Penticton to increase electrical rates for home business?

[CTF]

http://www.pentictonherald.ca/news/arti ... f2310.html

Maybe just me but I have some concerns with the fairness of this policy.

As an example in my neighborhood some out of town buyer invested in a condo that they use a few times a year but also legally rent out on a short term basis - again not often. Most of the time this dwelling sits empty - why should it be subject to higher power rates?

Using this same example assume it was rented on a constant basis - this is what power meters are for - use more - pay more.

This strikes me more as a rate grab then anything else but maybe that is just me. Full disclosure I do not do any short term rentals and do not have a home based business. I am just concerned for those who are in this situation and may be impacted.

[fluffy]

Just to play devil's advacate here, why should a home business enjoy such an advantage over those that rent or own space dedicated to business use? I see this as akin to Air B&B operations having an unfair advantage over the mainstream accommodations industry. Besides, as soon as these charges are directed at a given business, it becomes a business expense and thus tax deductible. $200 per year would be something to the tune of 55 cents a day, they could add that to the price of their product/service with little or no fuss from the customer.

[CTF]

Just to play devil's advacate here, why should a home business enjoy such an advantage over those that rent or own space dedicated to business use? I see this as akin to Air B&B operations having an unfair advantage over the mainstream accommodations industry. Besides, as soon as these charges are directed at a given business, it becomes a business expense and thus tax deductible. $200 per year would be something to the tune of 55 cents a day, they could add that to the price of their product/service with little or no fuss from the customer.

There are definitely advantages and disadvantages to operating a home based business - lowers costs are among the advantages however some home based business would not stand alone if independent whereas other may grow to ultimately become a successful stand alone business.

Either way when considering that one already pays more when more power is used thanks to metering it seems unfair to charge someone more not because they are necessarily using more power but because they are attempting to run a small business. They do not increase costs to the City or the electrical grid beyond that what is already covered through metering.

Just seems unjust from my perspective but I do get your point.

[twobits]

IMO, I think charging businesses, home or stand alone, a higher rate for electricity over residential rates is just stupid. Why should business be charged more for a unit of electricity than anyone that uses that same unit of electricity? We are penalizing the very entities that provide and create employment.
Why is it completely opposite to natural gas pricing where as a large commercial or Industrial consumer of natural gas gets a discount on rates? High volume users should get a discount as they provide a disproportionately lowercost of service than a single family residence would.
One of my businesses spends 10k per month in diesel bills. For that volume, I get fuel at about 2 cents a litre below market price because it takes the same amount of over head to sell to me as someone that buys 500 a month but they still make way more money off of me. It's bulk buying and I think everyone gets that. Costco anyone?
So why should a business pay more for their electricity?

It's the same for property taxes. Why do businesses or industrial properties have higher mil rates and thus higher taxes? We penalize the entities that provide the jobs, payroll and economy of the area they are established in. If your house has an assessed value of 500k, why should it be taxed at 40% less that a business property worth 500k? Why not apply the mil rate equally across the board and pay taxes on the assessed value of the property regardless of it's zoning?

[fluffy]

So if someone claims electrical costs (or property taxes for that matter) as a business expense does that expense not get deducted from their business income resulting in an income tax savings, is that person not, in essence, getting his electrical power cheaper than Joe Homeowner?

[Corneliousrooster]

So if someone claims electrical costs (or property taxes for that matter) as a business expense does that expense not get deducted from their business income resulting in an income tax savings, is that person not, in essence, getting his electrical power cheaper than Joe Homeowner?

You have to turn a profit to get any kind of potential "benefit" from that. All the upstarts or anyone having a struggling year is being penalized.

It's a form of energy - should transport companies and couriers pay more at the pumps than a regular resident? Same logic IMO

[fluffy]

You have to turn a profit to get any kind of potential "benefit" from that. All the upstarts or anyone having a struggling year is being penalized.

True, but expenses are part of doing business and "struggling" is a sign that something needs adjusting. My point is that paying residential rates when business rates are a little higher does amount to an advantage for the home operator and this in effect, is a form of subsidy. Is it fair to give home operators a break that stand-alone businesses don't get? Hardly a level playing field there. Let's not forget that we're not talking about a huge chunk of money here, it's more of a recognition that home businesses do enjoy advantages over their stand-alone counterparts and that the fairness of the city turning a blind eye to those advantages is ethically questionable from the perspective of the business community at large.

[Corneliousrooster]

My point was in agreement with twobits - residential and business should be paying the same rate.

[fluffy]

My point was in agreement with twobits - residential and business should be paying the same rate.

So raising residential rates to match business rates is a step in the right direction? :)

[rustled]

You have to turn a profit to get any kind of potential "benefit" from that. All the upstarts or anyone having a struggling year is being penalized.

