Kitchen table chats

The image of Tim Hudak speaking to a couple about their electricity bills in their kitchen – in a Toronto Sun article from 3 October 2011 entitled ‘Retired couple gives PC’s a boost’ – brought back memories of past photo-ops in Ontario electricity policy campaigning.  It would be interesting to compare and contrast such kitchen-table chatter.  The one that I wanted to pull out – but which I could not find ‘copyright-cleared’ on the web – was of Premier Ernie Eves doing something similar.  Though not during an election campaign, his visit to the home of Keshab Hardett and family in Mississauga – to announce his price freeze – is an image that is still in my mind almost ten years later.  When I went back and looked at Ontario newspapers on 12 November 2002 – and saw it on the front page of many – I can more fully understand why it is so ingrained.  In the next election, perhaps a pool could be formed to guess the first time such a moment might occur!  :>

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.

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.

PC plan for smart meters: to unplug rather than to rip out

On 30 August, in the Barrie Advance, there was a response to an earlier article that I have blogged about. More specifically, in an article entitled ‘No PC Plan for Energy System’, Liberal candidate Karl Walsh lamented the PC’s position on smart meters.  I pick up on one quotation in particular.

In the article, Walsh states, ‘The PCs’ pledge to rip out new, modern smart meters and replace them with old, out-dated meters doesn’t make much sense.’  While there seems to be some ambiguity in the PC’s plans – I wrote earlier about this in the aforementioned posting – I have never seen a proposal to re-install conventional meters.  Instead, in the relevant part of the PC’s platform, states that: ‘We will end mandatory time-of-use pricing. We will stop forcing families to be showered and ready for school and work before 7am or compelling seniors to do laundry late into the night. The smart meters forced on our homes – at a cost of more than $1 billion – have become nothing but government- sponsored tax machines. We will let you decide whether your family wants to use the time-of-use pricing system.’  The ‘ripping out’ of these meters is not mentioned.  Indeed, there is lots of mention of ‘unplugging’, but that is meant metaphorically rather than literally.

Consumer choice of time-of-use or flat-rate

A 23 August 2011 article, entitled ‘PC candidate says smart meters bad for business’, appeared in The Barrie Advance.  In it, the PC Party’s plan for moving away from obligatory time-of-use rates was noted.  The relevant part of the article is as follows:  ‘[PC candidate Rod] Jackson said families and business should be able to choose what works for them – and opt out of smart meters. He couldn’t say, however, what rate they’d pay – an off-peak, mid-peak or on-peak rate. “It’s a good question. It’s up to the Ontario Energy Board. It won’t be as much as for a smart meter,” he said.’

I am left to wonder how prices can really go down when consumers are left with a choice of time-of-use rates or, say, some kind of flat-rate.  The revenues from the customers need, of course, to cover the costs of providing the electricity, so without a change in the cost of supply (which, admittedly, may be part of the broader PC platform), the money coming in has to be the same.

To give this further substance, I laid out the following simplistic example. (And noting my earlier comments in this blog, I recognize my own problem for concentrating upon ‘commodity costs’, but the point does not depend on that.)

Imagine customer A and customer B with load profiles as below.  If both are paying in a time-of-use environment, then the total revenue is 141.4 cents.  If both were paying in a flat-rate environment, the total revenue would be 140.0 cents.

Now if each was given the choice, customer A would stay on time-of-use rates (a heavy off-peak user) and customer B would choose the flat-rate tariff. Total revenue is now 136.8 cents.  Would it not be that the missing revenue would have to be made up by increasing the relative costs (say to 6.1/9.1/10.9 and 7.2 – that is, increases of about 3%), which would then generate revenue of 140.8 cents?

Customer	kWh use during off-peak (5.9 cents/kWh)	kWh use during mid-peak (8.9 cents/kWh)	kWh use during on-peak (10.7 cents/kWh)	Total cost under time of use (cents)	Total cost under flat-rate (assuming 7.0 cents/kWh à blending 6.8 and 7.9 cents/kWh prices)
A	8	1	1	66.8	70
B	6	2	2	74.6	70

It will be interesting to see if these options that will be available to customers will be more fully elaborated during the campaign.