Sorting Through Regulatory Terms

Yesterday we promised to try to explain the difference between a rate application/revenue requirement hearing and a Cost of Service study. A revenue requirement hearing, which Yukon Energy has just gone through and which the Yukon Utilities Board (YUB) has just ruled on, allows the YUB to review all our costs to determine if we are operating in a reasonable and fiscally responsible manner. It also gives the Board the chance to decide how much money we need to operate and what the over-all amount is that we can charge our customers for the service we provide. 

A Cost of Service study, which will be part of an upcoming Phase 2 hearing, takes the YUB-approved costs of both utilities that operate in the territory (Yukon Energy and Yukon Electrical Company Ltd.) and decides how much of that total amount should be paid by each class of customer (i.e. residential, commercial, government, etc.).

The last time a full Cost of Service study was done was in 1996/97. At that time, the Utilities Board divided up the costs this way:

• Residential customers were asked to pay 80 percent of the actual cost. There was also a rate relief program in place - a pre-cursor to the existing rate subsidy. Once that was factored in, residential customers actually only paid 73 percent of the true cost of electricity.
• Small businesses received a large rate decrease to bring them down to 110 percent of the actual cost. Before the decrease they were paying 132 percent.
• And government general service (i.e. government buildings) got a small decrease which meant they went from 154 percent down to 143 percent.
• The rest of the classes, like streetlights, were all in the 90 to 110 percent range.

These numbers still apply today, and will continue to apply until they are changed by the Yukon Utilities Board.

There is one point worth noting. An Order in Council is currently in place that prevents the YUB from making changes to the amounts each class pays in relation to all the other classes. In other words, it prevents raising the rates of any one class so as to lower them for another. The OIC is in place until the end of 2012. So unless the Yukon government amends this order, a Cost of Service study can’t result in any changes between classes until at least 2013.

A Phase 2 hearing, however, can deal with more than just rebalancing of customer classes. For example, the Yukon Utilities Board has indicated it will use the upcoming Phase 2 hearing to look at our proposal to lower 'first block' customers (those using 1,000 kilowatt hours or less of electricity a month) and increase 'second block customers' (those using more than 1,000 kilowatt hours per month). Note that these customers are all in the same class, so there would be no class rebalancing involved.

Another Phase 2 issue is a review of the Electrical Service Regulations. These are the terms and conditions under which both Yukon utilities provide service to customers. The regulations cover everything from rights of land access (such as when a linesperson has to go on your property to access our transmission lines) to service fees to the maximum the utilities will invest to hook up a new customer.