Overview

Nelson Hydro's annual budget and rates process occurs every fall. Staff forecast expenditures to the end of the current year and estimate budgets for the next five years. The annual electricity rates are created from the budget. The five-year budget is based on operational and capital priorities.

Nelson Hydro is submitting a two-year rate application to the BC Utilities Commission (BCUC). This means that the rates will be set in advance for 2026 and 2027 at the same time.

This site walks through the regulatory context and process, how the budget impacts rates, and what we are proposing for rate increases for 2026 and 2027.

Step 1: Learn about the regulatory context and how rates work

Nelson Hydro serves customers in both northshore and southshore areas.

Southshore runs from the Nelson Hydro Power Plant on Kootenay River to the west, Blewett, Taghum, Sproule and Grohman Creek, and Highway 6 south towards Salmo to Perrier Road and beyond.

Northshore runs east along Kootenay Lake to Harrop - Procter, Balfour, Queens Bay and terminating at Coffee Creek north of Queens Bay along Kootenay Lake.

The British Columbia Utilities Commission (BCUC) approves rates and rate-setting principles for the Nelson Hydro rural service areas for northshore and southshore.

Rural means areas outside of the municipal boundary and within the Regional District of Central Kootenay.

Nelson Hydro serves the City of Nelson. The City of Nelson Mayor and Council approve rates for the Nelson Hydro Urban Service Area and provide overall governance to the utility as a whole.

Urban means areas within the City of Nelson.

British Columbia Utilities Commission (BCUC) oversees the rural portion of the utility. City Council oversees the urban portion of the utility.

BCUC requires all utilities under their jurisdiction to apply to have their rates approved. This is called a Revenue Requirements Application (RRA).

Nelson Hydro submits the Revenue Requirements Application for customers in the fall to City Council (urban) and then BCUC (rural). Interim approval from BCUC is expected by the end of the calendar year in the year the application is made, to be effective January 1st of the next year.

Electricity rates are calculated based on the budget or amount of funds needed by Nelson Hydro to operate the utility, to purchase electricity to top up our own generation, and to invest in capital improvements to electrical assets.

Rates are comprised of the following components:

  1. Capital Investment
  2. Power Purchases
  3. Operation and Maintenance
  4. Deferral Accounts (rural rates only)
  5. Cost of Capital (rural rates only)

Capital Investment is required to upgrade or replace aging electrical infrastructure or to purchase new technologies that support reliability. This is completed through the capital reserve fund.

Power Purchases are required to augment our own generation to meet the electrical demand of our customers because the province has capped how much electricity we generate through the water license.

Operation and Maintenance is required to run the day-to-day business of Nelson Hydro.

Deferral Accounts are required for rural customers to help offset rate adjustments made by BCUC through the regulatory process. This impacts rural customers only as BCUC is responsible for rural rates.

Cost of Capital is set by the BCUC for all utilities under their oversight to ensure utilities have an equitable return on investment. This impacts rural customers only as BCUC is responsible for rural rates.

Step 2: Learn about the Nelson Hydro budget

Budget Terms

Annual electricity rates are created to support the annual budget. The following are the categories within the Nelson Hydro budget.

  • Revenues

    Are received from customer payments of electricity bills, leasing of space on a power pole for other utilities like Telus and Shaw, manual meter reads for those customers that do not want their meter read by automatic radio transmission, and other services fees as noted in Appendix D and E of the Nelson Hydro Service Bylaw 3608, 2025.

  • Capital

    Is required to replace poles annually, strategic investments to improve the utility, as well as maintain and replace aging electrical infrastructure in our generation plant, in our transmission lines, substations, and distribution systems of electricity to customers homes and businesses. They are typically big projects that extend the operating life our equipment and utility.

  • Operating Expenses

    Are day-to-day spending required to operate the utility. Some costs are controllable, and some costs aren't. They include, but are not limited to, tree trimming, power purchases from FortisBC, regulatory fees, providing special event power requirements like markets, and operating costs related to being in compliance to provincial and federal standards like testing meters, checking equipment, completing studies, etc.