True, but expenses are part of doing business and "struggling" is a sign that something needs adjusting. My point is that paying residential rates when business rates are a little higher does amount to an advantage for the home operator and this in effect, is a form of subsidy. Is it fair to give home operators a break that stand-alone businesses don't get? Hardly a level playing field there. Let's not forget that we're not talking about a huge chunk of money here, it's more of a recognition that home businesses do enjoy advantages over their stand-alone counterparts and that the fairness of the city turning a blind eye to those advantages is ethically questionable from the perspective of the business community at large.

The advantage isn't clear-cut, though.

If I understand this correctly, the rate class is currently applied to rentals (homes, suites, B&Bs), where all net profit is taxable.

Now, whether you have a small sideline business bringing in an extra $5,000 a year or a full-time business earning a good living, you'd now have to pay the higher rate for your entire household's electrical needs, whether you're a couple in a small modern condo or a family in a home with greater household electrical requirements.

I agree with Smith: this doesn't seem reasonable. Using her as an example: she works very few hours, and pays the city for a business licence whether her business activities actually add anything to the cost of city infrastructure or not. That's reasonable, but charging her more to cook her dinner and do her laundry seems punitive.

It seems to me we want people who make and sell things and services from their homes to pay their fair share, but the question here is: what is fair?

[rustled]

My point was in agreement with twobits - residential and business should be paying the same rate.

So raising residential rates to match business rates is a step in the right direction? :)

This proposal doesn't raise "residential special" to the same rate as business. It aims to include more residences in the "residential special" rate.

Whether or not businesses operating from homes, or all households, should pay the same rate as our businesses with storefronts pay for their storefront's electrical usage would be another discussion.

[fluffy]

Whether or not businesses operating from homes, or all households, should pay the same rate as our businesses with storefronts pay for their storefront's electrical usage would be another discussion.

Oh. I thought that's what this discussion was about.

[rustled]

Whether or not businesses operating from homes, or all households, should pay the same rate as our businesses with storefronts pay for their storefront's electrical usage would be another discussion.

Oh. I thought that's what this discussion was about.

Not sure what the OP intended, but the news story is about charging more residences with a business licence at the class 15 rate, which is residential-special.

Her letter from the city explains council on Oct. 3 gave first reading to a new Electrical Utility Services Bylaw that formalizes two separate residential rates: one for regular dwellings and a special rate for homes in which a business is operated.

Power consumed in homes used for businesses would then be charged at a higher rate expected to add $17.40 per month to an average bill.
…
The two residential rates, he continued, already exist on paper, but are not applied uniformly.

“Historically, my understanding is there was some discretion used in the utility services area, and I’ve stumbled across some services that were multi-unit apartment buildings that were special residential rate, other multi-unit residentials were regular residential rate, so there has been some inconsistency in practice in the past,” said Filice.

He later explained the special rate for home-based businesses is meant to reflect in general how they “use and require more of the infrastructure to supply them.”

Noting businesses licences would be used to ensure consistent application of the special rate class, Coun. Andre Martin suggested some people may go underground to avoid the extra cost.

It's difficult to believe someone with a business licence to take in a few clients a week, as Smith does, puts any strain on the infrastructure. If I were to provide, say, a cake decorating service from home, I would already be paying for the power consumed. If this means I pay the higher rate, it increases my household's power bill by $450 annually. (Yes, my power bills are high and I'm working on bringing them down without adding a gas bill to the mix.) Point being, if I was thinking of starting up such a business, I might give serious thought to what Martin suggests people might do: save both the $165 business licence fee and the $450 ($37.5/mo).

Yes, I could increase what I charge my customers, but I'd be paying even more if I had kids at home and was cooking and doing laundry for them, too. Why should the cost of doing my kids' laundry impact the price of my cakes? I can't imagine how it could cost the city over $600 annually in for me to have such a business, as presumably they've already set the rates to covering those costs and perhaps profiting a little from all of the electricity I use.

Perhaps I am impacting the businesses with storefronts, though. Still, the single fellow in the well-insulated modern condo with a gas stove currently charges what I do now for the same cake, and with this policy he will the city a much lower amount than I will for doing the same work from home. If this is about leveling the playing field for cake decorating businesses, it's not being applied equitably.

What's fair, and for whom?

[CTF]

IMO, I think charging businesses, home or stand alone, a higher rate for electricity over residential rates is just stupid. Why should business be charged more for a unit of electricity than anyone that uses that same unit of electricity? We are penalizing the very entities that provide and create employment.

I completely agree with you. So far the arguments in favour of this policy seem to be about "leveling" the playing field - I would argue that is not the purpose of why we have electrical meters and pay for power based on consumption.

[fluffy]

So where do you stand on Air B&B operations competing with the local mainstream accommodations industry? I'm not trying to derail here, just trying to illustrate the principles involved.