A controversy is brewing over a B.C. Hydro policy that some Vancouver Island developers and politicians believe may be stalling growth.
Langford Mayor Stewart Young penned an open letter Aug. 12 deploring "the manner in which B.C. Hydro is downloading costs to local developers."
Young said the development of two major planned communities in Langford had been nearly stalled due to B.C. Hydro's demand that the proponent front the entire cost of extending electrical service to the area.
Langford has called on the province's municipalities to implore B.C. Hydro "to re-evaluate their position.
"(Developers) really shouldn't be incurring all these costs on new housing, because it kills the economy," said Young. "These are economy killers."
The policy itself is nothing new. When a developer plans to build a new subdivision and requires an extension of B.C. Hydro's infrastructure, the utility makes a business case for the installation.
Hydro's extension policy was formalized in 1998 and "streamlined" in 2007, according to the B.C. Utilities Commission.
Hydro will perform a test to determine the cost and economic feasibility of an expansion. If the situation warrants, Hydro may request a developer to essentially pay a deposit or a fraction of the cost up front. When new customers arrive, that money may be returned to the builder.
"The Extension Policy is used to determine B.C. Hydro's contribution for costs associated with extending or adding capacity," a spokeswoman wrote in an email to the Daily News.
The matters related to development in Langford are currently before the BCUC and a resolution is expected, according to B.C. Hydro. The policy is designed to guard taxpayers from footing the infrastructure bill for non-start or failed developments. But those in the development community fear the policy may doom their projects from the very beginning.
Jeff Tomlinson, a part-owner of Nanaimo development consulting firm J.E. Anderson & Associates, said the expansion fees are business as usual.
What has changed in recent years is how the fees are calculated, he says.
The result is that rather than paying a fraction of extension costs, developers seem more likely to be called upon to pay the whole bill.
"When you're trying to borrow money on a development right now, it's really tough to borrow an extra five or 10 per cent on top of what you already need," he said. "That could be enough to break the bank and not allow you to proceed."
Nanaimo developer Chris Cross, of Palladian Homes, said builders would struggle if more fees or financial demands were placed on them in the current economy.
"Things will just come to a screeching halt," he said.
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