I am a ratepayer, and I am a taxpayer

A useful article appeared in 25 September’s Ottawa Citizen, entitled ‘Ontario votes: Wanted! an adult conversation on power — hydro, that is’.  Of the various themes presented therein, the one that I would like to pick up upon is with regard to the ‘transfer of costs’ among Ontario taxpayers and ratepayers.

With the assistance of analyst Tom Adams, the point is made that all three major political parties have policies to shift the cost of electricity from the ‘ratepayer’ to the ‘taxpayer’.  More specifically, the Liberals’ ‘Clean Energy Benefit’ takes 10 per cent off what are supposed to be the costs (at least in one set of calculations) of supplying electricity, the NDP would remove the HST from electricity, and the PC would remove the HST and the Debt Retirement Charge from power bills.

While politically-understandable – if not necessarily defendable – the desirability of such an approach should be questioned.  Rather than encouraging us to take ‘responsibility for our actions’ – ‘you use more electricity (in certain ways), you pay more’ – the burden is moved to the tax base, which is independent of your electricity actions.  To put more simply, the motivations to ‘do the right thing’ in the power space are reduced, and prospects for sustainability diminish.

Remember that all of these resources flow from various government pots of money.  In Ontario, government revenues are of the order of $106.7 billion (2010-11).  Personal income tax (22%), sales tax (18%) and corporations tax (8%) are the largest contributors to this overall revenue stream.   Given much continued public ownership in the electricity sector, if you reduce revenue to one bit, then either revenue must be increased somewhere else, or services must be cut.  There is not a free lunch.

I am a ratepayer, and I am a taxpayer.  I think it best to keep those domains more separate than some are proposing.

Kitchener panel

An article in The Kitchener-Waterloo Record on 22 September – entitled ‘Survey gives Ontario Liberals the edge on green policies’ – reported upon a community event/discussion in which I was pleased to participate.  Organised by Sustainable Waterloo Region, approximately 150 people gathered at The Tannery in Kitchener to receive a newly-launched report and to explore the province’s energy issues with four panelists and a moderator.

I was grateful to be asked to participate, and this newspaper article picked up upon three themes about which I spoke there and about which I have written here in the past – namely, the changes in residential electricity costs over time, the impact of time-of-use billing and the consequences for seniors of the same.  Fuller information about these issues (and others) may be found there.

Impacts upon seniors' and low-income households

To be honest, it is an article that I would not have expected to read in The National Post.  Entitled ‘Ontario’s Electric Circus’, and from 21 September 2011, interesting points about the relatively-modest differences in costs – to operate individual electric appliances in the home – are made.  These are similar to a blog posting of mine from last month.

The point to pick up on in this posting, however, follows from the article’s comment that:  ‘But there's little concrete evidence that time-of-use electricity rates disproportionately impact low-income families, seniors or otherwise at-risk groups - Mr. Hudak certainly hasn't offered any - and where such evidence can be found, it can be mitigated.’  I had the opportunity to supervise a Master’s student at the University of Waterloo a couple of years ago who investigated this issue.  In short (and the reader is directed to her thesis for full details), she found that seniors and low-income households (at least her sample in Milton, and at least as the on-, mid- and off-peak pricing existed before they were changed more recently) were a bit worse off under time-of-use rates (as compared to the traditional two-tier approach) in summer and a bit better off under time-of-use rates in the winter.  And, important to recognize, is that any differences were relatively modest.

PC elaboration of new residential pricing plans

There was quite a lot of coverage of Tim Hudak’s elaboration of how he would give residential customers ‘the choice’ with respect to time-of-use or flat rates.  The Toronto Sun, in an article entitled ‘Meters outsmart power users:  Hudak’ and dated 19 September 2011, reported it as follows:  ‘But Monday he elaborated on how prices would be different under a PC government: There would be a flat rate for the first 1,000 kilowatt hours and a higher rate for use after that.  “The flat rate is simply set as an average of the other (time of use) rates,” Hudak said.’  A check of the PC website could not provide confirmation and/or elaboration of this on a posting that explored the smart meter issue.  The Liberals, in their own subsequent press release, suggested that Hudak’s campaign team had issued a press release in clarification, but I could not find it.

