The City of New Westminster is considering a change to its longstanding process for setting electrical utility rates.
On Monday, council approved in-principle rate adjustments for the water, sewer and solid waste utilities. Staff will prepare bylaws needed to amend the utility rates to incorporate a seven per cent increase to each of the water and sewer utilities (with similar increases projected annually until 2023) and a 12 per cent increase to the solid waste utility (with another 12 per cent increase projected in 2020 and eight per cent increases forecast in years 2021 to 2023).
The utilities budgets included in the draft five-year financial plan are based on projections using best estimates of future events that may affect the budget, such as annual wage increments, increased fees charged by Metro Vancouver and B.C. Hydro, and infrastructure replacement, said a staff report.
Council, however, held off on approving in-principle a proposed four per cent increase to the electrical utility.
The city’s electrical utility buys electricity from B.C. Hydro and resells it to New Westminster residents and businesses. While the city is anticipating B.C. Hydro’s rate increase to be three per cent annually from 2019 to 2023, staff recommended the city adopt increases of four per cent annually for the next five years to offset increased operating expenses and to fund the electric utility capital program.
Coun. Patrick Johnstone said the city’s longstanding practice has been to charge electrical rates in New Westminster that are the same that customers in Burnaby, Coquitlam or other communities would get from BC Hydro.
Because the city can buy electricity at a wholesale price and sell it at a retail price, Johnstone said it’s able to make a significant amount of money from that. He said most of that money goes toward the operation of the utility, so it continues to operate and to be sustainable.
“But we do also take a dividend,” he added. “As a shareholder, we make a profit every year, and that helps offset taxes for the residents of the city. In this proposal, we are talking about raising our electrical rates at a rate that is higher than the proposed increases that BC Hydro is foreseeing for the coming years.”
Johnstone said he recognizes the city has “some significant capital costs” to deal with in the coming years, including building a new substation and rising costs of maintaining the utility. He suggested the extra costs shouldn’t come from increasing rates above what customers are paying in cities served by BC Hydro, but from the dividends the city receives.
If the city is going to move way from its longtime practice of charging the same rate increases as those charged to BC Hydro customers, he said the city needs to have a fuller discussing about that.
“This would be a departure from the city’s past practice in terms of rate setting for the electrical utility,” said Mayor Jonathan Cote. “This issue was raised with council, earlier this year or last year, that this was a discussion that was going to be coming. I think it’s definitely an appropriate request to be getting more fulsome information and options regarding that. I know the utilities commission has spent more time discussing this particular issue.”
Instead of approving the electric utility rate increases with the other increases, council supported Johnstone’s motion to have staff report back to council with more options for rate increases to the five year plan, including an option that pegs the city’s rates to the expected BC Hydro rates
“The rates don’t normally change until April so there’s lots of time to come back and provide the report you are looking for with some other options,” said Colleen Ponzini, the city’s acting chief financial officer.
Coun. Chuck Puchmayr didn’t oppose referring the issue to staff for a report, but was comfortable with the staff recommendation because there are some “huge costs” down the road for the electrical utility. He’s confident that when staff report back to council with an analysis of what driving the proposed rate hikes, the “right” decision will prevail.
“I would never want to lose this utility,” he said. “It is a very valuable asset for the city, but with the new substation expansion, with the expansion of the population, there are some costs that are certainly unprecedented in the last couple of decades. So I think this is a reasonable way of assisting in those costs.”
Coun. Jaimie McEvoy said he wants the city’s approach is to focus on ensuring it creates a “strong and healthy” utility that has the necessary capital infrastructure that will be needed in the future.
Coun. Mary Trentadue supported getting more information about what’s being proposed from staff.
“I guess I am concerned about the level of transparency in how we explain to the community why the rates are different, when that is what they have come to expect,” she said. “I completely understand the increases and some of the larger capital costs that are coming at us, but I didn’t get enough from the report as to why we would consider this kind of a move.”
According to a staff report, a four per cent increase to the electrical utility would result in a $57 increase for a single family household, while a seven per cent water utility increase is $37, a seven per cent sewer utility increase is $52 and a 12 per cent sewer utility increases is $24