Due to increases in revenue from electricity trade, a decrease in finance charges and operating expenses, the Canadian utility BC Hydro’s net income for the six months ending September 30, 1997 has been boosted to C$145M, or C$88M higher than that earned in the same period in 1996. According to David Harrison, the utility’s Chief Financial Officer, BC Hydro was lucky to have exceptionally high water levels and low interest rates that combined to provide a favourable financial return. But Harrison cautioned that the utility’s earnings are volatile in that electricity generation and energy sales depend heavily on factors outside its control – factors such as water inflows into reservoirs, weather, interest rates, and the economy.
For the six months ending September 30, 1997, revenue from electricity trade was C$123M, C$40M more than in the first six months of 1996. Total revenue from domestic sales was C$1001M compared with C$998M for the same period in 1996.
Large industrial revenue was down C$11M from the same period in 1996, primarily due to a strike at a major forest products company and the shutdown of two mining customers.
Finance charges decreased by C$52M from the same period in 1996 and operations, maintenance and administration expenses were $23M lower. Last year’s operating costs were unusually high due to expenditures related to repairing two sinkholes at W.A.C. Bennett Dam.
Despite these economic fluctuations, BC Hydro has maintained low rates. The company has not had a general rate increase since April 1, 1993.
…And receives approval for real time pricing from BCUC
Canada’s BC Hydro has received formal approval for a revised tariff from the provincial utility watchdog, British Columbia Utilities Commission (BCUC). The tariff, called a Real Time Pricing (RTP), gives its industrial customers access to electricity at market rates, once their incremental consumption levels exceed a base amount (called a customer baseload). The utility carried out an extensive consultation process to determine what its industrial customers and other interested parties wanted in a revised tariff, prior to the design of the new one.
Participants in the consultation process wrote to BCUC supporting BC Hydro’s proposal and encouraged the commission to approve their application without a rate hearing.
Until now, industrial customers have bought electricity from the company at a ‘bundled rate’ which includes embedded costs such as BC Hydro’s infrastructure, its operations and dividends payable to its shareholder, the province. The rate per kilowatt was set by the BCUC and did not change, regardless of the amount of electricity customers consumed.
During the pilot, industrial customers were given access to energy, at market based prices after exceeding their baseload consumption.
In September 1997, BC Hydro applied to the BCUC for this revised tariff to become permanent.