Energy conservation through elimination of bulk metering and flat rate water heaters

Tom Adams
Energy Probe
May 25, 1998

Issue identification:

Bulk metering (also called master metering) of multi-occupancy residential and commercial buildings and flat rate water heaters result in excessive consumption, and there elimination should be a priority target for energy conservation. Individual metering improves customer choice, reduces customer bills, and advances sustainable development. Bulk metering is inconsistent with the sustainable development mission of Ontario Hydro. The load control benefits of flat rate water heaters can be provided by other incentive mechanisms to encourage consumers to participate in load control programs.

Proposal:

1. Ontario Hydro’s service company "Servco" should provide the OMDC with a comprehensive assessment of the extent of bulk metering and flat rate water heating in Ontario including the following:

  • the number of bulk metered utility customers (broken out by utility or region if possible, and also broken out by the portion of the bulk metered customers with submetering, also broken out by residential rental, residential condo, commercial rental, commercial condo);

     

  • the number of occupancy units represented by the bulk metered customers identified above; and

     

  • the annual peak and energy loads represented by bulk metered customers as disaggregated above and

     

  • the number of flat rate water heaters in use in Ontario and the annual energy usage of this equipment.

     

2. The OMDC should recommend that the Ontario Energy Board have the mandate and authority to oversee the elimination of existing bulk metering and flat rate water heating by distribution utilities.

3. The OMDC should recommend that the provincial government ensure that building codes, building regulations, rent legislation, and condominium legislation support individual metering of apartments and commercial suites.

Facts:

As of 1991, there were about 900,000 bulk metered residential suites in Ontario with a total annual electricity consumption of about 5.9 TWh [HR 22 5.2.23]. This consumption — about 4% of Ontario Hydro’s sales in the province — does not include bulk metered commercial suites. Ontario Hydro has estimated that bulk metering of apartments results in increase in energy use of 40% or more [HR 22 Ex. 5.3.2: Schedule D]. If this is still true, the value of the energy wasted due to bulk metering in the residential market alone at current rates is about $120 million annually.

History:

In 1980, the Porter Commission recommended:

"To encourage the prudent and efficient use of electricity, such features as declining block rates, uncontrolled flat-rate water heaters, and bulk metering of new electrically heated apartment building should be modified or eliminated" [Royal Commission on Electric Power Planning, Concepts, Conclusions, and Recommendations, Recommendation 11.8, February 1980].

In 1992, the OEB found:

"The Board agrees with one part of ADMIC’s argument namely that there exists a major opportunity for demand savings in electrically heated apartment blocks by installing individual meters" [HR 21 Report of the Board: 3.6.5],

and urged Hydro to:

"quickly formulate a plan in conjunction with the municipal utilities to take advantage of the potential energy savings in these areas" [HR 21 Report of the Board: 3.6.8].

In 1993, Ontario Hydro cancelled its program to encourage individual metering.

 

Explanation for the High Rate of Bulk Metering in Ontario:

Bulk metering is in the narrow financial self-interest of existing utilities. The excessive consumption created by bulk metering is paid for at retail prices. For distribution utilities, bulk metering also reduces accounting costs including metering, billing and collection.

In a July 1990 report, Ontario Hydro noted:

"Despite the substantial savings potential of individual meters, their market penetration in Ontario is limited, particularly in Metro Toronto. Most Metro utilities prohibit individually-metered rental apartments" [HR 22 Ex. 5.3.7].

The "Recommendation for Submission to the Board of Directors", which led directly to the 1993 cancellation of the program to eliminate bulk metering notes that although building owners and the OEB support the program, the MEA and most municipal utilities oppose individual metering [HR 22 Ex. 5.3.2]. The Submission goes on:

"It is recognized that, although a cost-effective program, individual metering would have been a ‘hard sell’ in the market place. Ontario Hydro’s current budget constraints have made it necessary to question the introduction of an unlaunched program in the present economic climate in which it operates. It is therefore proposed that all program funds be cancelled for individual metering" [5.3.2, emphasis added].

Energy Probe assumes the phrase "market place" in this context refers to municipal utility customers of Ontario Hydro rather than end users of electricity.

Alternatives to Bulk Metering:

Individual metering should be considered a quality of service issue. The OEB should regulate service quality, not just rates, because without service quality regulation, utilities under incentive regulation will have an incentive to cut in this area.

One solution to existing bulk metering is submetering individual units, where the submetering information is used to allocate bulk metered power costs. In the existing regulatory system, submetering has rate advantages over pure individual metering because large bulk metered customers are in a more favourable rate class than households.

In rental situations, collection issues associated with unit-billed utility services can be dealt with by means of prepayment meters or utility security deposits.

Regulatory efforts to eliminate bulk metering should ensure that consumers who now pay for electricity service bundled with their rent are not double charged when the transition occurs.

Alternatives to Flat Rate Water Heaters:

Flat rate water heaters are often used by utilities for load control. These water heaters are wired around the customer’s meter. Switching to metered but load controlled water heating will require wiring changes. Real time pricing would give consumers an incentive to control their own loads.

In the absence of rate time pricing, customers should be compensated for participating in load control programs through fixed payments or bill credits.

Very large hot water users have an incentive to stay on flat rate service. Some fuel switching may occur when flat rate service is no longer available.

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