The Toronto Star
January 1, 2015
Energy Board curbs gas conservation programs
Ontario’s energy regulator has issued new guidelines placing a ceiling on how much natural gas utilities can spend on conservation programs
Ontario’s energy regulator has issued new guidelines placing a ceiling on how much natural gas utilities can spend on conservation programs — especially for big industrial customers.
But some environmental groups say the new guidelines are at odds with the Ontario government’s “conservation first” policy on energy.
The guidelines were released just before Christmas by the Ontario Energy Board.
Enbridge and Union Gas have each been spending about $30 million a year on conservation programs, such as incentives for customers to install more efficient natural gas-fuelled equipment, or helping customers to insulate their homes.
Those costs are charged back to all customers through their gas rates. The theory is that all customers benefit from conservation, because it reduces the need for the utilities to expand the capacity of their expensive pipeline systems.
The new guidelines place a cap on conservation spending — albeit at a higher level than the utilities are currently spending.
The guidelines also eliminate mandatory conservation programs for big-volume industrial customers.
Those programs, the board says, “should not be mandated, as these customers are sophisticated and typically competitively motivated to ensure their systems are efficient.”
Moreover, the board says the costs and benefits may be unevenly distributed, so that some firms may end up effectively subsidizing efficiency improvements for a competitor.
The Industrial Gas Users Association had urged the board to end mandatory programs, arguing in a brief to the board that “ratepayer funded incentives have had little, if any, real impact” on driving investment in energy efficiency.
Union Gas had argued in a brief that it should not be mandatory for utilities to provide programs for large gas users.
“Gas utilities should ultimately have the flexibility to bring forward the specific program elements they believe are appropriate,” Union said.
But Jack Gibbons, who heads the Ontario Clean Air Alliance, said the new rules run afoul of directives from the Ontario government.
One is government’s general principle of “conservation first,” he said in an interview.
More specifically, the energy board is supposed to create a framework for “all cost effective demand side management,” he said. Demand side management, or DSM, is industry jargon for conservation.
The spending caps imposed on the utilities will not allow them to achieve that goal, Gibbons said in an interview.
“You can’t achieve all cost effective DSM with a budget of $75 million or $60 million. You just cannot do it,” he said, quoting the caps put on the budgets for Enbridge and Union, respectively.
“So what they’re doing is disobeying the directive. They’re not doing what the minister told them to create.”
He said Enbridge alone would have to spend $200 million a year to maximize customer savings.
Ultimately, restricting conservation will mean higher bills for Ontario consumers, he said:
“The only people who win from this decision are gas producers in Pennsylvania and western Canada.”
Kai Millyard of the Green Energy Alliance agreed that the new rules for industrial gas conservation are a mistake.
“Saying you can’t spend money on the single most effective conservation program is not putting conservation first,” he said in an interview.
But he said the decision has some positive points. Higher budgets for conservation, despite the caps, will reduce costs for all gas customers, he said:
“It’s cheaper to conserve gas than to pump it here from Pennsylvania or western Canada.”
He also noted that from now on, the board has ordered utilities to do conservation programming as an alternative to building pipelines.