IN THE MATTER OF
the Utilities Commission Act, R.S.B.C. 1996, Chapter 473
and
Kyuquot Power Ltd.
Application for Exemption from Two-Part Large General Service Rates
BEFORE: L.F. Kelsey, Commissioner
D. Morton, Commissioner
C.A. Brown, Commissioner March 31, 2011
N.E. MacMurchy, Commissioner
O R D E R
WHEREAS:
A. On October 16, 2009, British Columbia Hydro and Power Authority (BC Hydro) filed its Large General Service (LGS) Rate Application seeking orders establishing new energy rates, including two-part rates, for customers who take or would take service under Rate Schedules (RS) 1200, 1201, 1210, 1211 – General Service (35kW and Over);
B. A Negotiated Settlement Process (NSP) was held to review the LGS Rate Application during March and April 2010 and a Negotiated Settlement Agreement (NSA) was reached and was made public on May 14, 2010. The British Columbia Utilities Commission (Commission) approved the NSA by Order G-110-10 dated June 29, 2010;
C. Clause 14 of the NSA (attached as Appendix B to Order G-110-10) states: “[c]ustomers may apply to the BCUC for an exemption from the applicable two-part rate on the basis that they are electricity re-sellers under regulated tariffs with conservation rates for their end-use customers”;
D. BC Hydro filed its Large General Service Rate Tariff with the Commission on August 27, 2010;
E. On January 21, 2011, Kyuquot Power Ltd. (KPL) applied to the Commission to be exempted from the Large General Service Rate Tariff as filed and proposed, should its application be approved, to receiving service under BC Hydro Rate Schedule 1211 – Exempt General Service (35 kW and Over) (KPL Application);
F. By letter dated February 3, 2011, Commission staff informed KPL that because a similar application by Corix Multi-Utility Ltd. (Corix) was then before the Commission and the proceeding was in the post-Argument phase, it was unlikely the Commission would initiate a new proceeding until the Corix proceeding was complete;
G. Commission Order G-36-11 issued dated March 3, 2011 ordered, among other things, that Corix be exempt from BC Hydro’s LGS two-part rate;
H. By letter dated March 10, 2011, the Commission invited BC Hydro to comment on the KPL Application and KPL to reply to BC Hydro’s comments. BC Hydro filed its comments on March 17, 2011 and KPL filed its reply on March 18, 2011.
NOW THEREFORE for the Reasons for Decision appended hereto as Exhibit A, the Commission Panel orders that the KPL Application for exemption from the BC Hydro LGS two-part rate pursuant to Clause 14 of the NSA be denied.
DATED at the City of Vancouver, in the Province of British Columbia, this 1st day April, 2011.
BY ORDER
Original signed by:
L.F. Kelsey
Commissioner
Attachment
Kyuquot Power Ltd.
Application for Exemption from Two-Part Large General Service Rates
REASONS FOR DECISION
Introduction and Regulatory Context
Kyuquot Power Ltd. (KPL) is a regulated electrical utility and a reseller of energy which has a service area on the west coast of Vancouver Island. KPL holds a Certificate of Public Convenience and Necessity to operate a 14.4 kV single phase distribution line in the area extending from the electrical grid of British Columbia Power and Hydro Authority (BC Hydro) at Oclucje to Kyuquot. KPL’s current tariffs were approved by Commission Order G‑137‑09 issued on December 3, 2009.
KPL applied to the Commission on January 21, 2011 for an exemption from BC Hydro’s new Large General Service (LGS) Tariff (KPL Application). The LGS Tariff is a conservation rate structure where customers’ energy usage charges are split into two parts. The first part is the baseline or average historical use. The second part is an adjustment in the form of a credit or charge for the difference between a customer’s actual usage and baseline.
The KPL Application is filed pursuant to Clause 14 of the LGS Negotiated Settlement Agreement (NSA) that was approved by Commission Order G-110-10. Clause 14 of the NSA provides that “customers may apply to the BCUC for an exemption from the applicable two-part rate on the basis that they are re-sellers under regulated tariffs with conservation rates for their end-use customers”. The KPL Application is the second application filed with the Commission pursuant to Clause 14 of the NSA. The first application was filed by Corix Multi-Utility Services Inc. (Corix) and the review of Corix application was in the post-Argument phase when the KPL Application was filed.
