Regulatory
Jan 17, 2011
Explaining The Yukon Utilities Board’s Latest Ruling
Last October, Yukon Energy and the Yukon Electrical Company Limited appeared before our regulator, the Yukon Utilities Board, for what is known as a Phase II hearing. The purpose of the hearing was to provide the Utilities Board with the information it needed to make decisions regarding three topics:
1) What percentage of the total amount of money the utilities need to operate should be paid by each class of customer (residential, small business, government and industry);
2) How the rates within each class should be designed; and
3) Whether there should be any changes in the terms under which the utilities provide service to customers.
The Yukon Utilities Board has now made its ruling. Here are the main points that will likely be of most interest to you:
1) The Board recognized that as a result of Yukon government Orders-in-Council, no changes can be made before 2013 to the overall revenues charged to each rate class. The Board also observed that the revenues from the residential rate class are considerably below the costs to serve this class – residential customers pay less than 80 percent of the true cost of their power, while business and industry pay more than 100 percent and government general service customers pay over 140 percent of what it costs to provide them with power. In its Order, the Board said that once the government’s Orders-in-Council expire at the end of 2012, “the Board expects that both utilities will jointly come before this Board with a new Phase II Application to correct the current imbalances”. The Utilities Board writes, “In terms of pricing signals, the Board is of the view that the best pricing signals to customers are those prices that reflect the full cost to serve those customers.” That means that unless there is another Yukon government Order-in-Council that again prohibits the re-balancing of rates, non-government residential customers may be faced with significant rate increases in a few year’s time over and above any general rate increases that either utility may require.
2) In terms of how the rates within each class should be designed, both Yukon Energy and Yukon Electrical Company Limited had argued that there should be price signals set to encourage people to conserve electricity. In other words, the utilities suggested that a new rate block be established and that the more power used, the higher the rate charged for that power. Yukon Energy had also proposed that there be a substantial increase in the cost of any power consumed by residential customers above 2,500 kilowatt hours per month, and there be a decrease in power bills for those residential customers who keep their usage under 1,000 kilowatt hours per month (the average monthly residential usage is about 800 kilowatt hours per month).
The Utilities Board did create three blocks instead of the current two for residential and small business customers, each block being at a higher rate.
The Board rejected Yukon Energy’s idea for a decrease for non-government residential customers in the First Block (up to 1,000 kilowatt hours per month), making the observation that a reduction in these first-energy block rates is not warranted because the revenues paid by these residential customers are below the cost of their power and that this issue should be corrected when Order-in-Council 2008/149 expires (see Point 1). The Second Block, between 1,001 and 2,500 kilowatt hours per month, would see a slight reduction of up to .2 percent, and the Third Block, also known as the runoff rate, (anything over 2,500 kilowatt hours per month) would see an increase of between .2 percent (at 2,600 kilowatt hours per month) and 4.4 percent (at 5,000 kilowatt hours per month).
The Utilities Board approved the utilities’ proposal for four blocks for non-government small business and municipal government rates, with the fourth block being an initial step toward the transition to a new large business rate class that the Board directed the utilities to put forth in their next General Rate Applications. The utilities must still test the numbers to ensure they provide the correct returns, but the Board’s suggested rates for these customers would have the following bill impacts: The First Block (up to 2,000 kilowatt hours per month, would see reductions of between .8 and 2 percent. The Second Block (from 2,001 to 15,000 kilowatt hours per month) would see reductions of between .1 to 1.5 percent. The Third Block (15,001 to 20,000 kilowatt hours per month) would see increases of up to 4.8 percent. And the Fourth Block (over 20,000 kilowatt hours per month) would see increases of between .7 and 3.8 percent.
For the government residential and general service rate class, the Board has agreed to the same rate blocks as for non-government customers with inclining block rates for the first three rate blocks. Compared to the equivalent non-government rate classes, the Board suggested higher runoff rates for the government rate classes and also adjusted the utilities’ proposals to ensure that rates increase as monthly use increases.
So the bottom line for most of you reading this is that there will be very little if any near-term change in your power bills as a result of the Phase II hearing. Any near-term changes that do occur will not likely take place until at least April of this year, after the utilities submit compliance filings to the Utilities Board, the Board makes the necessary resulting orders, and the utilities then adjust billing systems as required.
While in some areas the Yukon Utilities Board has taken a different tact than Yukon Energy had proposed, there will hopefully be a similar end result: to encourage Yukoners to become more energy conscious and to understand that electricity is a precious resource that must be used wisely.
