Understanding rate design

The structure that determines your electricity rates is established by an extensive and regulated process.

We undertake this process when we’re looking to introduce a new rate or update an existing rate structure. To do this, we’re required to submit an application to the B.C. Utilities Commission (BCUC) to make changes to the Electric Tariff.

This process is different from when we determine any rate increases or decreases – that’s done through a Revenue Requirements Application.
 

Electricity rates and your bill

Your total bill amount is the price you see on your electricity bill. This price is made up of a number of different charges, that may include:

• Basic charge: A small daily charge that partially covers a variety of fixed customer-related costs.
• Energy charge: The charge for each unit of electricity you use, measured in kilowatt-hours.
• Demand charge: If you’re a larger business or industrial customer, you’ll also be charged based on the maximum amount of electricity used during a billing period.
• Power factor surcharge: Irrigation and larger business customers are subject to the power factor surcharge when their power factor is below 90%.

Your total bill amount also includes taxes and levies that we’re required to charge.
 

What's a rate structure?

A rate structure is a combination of rates, additional charges, and other rules that determine how your electricity costs are calculated.

It's designed to reflect our costs of providing service to you, however it doesn’t determine the actual amount per kilowatt-hour of electricity that you’re charged. That’s done through a Revenue Requirements Application (RRA).

A rate structure can also be designed to encourage certain customer behaviours that align with our objectives or certain policies. For example, the rate structure in place for residential customers since 2008 is a “tiered rate structure”. It’s designed to encourage conservation by charging a slightly higher price for energy that exceeds a threshold for the billing period.

Learn more about the residential rates and our other rates.
 

Sometimes, the rate structure needs to change

From time-to-time we revisit the approach we use to determine your electricity rates. We do this for a variety of reasons. For example:

• There are changes in the way our customers use electricity.
• There are new policies or mandates from the government that require us to adjust the rate structure to achieve certain goals.
• There are new business objectives that we need to meet.

In these cases, we evaluate our current rate structure and, if necessary, design alternatives so a new one can be proposed. We call this process "rate design".

Any change to our rates is subject to approval by the BCUC, which regulates all energy utilities in B.C.
 

What's involved in rate design?

When we design a new rate structure, we take many things into consideration.

First, we’re guided by rate design principles that are generally followed by the utilities industry. This includes designing rates that:

• Encourage the efficient use of electricity and discourage waste
• Fairly allocate our costs of providing service to all customers
• Are easy for customers to understand and practical for us to administer
• Recover revenue and ensure stable bills for our customers

In addition, our current rate design processes are guided by these four objectives:

1. Affordability: We consider the potential bill impacts of a new rate structure on various types of customers.
2. Economic efficiency: We consider how a rate structure reflects our cost of service.
3. Decarbonization: We consider how a rate structure could encourage the use of our clean, hydroelectricity over other types of fuels.
4. Flexibility: We must consider how a rate structure can adapt to economic or policy changes.

We gather customer feedback to help understand issues and concerns. And we get input from customers, stakeholders, and interveners, who are people or organizations that represent customers or interested parties and register to actively participate in a B.C. Utilities Commission (BCUC) process.

We also need to keep in mind regulations and requirements we need to comply with, previous decisions by the BCUC, and standard principles that ensure clear, fair, stable, and effective rates for customers.

Learn the details of the rate design process.