Corix proposed that the Commission set criteria to limit the applicability of the exemption it seeks to only those customers who: (1) qualify as General Service Customers; (2) are utilities regulated by the Commission; (3) resell electricity; and (4) employ conservation rates for their end-use customers (Reasons, Appendix A to Order G‑36‑11). On March 3, 2011, the Commission issued Order G-36-11 granting exemption to Corix and approved the criteria proposed by Corix in basic form.
In its review of the KPL Application, the Commission Panel determined that two major issues were raised. The first issue is whether the current schedule of rates of KPL can, in and of itself, be considered a conservation rate. The second issue is if KPL is qualified to be exempt from the LGS two-part rate, whether paragraphs 3 and 4 of Order G-36-11 are specific to Corix or whether the tariff is applicable to a new class of customers.
Positions of Parties
The position of KPL is that although it does not employ a two step rate for its customers such as that charged by BC Hydro for its Residential service, KPL strongly believes its’ elevated one-rate energy charge to be a strong incentive for conservation and efficiency. KPL’s energy charges are three to five times higher than BC Hydro’s current Step 1 – Residential service energy charge and two to four times higher than the current Step 2 – Residential Service and small General Service energy charges. (Application, p. 2)
Based on the motivation behind the implementation of the new LGS Rate Tariff being one of encouraging conservation in high electricity users, KPL believes its service should be exempted. KPL claims that its rates already send a very strong price signal to the end user to conserve. (Application, p. 3)
BC Hydro refers to the Commission Order G-36-11 that granted exemption to Corix and the direction from the Order to BC Hydro and Corix to negotiate a flat rate tariff under certain criteria as an indication that KPL does not qualify for exemption from the LGS rate. BC Hydro refers to paragraph 4 of Order G-36-11 where customer of BC Hydro should satisfy the criterion that it “employ(s) inclining block rates similar to those charged by BC Hydro for their end-use customers”. According to BC Hydro, since the rates structures of KPL are not inclining block rates, KPL does not meet the BCUC criterion and therefore its application should be dismissed. (March 17, 2011 BC Hydro Submission)
In its reply, KPL submits that its rates encourage conservation without the use of inclining blocks. Furthermore, KPL notes that Order G-36-11 is specific to the Corix application and therefore does not necessarily apply to KPL. (March 18, 2011 KPL Reply)
Commission Determination
In the Commission Panel’s view, the two issues arising from the submissions by BC Hydro and KPL are whether: (1) KPL meets the specific descriptions set out in Clause 14 of the NSA; and (2) if so and KPL is exempted from the LGS rate, whether the new tariff directed in Order G-36-11 is specific to Corix.
With respect to Issue (1), the Commission Panel acknowledges that ‘conservation rate’ is not a defined term. In order to discourage a variety of interpretations to suit various parties advancing their positions, the Commission Panel in arriving at this decision, looks at the regulatory history of KPL’s current rate schedules, the regulatory precedence in determining conservation rates, as well as the normal practice in estimating expected conservation savings.
The Commission Panel acknowledges KPL’s position that its rate schedules charge high rates and that high rates could be a strong incentive for conservation and efficiency. However, the Commission Panel finds that KPL’s current rate schedules as approved by Order G-137-09 were a result of a review of KPL’s revenue requirements and certain rate matters in order to allow KPL to achieve a fair return on common equity. Thus the intent of existing rates, although relatively high, was not for conservation purposes. The Commission Panel also finds that in the Reasons accompanying Order G-36-11, the Commission has substituted the words “conservation rates for end use customers” as proposed by Corix to “employ inclining block rates similar to those charged by BC Hydro for their end-use customers.” Finally, the Commission Panel notes that in the conservation rate structure applications before the Commission, inclining block rate structure has always been proposed as the tool to deliver savings in energy whereas flat rate structures, even elevated ones, have not been proposed.
Without substantive evidence that the KPL flat rate was designed to and will reduce conservation by its end use customers, the Commission Panel concludes that the current flat rate structures in KPL’s tariff are not conservation rates and do not meet the specific requirements of Clause 14 of the NSA. The Commission Panel denies KPL’s Application for exemption.
Since the KPL Application is denied, the Commission Panel has made no finding on Issue (2) with regards to whether the new tariff directed in Order G-36-11 is specific to Corix or to a new customer class.