Fortis’ Residential Conservation Rate (RCR) How Rural Customers Are Subsidizing Lower Rates For Urban Customers

RCR’s Two-Tier Pricing System Following consultations, British Columbia Utilities Commission (BCUC) directed Fortis to come forward with a two-tier pricing system for electricity System charges customers a higher price for all electricity consumed over a specified threshold In theory, customers pay a price closer to the cost of bringing on new generation and conserve more. Meant to be revenue neutral for Fortis. –Such a system however is very difficult to design

Residential Conservation Rate RCR commenced July 1, 2012 Moved from cents/kWh for total use (Flat Rate) to: –8.136 cents/kWh for first 1600 kWh (Block 1) Now cents/kWh – cents/kWh for the rest (Block 2) Now cents/kWh Threshold of 1600 kWh = 90% of median consumption of total Fortis customers

Energy Use Single Detached Homes BC

With Flat Rate During winter months typical rural customer uses 4X electricity of urban customer (who uses natural gas for space and water heating) Under flat rate: – urban customer pays 9.5 cents/kwh = $133 –Rural customer pays 9.5 cents/kWh = $532

With RCR Single Threshold Urban Customer pays 8.8 cents/kWh for all 1400 kWh = $123 –9% reduction Rural Customer pays 8.8 cents/kWh for 1600 kWh + 13 cents /kWh for 4000 kWh = $660 –24% increase

Bill Impact – RCR to Flat Rate Percent Of Customers Bill Impact 38-10% to -15% 19- 5% to -10% 13 (70) 0 to - 5% 12 0 to + 5% 10 5% to +10% 610% to +15% 215% to +20% 0.420% to +25%

RCR Improperly Designed As a conservation measure, RCR has been improperly designed 70% of Fortis’ customers have no incentive to conserve but rather an incentive to increase consumption Only 8% are given a strong price signal to conserve (primarily rural customers not using natural gas for space and water heating) –And these customers can’t possibly reduce consumption enough to get down to the threshold level and avoid major hike in bills

RCR Should Have Multiple Thresholds A properly designed RCR would have different thresholds for customers having widely divergent electricity needs E.g: If threshold = 90% of average electricity use for each major customer type (e.g. those with access to natural gas and those without) –all customers would have an incentive to conserve –most customers would be able to avoid major bill hikes through electricity conservation measures

Fortis’ RCR Evaluation Report October 31, 2013 Submitted to BCUC for period July 1, 2012-June 30, 2013 (288 pages) Report somewhat critical of RCR: –“a portion of customers have the benefit of a relative bill reduction without having made any efforts towards conservation behaviour” –“conservation results while present are uncertain and less than forecast” –the RCR “may be well suited to other jurisdictions” but it raises issues in Fortis’ service area “which is largely rural and has a relatively low penetration of alternative heating options such as natural gas”

Fortis’ RCR Evaluation Report cont. But conclusions undermine the criticisms: –“the perception of the impact is greater than that actually experienced. The group that is negatively affected is far smaller than is reflected by the publicity garnered by the rate” –“any move away from the current RCR provides a benefit primarily to a relatively small percentage of customers at the upper end of the consumption spectrum” –“changes to the current RCR can be made. However, there is no one solution that appears as an obvious option”

BCUC Response to Report BCUC’s response was a 1-page letter, January 30, 2014 BCUC stated: –“preliminary results … indicate electricity conservation and general customer impact is consistent with forecasts contained in FortisBC’s RCR Application. As such, preliminary evidence demonstrates that the RCR is achieving its intended results” –“the Commission recognizes that some customers … remain concerned about the rate structure. The Commission would like FortisBC to collect additional information from potentially heavily impacted customers” –“This information, as well as any proposed rate refinements, should be included in FortisBC’s next RCR report to the Commission to be filed on November 30, 2014.”

Our MLA’s Response to BCUC Linda Larson, our MLA, was quoted on February 8, 2014 in Osoyoos Times as saying: –“the amount of mail the BCUC is getting is unprecedented …. People affected negatively (should) continue to write and speak out about the issue”

I Wrote to BCUC and Government of BC Neither responded directly to my questions about the fairness and efficiency of RCR. BCUC stated: –“the rate is intended to help achieve the Policy Action of the Provincial Energy Plan and to create conservation awareness among all users” Government responded: –“if you feel that improvements can be made to the tariffs to encourage energy efficiency and conservation please contact the BCUC and your utility”

What Can We Do Next? Examine Fortis’ Report of November 30, 2014 –I can circulate with my summary Write to BCUC –Number of “complaints” probably more important than content, so everybody needs to write –Key arguments are: RCR is placing the full burden to conserve on a small minority of users, while encouraging the majority of customers (more than 70%) to consume more – this is contrary to objectives of Provincial Energy Plan Single threshold for all customers is absurd and discriminates against rural customers dependent on electricity for space and water heating There should be a higher threshold for those customers with no access to natural gas

What Can We Do Next? Cont. Write to Linda Larson –Express dissatisfaction with her lack of effort representing her rural constituents on this issue –Stress economic hardships on rural homeowners, many of whom are retired and on fixed incomes on local development (exorbitant electricity prices is discouraging people from living in rural areas) Other ideas?