Thursday, November 28, 2013

Rate Increase

 
We here in BC have some of the lowest hydro rates in the world, not only in real terms but relative to wages and salaries. However, because of aging infrastructure and the fact that the government takes a dividend on BC Hydro income (that is why I have tagged this post under 'taxes') a rate hike is inevitable.
The announced increase is 28% over the next five years. BUT, and that is a big but, it is compounded. That is, each year's increase is a percentage of the previous year's rate. Here is what it looks like in reality. If your 'equal payment plan' hydro bill is $60.00 per month, one might think that a 28% increase after 5 years would be $16.80 making it $76.80.
Here is what it will be:
Year 1  9%  of $60 = $9.40      $69.40
Year 2  6% of $69.40= $4.16    $73.56 
  Year 3   4% of $73.56 = $2.94   $76.50   
     Year 4  3.5% of $76.40 = $2.67   $79.07  
     Year 5  3%  of $79.07 = $2.37    $81.44  
Now that 25% increase  over 5 years has become a 36% increase over 5 years. And this morning I heard that there will be continued 3% increases for the five years following these initial five years. In the above example then, the monthly Hydro bill would be, ten years from now, $94.42  a 57% increase.
 
 Trust a crown corporation, which is an extension of government, to put a spin on it.  And like that spider in my photo, the cost of living keeps creeping up on us. Hydro would like to keep us in the dark as to what the real increase will be. We might all have to keep ourselves in the dark so we can afford the deceit.  

9 comments:

Stephanie said...

HORRORS. I guess we will have to move to a one bedroom apartment!

Stephanie said...

Or install solar panels on the roof!

Terry said...

Or beat your clothes on a rock using candle light.

Victoria International Cycling Festival said...

Hey Terry, I am unclear on the calculations. I thought the increases were 5.1% over the next 5 years. If I base that number on my current fixed rate, and compound it year-over-year, I get 28%. i.e. $160 Year 1 becomes $205.18 by year 5. That's a 28.3% increase. Am I missing something?

Victoria International Cycling Festival said...

Hey Terry, I think I see the discrepancy. 9% of $60 is actually $5.40. If you then add 6% to $65.40 you get $69.32...and so on. After year five, $60 becomes $76.86....which is a 28% increase.

Stephanie said...

HI Terry, I think there is a mistake in your calculations. Jon just noticed it. He says 9% added to $60 is actually $65.40. After year 5 the total is $76.86 which is 28 % increase since year 1.

Terry said...

I made the error at the most crucial time, right at the first calculation. My calculator is make in Italy. Is that a good excuse? I didn't think so.

Stephanie said...

Haha:)
P.s. Are you counting down the days til your fun-filled break?

Terry said...

It is finally soon enough that I can count that far.