  • Transfers

    Are one-time annual payments made to the City of Nelson by Nelson Hydro to support the day-to-day operations of the City of Nelson, to the Nelson Hydro capital reserve each year, and to pay for the loss of generation opportunities when BC Hydro constructed the Kootenay Canal on the Kootenay River, bypassing the City's Bonnington Falls Generating Station.

What is a Deferral Account?

A BCUC deferral account is an accounting tool that allows utilities in British Columbia to defer certain costs or revenues for recovery or refund in future years, rather than recording them immediately. These accounts require BCUC approval and are typically used for costs that are difficult to predict during the rate-setting process, such as expenses from major storms or fluctuations in electricity demand during extreme weather conditions.

Utilities use deferral accounts to manage these uncontrollable variances fairly. When actual costs differ from estimates, the balance is settled through the rate-setting process, either as a credit to customers or a recovery by the utility. For example, Nelson Hydro uses deferral accounts to handle differences between interim and final BCUC-approved rates, avoiding mid-year billing adjustments and ensuring a smoother experience for customers.

Deferral account balances also accrue interest at the utility’s weighted average cost of capital, which BCUC sets—currently 8.5% for 2026. This means customers earn interest on credits owed to them, and utilities earn interest on amounts they recover. Ultimately, these adjustments and interest charges are incorporated into future rates, ensuring transparency and fairness over time.

What is the Cost of Capital?

The BCUC cost of capital refers to the regulatory framework established by BCUC to determine the fair return on capital for all public utilities in British Columbia. This includes establishing a capital structure and methodology for utilities without third-party debt. The BCUC aims to ensure that shareholders of public utilities are given a reasonable opportunity to earn a fair return on their invested capital, considering each utility's risks, compared to the benchmark utility FortisBC Energy Inc.. Source: www.bcuc.com

The Cost of Capital is a weighted average fee that represents what it costs Nelson Hydro to provide funds upfront instead of passing those costs to customers. This capital return is recovered through electric rates.

Controllable Costs vs Uncontrollable Costs

Controllable Costs -> are costs that can be determined by the utility. They can be increased or reduced based on needs. Examples include:

  • Materials: Costs of goods and materials used to deliver and maintain the flow of electricity.
  • Labor: Wages paid to union and non-union workers and management.
  • Equipment: costs associated with maintaining and operating vehicles and machinery used to service utility assets.
  • Consulting: costs related to hiring specialized resources to ensure electrical assets are maintained.


Uncontrollable Costs -> are costs that are not under the control of the utility and are influenced by other bodies or customers outside the utility. Examples include:

  • Consumption of electricity by customers (this directly influences how much power is to be purchased)
  • FortisBC wholesale electrical rates (this directly influences the budget required to purchase power)
  • BCUC Cost of Capital and Deferral Accounts (see separate tab. This impacts rates to rural customers)
  • Major Storms (this impacts the budget as additional materials are required to repair equipment that were unforeseen)

Step 3: Learn about the proposed electrical rates

2026 and 2027 Urban Rates

The proposed 2026 urban rate increase is between 7% and 9%. The proposed 2027 urban rate increase is between 3% and 5%.

The two-year average increase is between 5% and 7%. This proposed increase for the City of Nelson is below the FortisBC rates in surrounding communities like Kaslo, Creston, Castlegar, and Trail.

2026 and 2027 Rural Rates

The proposed 2026 rural rate increase is between 14% and 16%. The proposed 2027 rural rate increase is between 3% and 5%.

The two-year average increase is between 8% and 10%. This proposed increase aligns with FortisBC rates in surrounding communities like Kaslo, Creston, Castlegar, and Trail.

Why are rates increasing?

Rates are increasing because uncontrollable costs are increasing. For rural customers, the significant increase in 2026 is largely from the deferral accounts and the change to the cost of capital both required by BCUC.

Here are the details for an average customer who consumes 1000kwh of electricity per month.


Rural Residential Comparison


Urban Residential Comparison


Step 4: Provide feedback on the proposed electrical rates

What are your budget priorities?

Rates vs Reliability

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Scott Spencer

General Manager, Nelson Hydro

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