Hydro still wants rate hike

Michael Kane
CanWest News Service
Times Colonist
Tuesday, June 15, 2004

B.C. Hydro released much improved financial results Monday but said the stronger bottom line won't stop it asking for an 8.9 per cent rate increase despite protests from customers.

Nor has recent wet weather eased the Crown corporation's concerns about low reservoir levels forcing more electricity imports to meet domestic demand.

"We'd need a lot more rain throughout the summer to make a difference," said Elisha Moreno, Hydro's media relations manager.

British Columbia relies on electricity imports from Alberta and the U.S. to provide about 10 per cent of its annual needs.

Hydro reported a consolidated net income of $98 million for the year ended March 31 -- $146 million better than the $48 million loss originally projected but $320 million lower than net income of $418 million for the previous year.

"Here we have a profitable company asking for a rate increase and we have to wonder why," said Mark Veerkamp, executive director of B.C. Citizens for Public Power. "What I have seen recently is Hydro consistently under-budgeting their returns and that money is transferred to the province."

Jay Grewal, Hydro's acting chief financial officer, said the results are much improved from the original forecast due to wetter than normal conditions in the spring of 2003 and a decrease in the prices of electricity and natural gas purchases at the same time.

He said lower than normal water inflows later in the fiscal year, which reduced the availability of low-cost generation and increased import demand, contributed to the decline from last year's results. Another factor is a $120-million "provision" to reflect money spent on a gas pipeline and a Vancouver Island power plant that are unlikely to be built.

Veerkamp complains the B.C. government has directed B.C. Hydro to purchase power from private energy sources and is banning any new power plants.

In fiscal year 2003, private power purchases cost 10 times what it cost for B.C. Hydro to produce its own power. Over the past 10 years, private electricity prices have increased 77 per cent while B.C. Hydro prices have increased only a fraction of one per cent.

"They are paying a huge amount of money to purchase private energy," Veerkamp said. "As well there are millions being spent on one-time restructuring costs but there are no benefits from these deals booked anywhere in this fiscal year or in the future.

"The government is making bad decisions that are hurting consumer and the economy. It's time to take a step back before it is too late."

The year-end numbers were submitted to the B.C. Utilities Commission prior to the public release of the B.C. Hydro annual report at the end of June.

The commission is wrapping up hearings on the rate increase application and is expected to announce its decision in fall.

Hydro has not received a rate increase for 10 years and the 8.9-per-cent hike it is proposing will yield $480 million over two years.

While the increase would work out to about $5 a month for an average homeowner, Veerkamp says prices will rise across the board because electricity is used in everything produced and sold in B.C.

Moreno said the improved financial results would not affect Hydro's request for more money but "may bode well for any future rate increases we have after this one."

Hydro's largest customers have told the commission a rate increase would be unnecessary if the Crown corporation kept a closer grip on costs, including bonuses to senior managers.

A preliminary examination of Hydro's books identified 13 initial ways in which reduced costs and other measures could save more than Hydro is seeking in its rate increase, says Dan Potts, executive director of the Joint Industry Electrical Steering Committee.

The financial results highlight the need for Hydro to buy more domestic electricity from independent producers, said David Austin, counsel for the Independent Power Producers Association of B.C.

"Over the long term they could make more money doing it, but their appetite for independent power is very, very low compared to the size of the import tab," Austin said.

Hydro also restated its third quarter income Monday to $102 million, down from $117 million, after finding that revenues were overstated by $15 million due to misinterpretation of weather data used in residential revenue calculations.

© Times Colonist (Victoria) 2004