But the Liberals were quick to jump on the issue, with a press release coming out saying that this would be a dramatic increase in costs to consumers.  The Liberal argument is that the PCs are talking about an ‘average’ of the three time-of-use rates – averaging 5.9, 8.9 and 10.7 gives you 8.5 cents per kWh.  Alternatively – and probably the case – if the average was in fact weighted to ‘time-of-use’, then the calculation would be a weighted average of 5.9 (64% weighted), 8.9 (18% weighted) and 10.5 (18% weighted), which is 7.268, or 7.3, cents per kWh.  This is higher than the present ‘lower-tier’ price of 6.8 cents per kWh, though lower than the ‘higher-tier’ price of 7.9 cents per kWh (which occurs across the summer threshold of 600 kWh). 

It will be interested to see how this is elaborated by the PCs.  ToU and two-tier are meant to be ‘impact-neutral’ to the average customer, and that is why you will find the 7.3 between the 6.8 and the 7.9.  As I have argued elsewhere in this blog, if you allow customers to choose whether they are on ToU or two-tier, then the rates for each would have to be higher than if everyone were on one or the other (because consumers will choose the ‘better one’ for them).   Another interesting elaboration will be with respect to the threshold – 1,000 kWh (mentioned by Hudak) is the winter threshold, but, as noted above, the summer one is lower.

This article also had interesting points about the impact of ToU upon peak consumption -- namely, a claim by Brad Duguid (Liberal MPP) that 'smart meters ... have already shaved 4% off demand during the peak consumption period' -- and I have addressed that in a previous posting.

The Cost of Wind

On 16 September, an article entitled ‘Environment issues top green debate’ appeared in the Oakville Beaver.  In that, ‘Halton incumbent MPP Ted Chudleigh, of the Tories, said he and his party are not opposed to alternative energy, but believe it has its time and its place.  “The windmills are becoming more and more efficient, more and more economically feasible. The big ones are down to 20 cents per kilowatt hour or less, which is great,” he said.’ … The statement is remarkable on at least two levels:  first, 20 cents per kWh is not particularly ‘great’ (compare to the average price of electricity, as a commodity, recently in Ontario here); and second, although it depends upon the wind resource, a number of sources cite the fact that wind power’s cost is often of the order of 2.5-3.5 cents kWh (e.g., this report from the NREL).

There are other passages in the article – issues of rising costs with smart meters, etc. – but I have addressed that issue in other parts of this blog.

August consumption and hot weather

The article entitled, ‘Hydro bills feeling the heat’ (Toronto Sun, 6 September 2011), inspired me to look at my own consumption through August.  Courtesy of my local utility’s webportal (Waterloo North Hydro), I was able to download what I concluded were ‘hourly-DST’ data.  Here, I give some results, and make some comparisons.

Below, in the table, are some core results.

time period	consumption (kWh)	percentage of total consumption	commodity cost ($)	percentage of total commodity cost
on-peak	210.03	18.5	22.47	27.1
mid-peak	199.47	17.6	17.75	21.4
off-peak	723.74	63.9	42.70	51.5
total	1,133.24	100	82.92	100

So, though we were often ‘at home’ during this period, our use ended up being very close to the standard 18/18/64 division that the Ontario Energy Board cites as ‘usual’ with regard to distribution of electricity across the three time periods.

Indeed, when I compare our ‘commodity costs’ to what they would have been if we were not on time-of-use rates (but were on the traditional, ‘two-tier system’), I find it striking – and I report it in the table below – that the difference is one cent.

consumption bracket	consumption (kWh)	commodity cost ($)
below threshold (6.8 cents per kWh)	600	40.80
above threshold (7.9 cents per kWh)	533.24	42.13
total	1,133.24	82.93

Our consumption was high in August – indeed, a little bit higher than usual.  (For some historical data, see an earlier blog posting.)

In any case, I was interested to see how consumption correlated with temperature.  To explore this, I retrieved temperature data from the University of Waterloo weather station, and compared them with my hourly consumption data in three ways:  plotting daily average temperature versus daily consumption; plotting daily maximum temperature versus daily consumption; and plotting hourly temperature versus hourly consumption.  Results are below.

Average daily temperature versus daily electricity consumption,

single home in Waterloo, ON,

August 2011

Maximum daily temp. versus daily electricity consumption,

single home in Waterloo, ON,

August 2011

Hourly temperature versus hourly electricity consumption,

single home in Waterloo, ON,

August 2011

Though the visual suggests that the relationship is not completely ‘direct’ (that is, higher temperature, higher consumption), but the trend is there.  Indeed, in these three graphs, there are positive correlations, with values of 0.277, 0.120 and 0.378, respectively.  Hot weather, not surprisingly, leads to greater consumption.