Winnipeg Free Press - PRINT EDITION

Hydro has conflict with gas

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Two energy sources dominate Manitoba's winter heating environment: hydro-generated electricity and natural gas. One, through the electricity grid, has been extended, assisted by significant government and ratepayer subsidies, to cover over 98 per cent of households. The other, natural gas, unlike in Saskatchewan, is restricted to a southwest density-driven "footprint."

Heating by electricity is considerably more costly than by natural gas. The average annual bill for a house heated by a high-efficiency gas furnace is $1,193. The same house heated by electricity anticipates an annual cost of $1,621 (37 per cent more). As for water heaters, by gas, an annual cost of $83, by electricity, $259 (312 per cent more than gas).

Even before the latest rate hike, many electrically heated households were delinquent in paying their electricity bills. For the 30 per cent of households classified as lower-income, and the 35 per cent of households not connected to the natural gas grid, heating bills are a major expense.

If the NDP's $33-billion hydro-electric development plans proceed, the cost to households dependent on electricity heat will soar.

Given Manitoba's limited natural gas distribution network, this will punish poorer Manitobans dependent on electric heat since they cannot switch their heating source to less expensive gas.

Efforts to reduce the impact of coming rate hikes will include, already common in many lower-income households, dialing back the thermostat, resulting in deteriorated health, additional medical appointments and prescriptions, hospital stays and shorter lifespans.

Unlike the situation in many other jurisdictions, natural gas distribution and electricity service are in the hands of a single corporation, Manitoba Hydro. Yet, in essence, natural gas and electricity are competing energy sources. When competing energy sources are controlled by a single corporation, conflicted decisions occur.

Hydro remains focused on electricity. Since its acquisition of Centra Gas, natural gas service extensions have been few and minor.

Unlike electricity, where the extension of service (particularly to the North) was highly subsidized by government (both federal and provincial) and urban ratepayers, or the Saskatchewan experience, where a broad expansion of the natural gas network was subsidized by the province, the extension of the natural gas network in Manitoba depends solely on the prospect of positive local economics (no subsidies). Less than two-thirds of Manitoba households are heated by natural gas.

Manitoba Hydro, needing to substantiate its claims for the need for additional hydro-electric generating stations and transmission lines, seeks out more demand for electricity.

For Hydro, it makes no sense to extend the gas distribution network or steer it to new residential housing, where the gas distribution network is in place, to employ natural gas for heating. That would cut future electricity demand and worsen Hydro's case for its hydro-electric gambit.

The government's demand-friendly environment has profound implications for householders. If the pursuit of new dams and Bipole III is consummated and the cost of electricity for residential customers reaches 20 cents per kilowatt hour (now, seven cents), how will the poorest afford to heat their homes? How far up the economic ladder will the stress caused by higher rates extend?

The average monthly residential electricity bill for a home heated by natural gas could eventually increase to $240 from $80, while the average household employing electricity for heating could see its average monthly electricity bill rise to $480 from $160. These future bills represent the average household: imagine the bill for a poorly insulated rural, northern house heated by electricity.

What choices would be forced on lower-income households? Will it be food or heat; winter clothing or heat; prescription drugs or heat?

While nearly one in three Manitoba households is already considered lower-income, what will the percentage of such households be if the average monthly electricity bill for homes heated by electricity closes in on $500?

In the United Kingdom, with household electricity and energy bills already high, it has been found that significant illness, hospitalization and premature deaths among the elderly and poor resulted as they turn down thermostats to hold down energy bills. High energy bills hurt more than household pocketbooks and health, they can also increase already high provincial health-care costs, shrinking the funds available for social and other requirements.

The increased use of cheap and abundant natural gas would help defer the need for new high-cost dams and transmission lines and reduce the scale of electricity rate increases in the future.

Government should think about the peril associated with the risk of soaring electricity bills in a province with a restricted natural gas network. Public discourse over its plans has lacked attention to the poor, many captive to electric heating.

Graham Lane is a retired chartered accountant who served as the chairman of the Public Utilities Board from to 2004 to 2012.

Should the gas network be extended? Join the conversation in the comments below.

Republished from the Winnipeg Free Press print edition October 16, 2013 A9

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About Graham Lane

Graham Lane is a retired chartered accountant who worked in the public and private sectors for 50 years, concluding his career as chairman of the Manitoba Public Utilities Board.

He has also held key positions at Credit Union Central, Public Investments of Manitoba, the Manitoba Public Insurance Corp., the University of Winnipeg, and the Manitoba Worker's Compensation Board.

Before gaining his CA designation in Quebec, he was third in Canada in the then-national intermediate examination. He has a diploma in business administration from the University of Western Ontario and has served on numerous charitable and service boards.


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