Canadian power companies will need to spend $300 billion on capital improvements over the next two decades, but have no clear strategy for keeping power rates from skyrocketing, a new KPMG study concludes.
Between the Regulator and a Hard Place said Canadian power regulators are starting to push back against power companies jacking up power rates.
“We found utility providers are not taking on the level of systematic and strategic cost-cutting regulators want to see before they allow ratepayers to be tapped any further,” said Muriel McGrath, KPMG Canada’s partner and national leader for power and utilities.
“We know better alignment between regulator expectations and the industry’s truly controllable cost drivers is critical in developing an effective cost optimization plan.”
Although the report does not refer to specific power utilities, BC Hydro is among the Canadian utilities that have come into conflict with government and regulators.
Last year, BC Hydro announced it would need to increase rates 32% over three years. The provincial government ordered the BC Utilities Commission to cap the rate increases and launched a review of BC Hydro’s operations that resulted in job cuts and other operational reductions.
But it appears BC Hydro isn’t the only power company in Canada to propose rate hikes that don’t sit well with consumers and regulators.
“Across Canada, regulators at all levels are pushing back on rate increase requests, and insisting providers demonstrate a strategic approach to cost-cutting before agreeing to further rate increases,” said Tom Vandeloo, KPMG Canada partner and national cost optimization leader.
“Utility companies insist that rate increases are critical to funding infrastructure renewal. Despite their efforts to cut costs, regulators are pushing for formalized cost-optimization programs and, more importantly, results.”
