Residential electricity costs could jump by hundreds of dollars annually by 2011, driven by a projected 25 per cent hike in rates and aggressive conservation measures, according to B.C. Hydro documents.

A typical customer who heats a home with gas now pays $715 a year for power.

A Hydro report says rates must rise 25 per cent between 2009 and 2011 because of costs to maintain and upgrade B.C.'s aging electricity grid, as well as expenses arising from higher finance costs and "an anticipated increase in government levies." The projection is contained in Hydro's second quarter report, which will be updated next month when the province announces its 2008-2009 annual budget.

Rates must be approved by the B.C. Utilities Commission.

Other moves could push electricity costs up even higher. For example, the commission has ordered Hydro to develop a scheme to encourage customers to reduce electricity use.

Customers would have to pay double or even triple the standard rate if their electricity use goes above a certain amount.

The scheme, called the "residential inclining block rate" could add an average $200 a year to electricity bills for customers unable or unwilling to cut back.

Hydro industrial customers are already on a similar program, while a test for residential users has been underway in several communities since 2006 -- with some customers paying as much as seven times the normal rate during peak evening hours in winter months.

Hydro is expected to set the base amount at 800 kilowatt hours a month, or 9,600 kWh a year.

Hydro documents show a typical residential consumer uses 11,000 kilowatt hours a year -- compared with 10,000 kWh just three years ago. The corporation is worried consumption will continue to rise with the popularity of big-screen televisions and other energy-devouring devices.

Documents also show the cheapest, base-rate amount is going to decline as a percentage of total consumption over time, as Hydro continues to add new, higher-priced electricity from independent producers and steadily dilutes the moderating price effect of its so-called heritage network of hydroelectric dams, generating and transmission networks.

Hydro declined to discuss the information, saying its financial plans are still in development. But the Crown corporation promised details will be available for public scrutiny in late February when it files a formal rate requirement application to the commission.

B.C. Hydro says its rates now are among the lowest in North America.

Longtime Hydro critic David Austin, a lawyer in the B.C. energy sector, said much of Hydro's projected cost increases stem from decisions by the provincial NDP government in the 1990s to freeze electricity rates and forego system improvements for an entire decade.

"You could see that the problems were being shuffled under the rug,"Austin said in an interview.

He said Hydro's projected rate hikes may be higher than what's projected -- but added it's just as likely the eventual increases allowed by the utilities commission will be lower than the projections.

A series of heavy precipitation years would keep Hydro reservoirs full and help keep prices down for both domestic and imported power, for example.

A final verdict on rates won't be made until intervenor groups, such as industrial consumers or independent power producers, have a chance to review in detail Hydro's information and suggest ways in which costs could be kept lower.

© Times Colonist (Victoria) 2008