June 17, 2014
Energy board proposal for fixed hydro rates called “Robin Hood in reverse”
Scheme would overwhelmingly benefit wealthy homeowners and energy hogs, critics say.
Householders should pay their local hydro utility a fixed monthly amount for electricity delivery, no matter how much power they use, a draft report by the Ontario Energy Board proposes.
The proposal has run into a blizzard of criticism that it would reward energy hogs by limiting their bills, while increasing the amount paid by those who use little energy.
“It is Robin Hood in reverse,” argues a letter from the Green Energy Coalition.
The proposal is contained in a draft report that the board quietly circulated this spring.
The report deals only with the portion of the bill that goes to the local utility — which normally makes up 20 to 25 per cent of the total.
Currently, householders pay a fixed monthly rate, plus a charge per kilowatt hour
In the case of Toronto Hydro, the fixed rate is $18.63 for every 30 days, plus 1.538 cents a kilowatt hour.
Customers also pay a charge per kilowatt hour for the energy they use, plus charges for Hydro One’s transmission wires, for debt retirement and administrative fees. None of those charges would be affected by this proposal.
The energy board proposal would abolish the kilowatt hour charge paid to the local utility — in Toronto Hydro’s case, 1.538 cents — in favour of a single, flat-rate monthly fee.
The board’s report says the fee might be set in several ways.
It might be same for all residential customers. Or it could group customers in classes, based on their peak usage. Or it could group them based on the size of their connection to the system.
But in all three cases, the customer would pay a fixed amount to the local utility, no matter how much electricity was used.
The report says the proposal is meant to align the costs of local utilities with their revenues.
Local utilities own the wires that deliver electricity directly to homes and businesses. The fixed cost of installing and maintaining the wires is high, regardless of the volume of electricity moving across them.
Moreover, the report notes, local utilities are being encouraged to run conservation programs to decrease electricity use. But under the current system, the more successful the conservation programs are, the less revenue the utilities get.
A flat-rate monthly charge doesn’t penalize utilities for succeeding at conservation, it says.
Moreover, charging customers a fixed fee for distribution matches the high fixed cost that utilities face in operating their systems.
The report estimates that under a straight flat rate fee, 70 per cent of residential customers will see a change of $5 a month or less in their hydro bill.
But the draft report has drawn criticism from consumer and environmental groups — and some utilities.
Jack Gibbons of the Ontario Clean Air Alliance, said the energy board already takes the utilities’ conservation programs into consideration when it sets their rates.
The board’s proposals are “all worse than the status quo,” he said in an interview.
If the board wants to encourage consumers to conserve, it should base the local utilities’ revenues on time of use rates, just like the energy portion of the bill, he said.
The board’s proposal in effect give utilities guaranteed revenue, and insulates them from nearly all normal risks, he said.
“That’s an extreme position,” he said. “It’s just not necessary. The utilities have been able to operate and be financially healthy for 100 years without a100-per-cent guaranteed revenue stream.”
Hydro One, which has more customers than any utility in the province, says the proposal will jack up the rates of people who use the least amount of electricity — including those with seasonal properties.
Hydro One questions the report’s contention that most customers’ hydro bills would change by $5 a month or less. In fact, the company says its analysis shows that only 20 per cent of its customers would see an impact that small, while 51 per cent would see their bills increase more than $5 a month.
The impact would be greatest on seasonal properties, 67 per cent of which would increase more than $5 a month.
The Green Energy Coalition says the proposal, if adopted, “will cause small customers (often with lower incomes) to subsidize large customers with higher peak demands.”
“It will sacrifice energy efficiency and raise consumption to give a disproportionate and unjustified break to larger businesses and wealthy individuals.”