Yukoners should get ready to see a hike in their energy bills.
The president of the Yukon Energy Corporation says rising costs mean the company will have to apply to the Yukon Utilities Board this month for a rate increase.
It has been about five years since the corporation asked for a rate increase, said Andrew Hall.
“What happens over a five year period is that some of your costs go up,” he said June 9.
“We’ve got a collective agreement with our unionized staff that has a certain salary increase every year. Then if you go over five years those numbers kind of build. Every so often you have to increase rates. That’s the unfortunate reality.”
The company’s new liquified natural gas plant as well as work on the elevator at the Ashihik hydro plant, have driven up expenses, he said.
“It’s kind of a trigger. Whenever you do big capital work, you should be adjusting your rates accordingly.”
The Yukon Utilities Board, which has to approve rate increases, has ruled that Yukon Energy should earn enough profit to maintain a return on equity of 8.25 per cent.
“Our financials are set up so we should deliver that amount of bottom line profitability,” Hall said.
“If that profitability starts to slip … that means we have to go and increase rates because it’s the only way to address the problem if we’re not making our required return.”
The corporation’s return on equity in 2016 was 8.7 per cent, said spokesperson Janet Patterson.
“However, without a general rate application our forecasts for 2017-18 are anticipated to be below our allowed return on equity,” she said in an email.
Hall won’t say how much of a bump the utility is going to ask for. All of that will become public when the application is is submitted to the board, he said.
In December there was talk of rates going up by about 14 per cent. The actual increase will be lower than that, Hall said.
“There’s been some positive things that have happened earlier in the year that helped. We had some pretty strong sales in Q1 because it was colder. What that meant is that we could move our sales forecasts up,” he said.
“Secondly we got the announcement from Capstone about the Minto mine, that they were looking to continue operations through 2020.”
The utilities board decides on a rate increase after a public hearing. Anyone can apply to be an intervenor and either submit written questions or participate in the hearing itself.
“The numbers are scrutinized and then based on those question the YUB then comes up with a decision where they say is your application reasonable,” Hall said.
As it stands there are no rules on how often a utility should apply for a rate increase.
Waiting for years to apply can sometimes be jarring for consumers, Hall said.
“One of the challenges when there are big gaps between when we do this, you get something called rate shock, where everything just accumulates.”
In the legislative assembly earlier this month Economic Development Minister Ranj Pillai said that is going to change.
Pillai said he was working with the corporation on changing the rules so rate applications take place on a schedule “so it’s not politically interfered with.”
Contact Ashley Joannou at ashleyj@yukon-news.com