BCUC Completes Stage 2 of Generic Cost of Capital Proceeding

VANCOUVER, British Columbia, Nov. 29, 2024 (GLOBE NEWSWIRE) -- Today, the British Columbia Utilities Commission (BCUC) completed Stage 2 of its Generic Cost of Capital proceeding, which set the allowed return for public utilities regulated by the BCUC.

The BCUC is responsible for ensuring shareholders of public utilities are afforded a reasonable opportunity to earn a fair return on their invested capital. In determining a fair return, the BCUC considered each utility’s business risks compared to the benchmark utility, FortisBC Energy Inc. (FortisBC), and any changes since the last cost of capital review.

The BCUC found that each utility’s overall business risk was higher than the benchmark utility and has changed over time to varying degrees.

Based on these assessments, the BCUC approved the following return on equity and equity components, which together form the basis for each utility’s allowed return:

To determine the equity component, the BCUC examined each utility’s business risk by comparing them to the benchmark utility and any changes since the last assessment. The BCUC adjusted for a size difference between the utilities and the benchmark utility, based on financial modelling and market data, to determine the return on equity. As the benchmark utility, FortisBC’s equity component is 45% and its return on equity is 9.65%, as outlined in the Stage 1 decision.

As part of its decision, the BCUC also established a default allowed return for TES utilities (TES Default), as these utilities continue to face unique and higher business risks compared to the benchmark utility. The TES Default will reduce regulatory burden on small utilities and promote regulatory efficiency.

The approved allowed returns are effective January 1, 2024, and the impact of these changes on rates will be carried out on a utility-by-utility basis.

For more information on the BCUC’s decision or the Stage 2 Generic Cost of Capital proceeding, please visit the proceeding page.

Background

In September 2023, the BCUC completed Stage 1 of the Generic Cost of Capital Proceeding, which determined a new allowed return for FortisBC and FortisBC Inc. 

In cost of capital proceedings, the BCUC applies the Fair Return Standard, which requires the return on a utility’s invested capital to be comparable to the return available to shareholders on similar investments and to maintain the utility’s financial integrity and attract new investments. The BCUC also follows the Standalone Principle to ensure utilities are evaluated as standalone entities, independent of relationships, financial arrangements, or dependencies.

About the BCUC 

The BCUC is an independent regulatory body, responsible for regulating BC’s energy utilities, basic automobile insurance rates, and intra-provincial pipeline rates. It is the BCUC’s role to balance the interests of ratepayers and other stakeholders with the interests of the businesses it regulates. The BCUC carries out fair and transparent reviews of matters within its jurisdiction and considers public input where public interest is impacted. The BCUC is also the Administrator of BC’s Fuel Price Transparency Act and is responsible for collecting and publishing information about gasoline and diesel activities in BC, in an effort to promote competitiveness and public confidence in the fuel market.

CONTACT INFORMATION 

Kelsey Newsham
Communications Specialist  
Phone: 604.660.4317
Email: media@bcuc.com