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This article was published 8/6/2015 (1594 days ago), so information in it may no longer be current.
An aggressive Power Smart program could save 85 per cent of the dependable energy output of Conawapa at only eight per cent of Conawapa’s cost, according to the Public Utilities Board report on Manitoba Hydro’s development plans. Conservation is the most cost-effective component in Manitoba’s energy future.
A Power Smart rates policy should price energy to promote conservation while keeping bills to low-income customers within reach of their ability to pay. How can this be done?
For residential customers, conservation pricing takes the form of inclined rates. For example Seattle City Light charges only $4.35 for the basic monthly charge and 5.57 cents/kW.h for the first block of energy (300 kW.h/month in summer and 480 kW.h/month in winter). However once the cheap first block of energy is exceeded, the higher consumption is charged 11.89 cents/kW.h — more than twice as much as the first block. This provides a powerful incentive to conserve electricity.
Obviously an inclined rate (also called a lifeline rate) makes electricity much more affordable for customers who don’t consume large amounts. And since the average low-income residence uses less electricity than the average of other households, inclined rates would mean lower bills than now for a majority of low-income customers. So that’s one part of an answer to the affordability question.
But there are still many low-income customers with higher electrical consumption than they can afford — especially those who heat with electricity, often because much cheaper natural gas is unavailable where they live. How can they be helped? To answer that question, Green Action Centre engaged Roger Colton, an expert on energy poverty and utilities, to testify at the current Manitoba Hydro rate hearing. He will appear before the Public Utilities Board at 9 a.m. on Wednesday. His pre-filed report is available online at the PUB site.
Colton focuses on utility strategies to address inability-to-pay customers, which he defines as "a customer who by reason of level of income and/or level of consumption, alone or in combination, receives monthly bills that cannot be consistently paid in a sustainable fashion over the course of time."
These customers pose, not just a social welfare issue, but a business problem for the utility. For example, Hydro is not permitted to shut off electricity or gas used for heating during the winter months, whether or not customers pay their bills.
Colton recommends a multi-pronged approach, some parts of which Manitoba Hydro already has.
• Hydro’s Affordable Energy Program subsidizes insulation, weather-stripping, low-flow shower heads, and high-efficiency gas furnaces for low-income customers to reduce their energy consumption. Lower consumption means lower bills.
• Their Neighbours Helping Neighbours program invites customers to contribute to a fund that makes a one-time emergency payment to cover arrears for a customer who can’t pay their bill.
• Their Equal Payment Plan spreads the high costs of winter heating over the entire year.
In addition, customers enrolled in provincial income assistance programs have their Hydro bills covered.
But despite these programs, there still remain tens of thousands of customers who can’t pay their Hydro bills, fall ever further into arrears, and eventually are subject to disconnection and collection actions — all of which are quite costly to Hydro. With electricity rates projected to increase at 3.95 per cent a year for the next decade or more, that number is likely to increase.
Colton recommends several additional tools to address inability-to-pay.
• Subsidized fuel switching to cheaper fuels (geothermal and high-efficiency natural gas cost half or less what electricity costs for heating once the system is paid for),
• Partial arrearage forgiveness (e.g. by matching customer arrears payments with added credits to bring down the balance to a manageable level), and
• Bill assistance to lower bills for current usage (which can take a number of different forms).
Well-designed and co-ordinated, such a suite of programs has led to an increase in bill payments and lowering of collection costs where they have been tried. Customers are more likely to pay their bills when they are affordable.
As Colton explains:
"My conclusion ... is that it is unreasonable to exclude a bill assistance program as one of the available tools based on an out-moded and economically flawed conclusion that inability-to-pay is only a social problem. To the extent that energy efficiency can reduce bills to an affordable burden, bill assistance is not needed ... To the extent that public funds (through a social assistance program) are available to pay the bills of inability-to-pay customers, ratepayer-provided funds through a bill assistance program are not needed. To the extent that a customer faces an arrearage balance because of an emergency situation, but otherwise has an ability-to-pay, a crisis assistance program is appropriate and ongoing assistance is not needed. To the extent that a customer faces seasonal unaffordability, but has adequate income to pay annual bills, a levelized budget bill is appropriate."
While the outline of an affordable energy program can be gleaned from decades of utility experience in other jurisdictions, refinement of the tools to fit Manitoba requires local knowledge and research. Hence Colton recommends that the PUB should initiate and lead a collaborative process with Manitoba Hydro and other stakeholders to devise a comprehensive made-in-Manitoba solution containing the components identified above.
Peter Miller was a founding member of Time to Respect Earth’s Ecosystems and has been active in the Recycling Council of Manitoba (now the Green Action Centre) for decades.
Editorials are the consensus view of the Winnipeg Free Press’ editorial board.