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Premier Christy Clark during a campaign stop in Kelowna on July 9, 2013.John Lehmann/The Globe and Mail

B.C. Premier Christy Clark is ruling out an internal BC Hydro proposal for a 26.4-per-cent increase in electricity rates, leaving her energy minister to formulate a hike that provides proper financing of hydro infrastructure while averting political damage to the B.C. Liberal government.

In Kelowna for a caucus meeting, Ms. Clark told a radio interviewer that the proposed 26-per-cent increase for homeowners, small businesses and industrial users between 2014 and 2016 is "not going to happen." Still, Ms. Clark said on Wednesday that there's a need to renew aging power infrastructure, suggesting some middle ground would be necessary.

Energy Minister Bill Bennett said he's working on a figure, but it probably will still cause some turmoil.

"I don't expect to win any popularity awards when we get to the end of this and announce what the rate increase will be," Mr. Bennett said in an interview as word of the proposal got out.

Like the Premier, Mr. Bennett is rejecting the 26-per-cent figure proposed in a document from a Hydro unit working on the rates issue. "For a lot of people, residential users, it would just take them over the edge in terms of their day-to-day costs of running their households," he said.

Such an increase could remove the business case for some industrial users, he added. However, Mr. Bennett said rates are going to increase.

"It will be the lowest rate increase possible," he said, "while still allowing B.C. Hydro to still invest in its infrastructure so that we have a reliable electricity system."

Mr. Bennett said he was hoping for something less than a double-digit increase, but that no final decisions have been made.

"What has to occur before I am prepared to go to cabinet with a recommendation we could then give to BC Hydro is that we have exhausted every single opportunity there is for us to take pressure off rates," he said. " I don't think we're there yet."

Among issues under review is spending less money on capital projects, or possibly deferring or terminating more Independent Power Projects. Mr. Bennett has said hydro will cancel up to 10 purchase contracts for electricity from such producers and defer delivery dates on nine more to reduce costs.

"We'll look for everything we can," he said.

NDP energy critic John Horgan said the government "has a lot to account for" over the threatened rate increases, because it suppressed rate hikes before the provincial election and didn't allow an independent review of the corporation's financial needs.

Now, he said, the situation is challenging. "I hate to say 'I told you so,' but I've been talking about the consequences of buying more power than we need at a price that is higher than the market will bear for some time."

Mr. Horgan noted that before the election, the provincial government cancelled a scheduled rate hearing before BC Hydro's regulator. The opposition MLA said Mr. Bennett should not be surprised because he has been a member of the governing Liberal caucus for a dozen years.

Jim Quail, a spokesperson for the Canadian Office and Professional Employees Union, local 378, representing 1,800 employees of the power utility, said the current situation was inevitable because the government had deferred the costs of power in recent years. "There are no free electrons," he said. "If people don't pay for today's power, they will pay for it tomorrow."

BC Hydro declined comment on the situation, saying it would be up to the government to comment.