Parker Gallant on Energy conservation experiments in Ontario: in your wallet and in your personal life

Here's looking at you (and your power bill), kid
Here’s looking at you (and your power bill), kid

If 90.2% of your customers were purchasing only 32.3% of your product, your marketing department would be working overtime to come up with ways to entice those customers to purchase more, right?

If you are a monopoly operating in the electricity sector in the Province of Ontario you wouldn’t do that, because your boss doesn’t want that to happen.  Instead, he’s telling you to get customers to buy less.

The 2013 Yearbook of Electricity Distributors has data that allows you to calculate total consumption of the residential sector using the “standards” applied by the Ontario Energy Board on usage by the 4,460,593 residential customers.  They represent 90.2% of the 2013 total customers of all local distribution companies (LDC) in the province.

The standards that the OEB use for Hydro One is 1,000 kilowatts (kWh) per month and 800 kWh/month for all the other LDCs, when they apply for a rate increase.  Using that “standard” and applying it to the breakdown of the residential customers it is easy to determine that consumption was about 45.5 terawatts (TWh) in 2013.  Accept that total Ontario consumption was 140.7 TWh as reported by the IESO (Independent Electricity System Operator) in their January 8, 2014 press release, then 45.5 TWh represents 32.3% of total Ontario consumption.

Looking at the Yearbook from 2005, it’s obvious that the average monthly consumption by all customers dropped 11.2% in eight years—that’s just shy of 5 million megawatt hours (MWh) or, using the 800 kWh OEB standard, enough to power 517,000 “average” homes.

Energy Minister, Bob Chiarelli, however, wants more: his message from Conservation First: A Renewed Vision for Energy Conservation in Ontario said: “The government is committed to expanding and enhancing our conservation efforts. With the current Conservation and Demand Management Framework set to wind down at the end of 2014, the time is right to create a new framework and set a policy of putting conservation first. Ontario’s vision is to invest in conservation first, before new generation, where cost-effective.”

And, “Saving energy means saving money – for families, businesses, hospitals, schools and other public institutions.”

The problem with Minister Chiarelli’s premise is that for families to save money they would need to reduce consumption by more than the price increases per kWh that we have seen and will continue to see, due to the renewable energy agenda and the Green Energy Act.   For example, in 2005 the all-in cost for power and distribution, including the debt retirement and regulatory charge, for Hydro One was 10.5 cents/kWh; for 2013 the all-in cost together with the HST was 19.9 cents/kWh. That’s an increase of almost 90% in eight years.   If families decreased their average consumption by less than 11% annually they are paying more.  And, the 1,000 kWh/month standard used by the OEB would need to have been reduced to 527 kWh/month in order to be paying the same monthly bill to Hydro One in 2013 as was paid in 2005.  So in Ontario “saving energy” doesn’t mean you will actually “save money” unless you move to a cave or disconnect from the grid!

What’s interesting is that the schemes concocted by our government to get us to conserve are often weird and include social engineering strategies (any act that influences a person to take an action that may or may not be in their best interest). The three LDCs call it “social benchmarking”!

Horizon Utilities says, “The Program seeks to empower customers to drive energy conservation utilizing behavioural science, gaming mechanics, and rewards, including AIR MILES for Social Change.”  Hydro one has this idea:  “These reports will include a normative comparison that compares that customer to efficient neighbours and other neighbours.” And the third LDC, Milton Hydro, says this:  “[We] will deliver a social benchmarking program to residential customers in Milton, Ont., beginning later this July. Funded by the Ontario Power Authority’s Conservation Fund, the Milton Community Energy Challenge will demonstrate how a community engagement program can deliver behaviour-based energy conservation. Customers who choose to participate will earn rewards for reducing their household energy use. They will also be able to help local schools win up to $10,000 in awards by joining a school challenge team.”

Wow, Air Miles, other rewards and $10,000 for schools because their students will be taught to “shame” their parents for using electricity.  Ordinary residential ratepayers are financing these “social engineering” schemes in the pilot projects via their monthly electricity bills.  The cost of the pilots is not disclosed but comes from the Ontario Power Authority’s “Conservation Fund” which is charged to ratepayers via the electricity time-of-use billings.  The 2012 Conservation and Demand Management Reports for 2012 filed with the OEB for these three utilities carried no information on the success or failure of the initiatives. Toronto Hydro engaged in a nine-month program in 2011, estimated to cost $495,000.

