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The Ruskin Dam and Powerhouse in Ruskin, B.C. on Oct. 17, 2013.John Lehmann/The Globe and Mail

BC Hydro rates will jump over the next two years, bringing small monthly increases for residences and thousands more for industry, as the provincial government attempts to put the Crown corporation back on a stable financial footing.

But the increases of 15.6 per cent over the next two years don't cover the true cost of running Hydro: B.C. Energy Minister Bill Bennett says the government will create a new "regulatory account" to defer $1-billion in rate hikes until some time after the next provincial election.

Hydro's customers, large and small, blamed political interference from Victoria for the wild swings in rates. Rates were almost frozen in the lead-up to the May provincial election. Now, Mr. Bennett says rates must rise to tackle the Crown corporation's growing debt and to upgrade its aging infrastructure.

"I said BC Hydro rates would go up," Mr. Bennett told reporters in Victoria, but he maintained they are being kept "at the lowest level possible." While rates are not rising as fast as predicted – a leaked Hydro document suggested they could rise by 26 per cent over two years – the average household will pay almost $14 per month more by April, 2015.

"If you are a low-income earner, it's going to have a significant impact. We're already seeing a lot of people having difficulty paying their current hydro bills," said Tannis Braithwaite of the B.C. Public Interest Advocacy Centre.

Some major customers are also worried. Hydro's largest industrial customer is Catalyst Paper, which came out of creditor protection last year and remains in a precarious financial state. The company will see its power bill rise by $2-million per month once the second year of rate hikes is implemented. Lyn Brown, Catalyst's vice-president for marketing, said the government needs to find ways to mitigate that kind of rate shock. "We are looking for solutions that can be implemented in the near term," she added.

Prior to the provincial election this year, the B.C. Liberal government cancelled an independent rate review and set the annual increase at 1.4 per cent. Next April, the rate will climb by 9 per cent. Without the new rate-smoothing account, however, the increase would be 13.7 per cent. That "would have been unbearable, particularly for industrial customers," Mr. Bennett said.

Mr. Bennett vowed his government will do its part by reducing its reliance on Hydro dividends to balance its own budget. "There is a commitment for government to take less," he said. But that belt-tightening won't begin until 2018. Over the next three years, the province will collect $3-billion in taxes, grants, water rentals and dividends from Hydro.

Jim Quail is the lawyer for the union representing the bulk of Hydro's workers, the Canadian Office and Professional Employees Union Local 378. He said the government energy plan fails to address the Crown's escalating costs or rate stability for consumers.

"It's a good idea to have a 10-year plan, if it was to smooth rates over time," he said. "But that's not what is happening here. It's a political plan, they have front-end-loaded the pain, and it eases up before the next election."

In the third year of Mr. Bennett's plan, the utility's independent regulator will finally be allowed to review Hydro rates once more, although within government-imposed caps. If the maximum rates are approved, that would add up to roughly 28-per-cent rate hikes over five years.

Richard Stout, executive director of the Association of Major Power Customers of B.C., applauded the commitment to return some control to the B.C. Utilities Commission. But he said the government will have to do more to help industry adapt to the new rates. "There are some electricity-intensive industries that cannot survive this magnitude of a rate increase."

Mr. Bennett, meanwhile, has maintained cabinet control over B.C. Hydro's long-term energy plan, approving this week the Crown's "integrated resource plan." David Austin, an energy industry lawyer, said that document "is not worth the paper it's written on." Hydro is only planning for minimal extra capacity to accommodate the huge potential demand from liquefied natural gas. "BC Hydro thinks that the electricity requirements for the LNG industry and related development in the gas fields is somebody is else's problem."

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