Why B.C. Hydro bills sting more on Vancouver Island

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Because of the way many of us on Vancouver Island heat our homes and our water, we are more likely to pay a higher rate for electricity than other B.C. Hydro customers.

The two-step billing system causes this.

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B.C. Hydro introduced two-step in October 2008 to encourage conservation. Electricity use up to about 1,350 kWh in a two-month billing period is charged at 7.52 cents per kWh. Use above that costs a lot more — 11.27 cents per kWh is the Step 2 rate. (It’s not quite that straightforward, but that’s the simple explanation. See below.)

In theory, we have a financial incentive to stay below 1,350 kWh.

But you pretty much have to go above that threshold once in a while if you heat a house with electricity, even with a heat pump.

A study of the two-step billing system was included with B.C. Hydro’s November 2013 rate application to the B.C. Utilities Commission.

During fiscal 2012 — the consumption period covered by the study — 79% of B.C. Hydro customers on Vancouver Island paid the Step 2 rate at least once, versus 65% for all B.C. customers.

About 35 per cent of customers on the Island always paid the Step 2 rate, versus 25 per cent overall.

Paying the higher Step 2 rate is probably more common for Islanders because more households here use electricity for space heating and water heating. The study says: “these findings likely reflect that one-half of customers on Vancouver Island rely on electricity for both their space heating and water heating needs.”

(Natural gas appears to be a more common heating fuel elsewhere in the province, though the study doesn’t say so.)

Lower Mainland customers are least likely to pay the higher Step 2 price. That’s partly because there are so many apartments and condominiums in Metro Vancouver. They are smaller dwellings, which require less energy to heat. They also tend to have central hot water heating systems, so water heating isn’t a part of individual electric bills.

Other highlights from the study:

• 35 per cent of customer households never went over Step 1.

• 40 per cent sometimes went over.

• 25 per cent always went over.

• Many people do not know that they are being charged on a two-step system; the survey found 50 per cent knew billing is two-step.

• More people with higher bills know about two-step, especially those who always paid the Step 2 rate.

• Of those who knew, 33% said it was a major incentive to conserve, and 46% said it was a minor incentive; 16% said it was “no incentive at all”; 6% had no opinion.

• Awareness of two-step on Vancouver Island was 66 per cent, versus less than 50 per cent in other regions.

The study’s conclusion: The two-step system “appears to be achieving its overall objective of encouraging conservation through the customer response to higher marginal prices — particularly amongst customers with the highest consumption.”

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A reader suggests that it would be fairer for Vancouver Island customers if B.C. Hydro billed monthly instead of every two months.

They could still send the bill every two months, but come up with a way to calculate Step 2 consumption by the month.

On a March-April bill, for example: It might be impractical to cut consumption in March at a house heated by electricity. But in April, the lower rate is within reach, and knowing that, a household would try harder to conserve.

All sorts of math was likely done to come up with the existing system, to ensure B.C. Hydro doesn't lose a bucket of money from having too many kWh billed at the lower Step 1 rate.

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B.C. Hydro’s name for the two-step system is “inclining block rate.”

B.C. Hydro’s November 2013 rate application to the B.C. Utilities Commission includes the two-step-rate study in Appendix C. This is a PDF download.

B.C. Hydro explains kWh.

Calculating the amount of electricity allowed at the lower Step 1 price: “Step 1 threshold is calculated by multiplying the number of days in a billing period by 22.1918 kWh per day.” For 60 days, that’s 1,332 kWh. More details at bchydro.com.

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