Privacy was on the agenda at the OEB’s Smart Grid Advisory Committee meeting July 16, 2013, which is the other alarming issue associated with these pilots. Has the Privacy Commissioner blessed this social benchmarking concept that will place your neighbour’s power use data in your hands?

Just another example of “transparency” in the Kathleen Wynne government.

©Parker Gallant,

September 21, 2014

 

PS:  Stay tuned for more on the “conservation” vision.

 

The views expressed are those of the author.

 

Comments

Pat Cusack
Reply

Very worth reading “Green Energy Bust in Germany”

Jay Shepherd
Reply

All of the actual data is in the reports you are already quoting. The 2005 report is missing stats by customer class, but that stuff is available in the 2006 report. The facts are that in 2006 distributors delivered 118.4 Twh. to customers, of which 40.3 Twh or 34.0% was to residential customers. The average residential customer consumed 9817 kwh. In 2013 the distributors delivered 117.0 Twh. to customers, of which 40.4 Twh., or 34.5% was to residential customers. The average residential customer consumed 9061 kwh. The number of residential customers increased by about 8.6%, but average consumption per residential customer dropped by 7.7%. None of these figures are adjusted for weather, and without that no useful trend information can be determined. Weather is one of the biggest influences on residential consumption, which is the reason why experts in the field, including the regulator, usually rely on weather-normalized data.

I have no real comment on the body of your piece, attacking the value of conservation. When you are using solid statistics, and you adjust for increasing energy intensity due to technology and other factors, then it will be possible to see the value of conservation. Your limited information doesn’t help in that respect.

Wind Concerns Ontario
Reply

No one is trashing conservation; it is just difficult to watch the government promote it as “saving money” when they are raising rates as fast as people can conserve. The other worrisome trend is the guilt being forced on ordinary consumers who, as Parker has explained in earlier pieces, have already dropped their consumption of electricity significantly. It is difficult to swallow this pill when the Ontario government is handing out millions in subsidies to huge, wealthy corporations to build inefficient wind power plants.

Parker Gallant
Reply

I totally agree that weather plays a big role in consumption. Winter went missing in 2006 and set new records—not so much in 2013. My guess is that the 7.7% decline you note, if normalized, would be a much higher percentage and possibly north of the 11% I noted for ALL customers.

I am a one man show and not paid for what I produce, have no one else to do my research or crunch numbers, (full disclosure: Scott Luft has helped many times) but I do what I can to try and highlight the vagaries of the current energy regime in the province. As a former international banker I viewed lots of messes around the world but our energy system beats anything I saw in all my years in the banking sector.

I have no problem with “energy efficiency” but social engineering, in my view is simply suggesting we are all sheep or as I suggested “trained seals”!

Barbara
Reply

FORBES, April 11, 2005

Peer Pressure

“There are two elements to the approach to energy conservation. First give people good data and second, use peer pressure.”

http://www.forbes.com/search/?q=peer+pressure Scroll down for this article.

Have Ontario electricity customers been informed that peer pressure and psychological tactics are being used on them?

Bob Lyman
Reply

There are three other factors I would note here.

First, “conservation” is a misnomer when applied to electricity. There is no resource to “conserve”. One should speak in terms of increasing efficiency of energy use.

Second, the rationale for increasing the efficiency of energy use would normally be to reduce the costs to the consumer. In this case, the consumer’s costs will inexorably rise because of government policy. Government policy includes the use of cost-based regulation, so that, as demand drops, the cost of the available supply is simply spread over the remaining users and uses (i.e. unlike in a competitive market, the supplier’s return is not affected). In Ontario, the government owns, operates and regulates all electricity sales except for those of a few generators. By policy, Ontario has chosen to invest heavily in new generation and transmission facilities even as demand has been stable or declining. This includes the escalating cost of purchasing “green” power at up to 50 cents per kWh (for solar) and giving this power “first to the grid” rights over lower cost supplies and guaranteeing that transmission facilities will be built to serve the far flung generation system. When you are willing to pay 50 cents a kWh for politically correct supply, you can claim that spending more on “conservation” is always cheaper.

Finally, the goal should not be to use less for the sake of using less. Throughout most of its history, the main objective of the province’s electricity policy was to ensure that consumers faced the lowest rates possible consistent with ensuring the reliability of supply. This approach recognized that plentiful, low-cost energy is a powerful inducement to economic growth, employment and an ever-broadening use of the modern energy services that enhance our quality of life. Present Ontario policy has turned this approach on its head in order to serve the environmentalist agenda.

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