On December 12, 2023, the BCUC approved an increase of 6.74 percent to the electricity rates for FortisBC Inc. (FBC).
Similar to FEI’s gas delivery rate for 2024, the BCUC’s recent cost of capital decision also increased the return FBC can earn, although by a smaller amount compared to its sister company FEI. The BCUC approved an increase in FBC’s return on equity for 2024 of $5.09 million, equivalent to an increase in rates of 1.19% (see note 1).
FBC, like FEI, has costs from 2023 to recover from ratepayers in 2024, also as a result of its increased allowed return on equity. Unlike FEI, however, FBC’s proposed increase of 6.74 percent for 2024 includes both the recovery of its forecast 2024 costs, plus it also starts to recover the outstanding amounts from 2023. In the current decision, the BCUC approved FBC to recover its outstanding 2023 costs using an amortization period of three years. This may be a precedent that the BCUC will draw on when deciding FEI’s amortization period next year.
The biggest increase in forecast costs for FBC in 2024 is an additional $11.427 million in power supply costs, an increase of 6.3 percent over the approved amount for 2023, due to higher costs for the power that FBC buys on the spot market. Customers ultimately pay for the actual power purchase costs incurred by FBC; if FBC over- or under-forecasts the costs, it repays or recovers the difference in a subsequent year.
2024 is the final year of FBC’s current multi-year rate plan, an incentive-based scheme whereby the utility’s rate is set using a formula, and FBC and its customers share in any cost efficiencies that FBC achieves. FBC is expected to file an application next year for rates in 2025 and beyond. That proceeding will now also have to decide how to collect the balance of $19.7 million not collected in 2024.
Notes
(1) FBC’s deemed equity “thickness” was increased from 40 to 41 percent, and its return on equity was increased from 9.15 to 9.65 percent.