`Current level of service reliability’ by Nelson Hydro to rural customers not adequate: BCUC report

Although a BC Utilities Commission review approved an increase to Nelson Hydro rural customer rates it noted the city-owned utility’s index of service reliability had deteriorated in recent years, and its current level of service reliability to its rural customers was not adequate.

As a result, Nelson Hydro must file with the BCUC – within the next three months – a five-year vegetation management plan to address how and when the utility will improve service levels “through the adoption of improved vegetation management practices and, if necessary, through increased spending levels on vegetation management.”

In addition, Nelson Hydro must bring its reliability concerns to the senior management of its supplier, FortisBC – the primary cause of power outages – and explain how it will achieve service improvements, along with a financial analysis of the customer service software upgrade.

The BCUC report, filed July 27 on behalf of the BCUC panel by commissioner R. I. Mason, noted that part of the failing was not Nelson Hydro’s fault.

“The causes appear to relate to supply issues from FortisBC Inc., Nelson Hydro’s vegetation management approach and its limited level of investment in system upgrades,” the report read.

Climate change has quickly altered the landscape and increased the importance of vegetation management to respond to rising storm frequency and intensity, threat of wildfire and extreme temperatures, said Nelson Hydro general manager Scott Spencer.

Although the primary objective of the city-owned utility’s vegetation management plan is to decrease the likelihood that trees or branches will contact power lines and cause outages, fires, damage to infrastructure and threats to humans and wildlife, the responsibility is shared, he explained.

“While Nelson Hydro bears responsibility for protecting its infrastructure, land owners also have a part in vegetation management,” he said.

This year the utility’s Vegetation Best Management Practices (VBMP) was completed, containing a “comprehensive collection of industry accepted activities that provide guidance to our staff, contractors and land owners around maintaining vegetation near power lines.”

This year the city hired two arborists, including a certified utility arborist who is working with Nelson Hydro to implement its VBMP and the development of a five-year vegetation management plan to map out the resources needed for the work.

“Nelson Hydro believes that adherence to these practices and adequate funding for the vegetation management program will improve service reliability,” Spencer explained.

– The Vegetation Best Management Practices document can be found at:

http://www.nelson.ca/DocumentCenter/View/4941/Nelson-Hydro-Vegetatio http://www.nelson.ca/Docume

In addition, Nelson Hydro has spent over $1 million on vegetation management in the rural area over the last two years.

Reliability questioned

The BCUC panel expressed concern about Nelson Hydro’s approach to capital investments in maintaining service reliability.

“While the panel agrees that additional capital expenditures would allow the utility to offer more reliable service to rural customers, we disagree that the utility `cannot’ invest in capital projects to improve service unless the BCUC approves its COSA and Rate Design application,” the report stated.

“Regardless of the outcome of that proceeding, Nelson Hydro is a public utility regulated by the BCUC pursuant to the UCA with respect to service to its rural customers and must provide adequate service, something it is not presently doing.”

As a result, the utility needs to file – in its next revenue requirements application or by the end of the year – an explanation of how it will achieve the service improvements which are anticipated from the Taghum voltage conversion and the new North Shore substation projects.

“It must also determine whether or not Nelson Hydro intends to proceed with these projects and, if not, what alternatives Nelson Hydro will pursue to achieve service improvements to its rural customers,” the report read.

Nelson Hydro invests more than $3 million annually in system upgrades, Spencer contended.

“(H)owever, it is clear that increased investment in infrastructure will be required to improve service reliability,” he said.

“I would add that our index of reliability, a measure of power availability to our customers, is 99.71 per cent, however, we are striving to reach the 99.9 per cent plus levels we have achieved in the past, comparable to other utilities that serve primarily large urban centers.”

The city utility was directed by the BCUC to “escalate its reliability concerns to the senior management of its supplier, FortisBC Inc.” If FortisBC did not deliver a prompt and credible action, Nelson Hydro was to make a formal complaint to the BCUC.

Spencer said Nelson Hydro is working with FortisBC to solve the problem, as the primary cause of Nelson Hydro outages are a result of loss of supply from FortisBC.

The bottom line

Nelson Hydro was also directed to file with the BCUC a financial analysis of the customer service software upgrade, including the full cost analysis, cost savings to date and expected future cost savings, by June 30, 2022.

Spencer said Nelson Hydro, like all utilities in North America, “has aging infrastructure and is faced with rising costs for new equipment and construction which often outpace inflation.

“New technology is increasingly complex, requiring engineers and other technical resources to specify, source and install.”

Even so, over the last two decades the city has supported continual renewal of the electric utility _ including generation, transmission and distribution investments _ but Nelson Hydro faces challenges in serving the rural areas.

“While places like the Lardeau Valley are at the end of radial lines without redundancy, the improvements that have been identified by Nelson Hydro will expand our system in the rural area to supply customers from alternate sources in the event of an outage on the main power line,” he said.

“Finally, we will be initiating an advanced metering infrastructure project that will provide real-time outage information from smart meters and other technology that will allow us to respond to outages more efficiently, reducing customer downtime.”

All of the projects will require new investment and rate increases.

How we got here

On Nov. 30, 2020, Nelson Hydro filed an application with the British Columbia Utilities Commission (BCUC) for approval of a general annual rate increase of 2.3 percent for the rural service area for the 2021 calendar year.

The utility proposed the general annual rate increase to become effective on April 1, 2021, which resulted in a compounded rate increase of 3.32 percent. Nelson Hydro did not increase its rates for rural customers in 2020.

“The panel finds that the requested rate increase is required to generate sufficient revenue for the utility to provide reliable service, and notes that further increases may be necessary in the future to improve service,” the report read.

People were invited to participate in the proceeding by submitting a letter of comment or by registering as an interested party. The BCUC received 88 letters of comments from the public and 25 individuals and organizations registered as interested parties.

The panel found it appropriate for Nelson Hydro’s rates for rural customers to increase at the same rate in 2021 as its urban customers.

“To do otherwise would require duplicating the examination of cost allocation issues already underway in Nelson Hydro’s cost of service (COSA) and rate design application,” the report read.

COSA and RDA

Estimates for the rural Nelson Hydro cost of service (COSA) and rate design application (RDA) – submitted to the BC Utilities Commission (BCUC) but still to be ruled on – are just that, estimates, says the city chief financial officer.

Colin McClure said COSA and RDA propose an 18 per cent increase over almost four years for rural Nelson Hydro customers to account for rising costs and the delivery of service to rural areas, he said, but it will not compound over the time span to 28 per cent, as some people have suggested.

As well, the rate approved for city residents April 1 of 3.32 per cent – and 2.5 per cent for 2022 and 2023 – will not compound to just over eight per cent in three years, McClure said.

A compounding effect is dependent on consumption, McClure explained, so it isn’t a valid calculation. He also added that Nelson Hydro had a zero per cent rate increase in 2020 (versus Fortis BC at a one per cent increase), which should be considered in any averages or comparisons.

“Nelson Hydro recognizes that the rate increases proposed in the applications before the BCUC represent a potential hardship to its customers which is why it has endeavoured to mitigate the impact by spreading the increases out over almost four years,” said McClure.

“(E)ven after the proposed rate increases, rural customers will still be paying less than their neighbours in the region supplied by Fortis BC.”
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By Timothy Schafer, Local Journalism Initiative Reporter, THE NELSON DAILY