BC Hydro reported a 3.5% increase in net income, despite being forced to pay for higher-priced power on export markets to compensate for domestic supplies that are 23% lower due to lower snowpack and rainfall.
The boosted income is partly a result of higher customer rates, an increase in the rate rider and lower operating costs primarily due to lower expenditures for electricity and gas purchases.
As well, BC Hydro’s energy trading margins and overall trade income improved as a stronger U.S. dollar resulted in much smaller foreign exchange losses than those experienced last year.
"While we are pleased with our overall financial results, historically low water levels in our reservoirs – which is where we store water for generating electricity – remain a concern and are placing upward pressure on rates," said Dave Cobb, BC Hydro's president and CEO, in a release.
Water inflows this year are forecast to be only 83% of average, the second lowest level in the 50 years. As a result, BC Hydro said it has continued to buy additional and more expensive energy from the market to meet to domestic needs.
BC Hydro is implementing a $1.7 billion capital plan for fiscal 2011 that largely focuses on renewing and revitalizing aged infrastructure to meet the growing demand for electricity.
With the economy stabilizing, domestic electricity sales volumes were comparable to the previous year.
“[Customers are paying for dividends now, they are not necessarily paying for infrastructure developments,” said NDP energy critic John Horgan, noting BC Hydro’s net income.
He noted British Columbians are facing a 28% increase in energy rates in the next three years.
He said the rate hikes are tough to swallow given BC Hydro could be reducing costs by buying even more power on the spot market – where kilowatt-hours are selling for less than $0.50 – rather than spending up to $1.20 a kilowatt hour for power from independent power producers through electricity purchase agreements.
“Bizarrely, we’re purchasing new sources of supply at more than twice the market rate,” he said. “At some point we will certainly need new sources of supply, but why aren’t we filling [today’s] gaps with low cost power on the spot market?”