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FortisBC to eliminate two-tiered rate

The BC Utilities Commission (BCUC) approved the companies request to return to a single, flat rate for its residential electricity customers over a period of five years.

In a media release Thursday, FortisBC said the BC Utilities Commission (BCUC) approved the companies request to return to a single, flat rate for its residential electricity customers over a period of five years.

The release said the request formed part of FortisBC’s Cost of Service Analysis and Rate Design Application, submitted to the BCUC in December 2017.

“We’re satisfied with this result,” said Diane Roy, vice-president of regulatory affairs, FortisBC in the media release. “During the rate design process, we heard from many residential customers with concerns about the two-tiered rate, particularly those with high energy needs and limited conservation options. A gradual return to a flat rate balances the interests of our residential customers.”

FortisBC said the two-tiered rate, also known as the residential conservation rate (RCR), was put in place in 2012 at the direction of the BCUC to encourage energy conservation. Customers pay a higher rate when their use exceeds 1,600 kilowatt hours (kWh) over a two-month period.

The company said returning to a flat rate provides annual savings for about 30 per cent of customers who had higher bills under the two-tiered system. It could also mean moderate bill increases for lower use customers who saved under the two-tiered system. The phased approach reduces the bill impacts for these customers, which FortisBC forecasts to be less than 3.5 per cent per year. The actual change to individual accounts will vary, depending on use. Returning to a flat rate is revenue-neutral for FortisBC.

“Helping customers reduce their bills remains a priority for FortisBC,” said Roy. “We continue to enhance our energy saving programs, especially those that support customers on the tightest budgets, and we encourage all customers to contact us if they need help.”

As a regulated utility, FortisBC requires approval for rate design changes like this through a rigorous and transparent process with the BCUC. This involves a comprehensive look at the cost of providing service to each rate class and a review of several options for rate design. Through this process, FortisBC solicited input from a variety of stakeholders, hosted eight public consultation sessions and responded to approximately 1,800 information requests from 13 interveners.

“We would like to thank the many people who took part in the engagement process,” said Roy, “We believe this level of participation results in the best outcomes for our customers and we appreciate everyone who contributed to this effort.”

While the BCUC approved a phased-in return to a flat residential rate and changes to FortisBC’s other rate classes, it rejected a new optional time-of-use rate for residential customers. FortisBC is continuing to review the decision and once complete, will establish a timeline for implementing the approved rate design changes.

Customers can find out more and estimate how the return to a flat rate will affect their annual electricity costs by visiting fortisbc.com/flatrate or calling 1-866-436-7847.

BACKGROUNDER

  • As of January 2019 interim residential conservation rate (RCR) is 10.117 cents for the first 800 kilowatt hours (kWh) of monthly use and 15.617¢ for additional use. The basic customer charge is fixed at $16.05 per month. Under this structure, customers save when their consumption is below 2550 kWh over a two-month billing period.
  • Most FortisBC customers (70 per cent) use less than 11,000 kWh per year, while about 10 per cent of FortisBC customers use more than 20,000 kWh.
  • Over the five-year phase-out period, FortisBC will reduce the rate in the higher tier and increase the lower rate, in small annual increments, resulting in flat rate in 2023. The basic customer charge will also change.
  • Under current rates, if a flat rate were in place, all residential customers would be charged 11.749 cents per kilowatt-hour, and a basic customer charge of $18.70 per month.
  • Using current rates as a benchmark, once the flat rate is fully implemented in 2023, customers using between 20,000 and 25,000 kWh per year would see an estimated decrease of about $310 per year or $26 per month.
  • In contrast, customers using between 5,000 to 10,000 kWh per year would pay an estimated $150 more per year or about $12.50 per month under a flat rate in 2023. (Note that this rate is subject to change over the five-year implementation period.)
  • By using a phased-in approach, any increases that result from implementing a flat rate will be less than 3.5 per cent per year.
  • These changes resulted from FortisBC’s Cost of Service Analysis and Rate Design Application — all utilities review cost of service allocation and rate design periodically to make sure that rates reflect the fair and equitable allocation of costs. Any changes that result from this process are revenue neutral to FortisBC.
  • There are a number of changes to FortisBC’s other rate classes. Once FortisBC fully reviews the details of the decision, it will establish a timeline for implementing.
  • Customers can review the proceedings at bcuc.com