(October 30, 2013) How “conservation” drives up your realty taxes.

Intrigued by news from a councillor of a rural community that the town’s council had just had a presentation on how they could reduce their municipal electricity bill through the simple conversion of their street lighting fixtures.

The presentation suggested street lighting accounted for as much as 20% of their electricity consumption as one of the “facts” presented by the company making the pitch that conversion to light emitting diode lighting (LED) from high pressure sodium lamps (HPS) could reduce consumption by 50% (another fact).

Most of us believe that the cost of operating the street lights is included in our realty taxes and that it is worth the money. A presentation to the Ontario Energy Board (OEB) from the City of Welland sums up how most Ontarians view street lights:

“Street and sentinel lighting provide a public good. They are a safety device for drivers and pedestrians alike. It is a public safety service the City must provide.”

A reduction in consumption, however, should equate to a budget reduction and hopefully reflect itself in the local realty tax bill. Well that may not be the case.

That submission to the OEB related to a billing change creating a “different” way to bill for what’s known as, “unmetered loads,” applied to street lights. The OEB changed the methodology of setting the charge by telling municipalities that they would be billed by “connections” which benefited some municipalities who were “daisy chained” (eg;  20 streetlights with one connection) versus those individually connected. It had absolutely nothing to do with how much electricity was consumed! As a result cities like Brampton saw increases of 54% ($1.4 million) for their street lighting costs in just two years and Hamilton an increase of $1.9 million (reported as an increase of 166%) in three years. Their “connection” costs jumped from 13 cents to $2.39 each despite consumption rising only 3.2%.

As this arbitrary increase was occurring, the local distribution companies (LDCs) were obligated to operate in accordance with the Green Energy and Green Economy Act, 2009 GEA) that:

“required that Ontario’s Local Distribution Companies “LDC” be given conservation targets as part of their conditions of licence. The LDC conservation targets consist of both system peak demand savings and cumulative energy savings requirements.”

So LDCs were raising rates for street lighting while pushing for conservation. The GEA had created yet another anomaly that penalized municipalities for a “safety device”! Those same LDCs however, if successful in getting consumption levels reduced, can apply for a rate increase to the OEB and it is generally granted by them meaning the cost reflects itself on the “delivery” line of our bills.

The Association of Municipalities of Ontario (AMO) raised  objections in their submission to the OEB pointing out:

“The impact of the 2007-2009 rate changes definitely did not take this into consideration.  In Hamilton, for example, the rate increases meant unbudgeted impacts of $384,297 in 2008 and $917,179 in 2009. Among nine LDCs that filed in 2008, there was an average of a 204% increase in the monthly service charge for streetlights.”

Now if one lives in one of those affected cities/municipalities serviced by those nine LDCs your realty tax increase can be partly attributed to those increased charges for street lighting.

In order to try to offset those increased costs many municipalities asked their servicing LDC to pursue conservation through conversion of those old technology streetlights to LED lights but that is costly. It adds to the capital budgets of LDCs who are also trying to refurbish old infrastructure at risk of crashing and causing blackouts or brownouts. Not to worry though, as several private companies have rushed to the street lighting marketplace offering financing to cover the costs of conversion and generally guarantee a 6 year payback which isn’t bad considering LED lights have an estimated 20 year life span. Also, in order to order to help the transition, the Ontario Power Authority (OPA) offer both audit and other grants to help out. Those funds come from their “conservation” budget ($357 million budgeted for 2011) but in searching the saveONenergy website no information can be found related to this “municipal” focused program. Likewise the OPA website doesn’t seem to have posted a budget since 2011 so who knows how big their “conservation” budget is? One must assume it is sitting on Energy Minister’s Bob Chiarelli’s desk and has not been submitted to Cabinet for approval.  All monies spent on “conservation” wind up on our electricity bills each time rates change.

One example of where the OPA handed out a grant is Utilities Kingston¹ who received $330,000 (referred to as a “rebate” on their webpage) for their light conversion project. Utilities Kingston claim they will annually save 50% ($500,000) on the cost of the electricity used for streetlight consumption.

While the objective of reducing electricity consumption is an admirable one the fact of the matter is that “streetlight” consumption principally occurs during off-peak hours so the benefits accrued will reduce Ontario’s “off-peak” peak demand and create no benefit for “on-peak” peak demand. The result will simply mean more “steaming off” of Bruce nuclear, more clean hydro spilled and a jump in the Global Adjustment pot. The reduction in consumption (at the wrong time of the day) will allow the LDC to apply for a rate increase so the ratepayers should expect their electricity rates to rise. The damage to the realty tax rates have already happened so don’t expect the municipality to obtain a benefit in reduced charges for their energy costs as their LDC doesn’t set the rates-the OEB does.

In other words the “conversion” exercise is a losing proposition for the ratepayers and taxpayers and is simply a revenue grab that will not save one kilogram of emissions.

The ruling Ontario Liberal Party have successfully created a new “revenue tool” without even having a Premier Wynne “conversation” with the ratepayers and taxpayers of the province.

Perhaps LED really stands for “let’s evacuate dollars” from the ratepayers and taxpayers?

1. It is worth noting that John Gerretsen is a Liberal MPP from Kingston and the current Ontario Attorney General and his son, Mark Gerretsen, is the Mayor of the City of Kingston.

Parker Gallant is a retired bank executive and a former director of Energy Probe Research Foundation. As with all independent bloggers on this site, Parker’s views do not necessarily reflect those of Energy Probe.