Managing Editor Elaine Shein was among a group of media, industry and municipal officials who were briefed in Regina last week on SaskPower plans for rate increases.
SaskPower president Jack Messer didn’t mince words. Rural customers must face reality. It’s time to pay the real cost of power. It’s time to quit being subsidized.
Saskatchewan rural areas and urban residential customers will see a rise in their electricity rates before the end of the year, and SaskPower officials warn several increases may be on the way within the next three years.
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The last increase was April 1, 1994, when electrical rates rose 3.8 percent. This cost an average farm customer, using 1,620 kilowatt hours per month, an extra $4.15 a month.
Meanwhile, SaskPower will cut industrial rates as competition is increasing from utility companies throughout North America vying for SaskPower’s industrial customers.
The top seven customers, for example, provide 20 percent of SaskPower’s annual revenue. However, a survey of the large customers showed the province will lose its monopoly on power generation and distribution unless it begins changing its rate structure.
A recent study by the Washington International Energy Group strongly stressed that cross-subsidies must be eliminated, or larger customers will shift operations to other provinces or states.
Roger Gale, president of the Washington group, and Messer acknowledged farmers won’t like paying more for electricity, but they bluntly said the alternative to higher rates is worse.
If one large customer, using 100 megawatts of power a year, decided to take its business elsewhere, SaskPower would lose $21 million in revenue. (Last year it had $85 million net income on revenue of $837 million.)
To make up the shortfall, rural and residential customers would face a rate increase of nearly 7.75 percent. If everyone in the province pitched in, including industrial customers, the increase would be 3.5 percent.
Saskatchewan’s residential and rural customers are subsidized by industrial customers, who pay 120 to 155 percent of the cost. Farmers pay less than 75 percent of the real costs, while residential customers pay less than 80 percent.
Most utilities in North America cross-subsidize rural customers in the five to 10 percent range.
Since the 1950s, the cost of power has fallen by up to 30 percent for these customers compared to the price of other commodities, SaskPower points out.
Questioned on whether they expected backlash from rural customers, SaskPower officials acknowledged that they do. Messer, himself a farmer and a former agriculture minister, knows it will mean extra costs to farmers who are still determining the effects of lost grain transportation subsidies.
“People enjoying benefits of cross-subsidization don’t like hearing proposals of rate increases,” he said. However, he believes that once farmers understand how much their utilities really cost and that all subsidies need to be ended in the new international trade era, they’ll accept the bitter pill they need to swallow.
SaskPower officials and the other people gathered in Regina also said the quiet death of the Crow Rate signalled farmers are more complacent and ready to accept change. They will accept subsidies, even for electricity, being eliminated. Recently announced higher grain prices also help make the timing perfect, they added.
The irony was SaskPower announced plans for rate increases on July 31, just as the last remnants of the Crow were being buried. It will be up to farmers and farm groups to let their politicians know if they’re ready to accept yet another increase in their costs, or if it’s another nail in the coffin.
