Panel recommends revised increase in SaskPower rates
The Saskatchewan Rate Review Panel (the Panel) is recommending to the Minister a rate increase of 3.5% to be applied to all rate classes effective March 1st, 2018. SaskPower had requested in the August 15th, 2017 rate application an increase of 5.0% to apply to all rate classes.
These increases, if approved, would see the average residential customer’s monthly bill rise by $3.84 effective March 1st, 2018. A typical urban small commercial customer will see their monthly bill increase $10.45, a typical urban standard commercial customer will see their monthly bill increase
$125.31 and typical large industrial customer will see a monthly bill increase of $15,349.00.
In its application, SaskPower stated the increases are needed to fund ongoing growth and sustainment spending. They stated that significant portions of the existing infrastructure are at or near the end
of their economic lives. The Company’s forecasts for the next 10 years indicate annual capital expenditures of approximately $1.0 billion per year to maintain and renew the Company’s generation, transmission and distribution facilities. These expenditures will ensure reliable safe electrical services and expand and renew the system to include ever increasing renewable energy sources. This level
of capital expenditures account for a rate increase of approximately 3% annually. The Company also stated that its targeted return on equity of 8.5% and its debt equity ratio at the upper end of its target range of 75% are important to the ongoing financial health of the company.
The Panel heard unprecedented interest in this rate application. Nearly 100 individuals contacted the Panel via email, telephone and social media to comment on the increase. They expressed significant concern that the rate increase was too high – higher than inflation and that the pace of rate changes is simply too quick. Industrial users through their associations and individually also
expressed concern whether the increase and projected future increases would render Saskatchewan uncompetitive with our neighbouring jurisdictions. SaskPower will need to find areas where they
can reduce expenses or make other adjustments to accommodate this lower rate increase while still meeting its financial objectives.
The Panel has also made recommendations to SaskPower as follows:
- That SaskPower have an external review of its depreciation expense including examining estimated service lives to be completed prior to the next general rate application;
- That SaskPower undertake a comprehensive public engagement process for its integrated resource plan; and
- That SaskPower address rate rebalancing between customer classes using the recent cost of service study recommendations.
The mandate of the Panel is to review the application and provide an opinion on the fairness of the rate adjustments requested, considering the best interests of the customer, the Crown Corporation and the public. The Panel believes these recommended rates and other recommendations represent a fair balance of the interests of the affected parties. The provincial Cabinet will make the final decision on the recommendations.
