homes and businesses.
Bill Bennett is B.C.’s minister of energy and mines.
