(August 11, 2015) Putting money slated for conservation spending back into the pockets of consumers would give the province’s economy a much-needed boost.
This article originally appeared in the Financial Post.
Putting money slated for conservation spending back into the pockets of consumers would give the province’s economy a much-needed boost.
Ontarians have radically reduced their electricity consumption in recent years, so much so that almost 95 per cent of the government’s planned future spending on conservation programs will fail to save a single additional kilowatt hour. Given the province’s past conservation record, and the absence of future potential, the Ontario government now has an opportunity to cancel the conservation programs in the pipeline – a move that would be equivalent to a $2.6 billion stimulus package.
This stimulus could help offset part of the economic slowdown that has recently taken hold in Ontario. The province’s economy contracted by 0.1 per cent in the first quarter, while retail sales were about 0.8 per cent lower in first quarter compared to the end of last year. Putting money slated for conservation spending back into the pockets of consumers would give the province’s economy a much-needed boost.
The conservation programs consist of a mix of coupons for energy efficient lights, energy audits, heating and cooling rebates and other energy-saving programs. They are paid for by ratepayers through charges on their monthly bills and were introduced to mitigate the need to build new generation plants, such as expensive nuclear refurbishments or new gas plants. Ratepayers were told that the upfront costs of conservation were lower than the long-term costs of new infrastructure, ultimately, saving them money on their monthly bills.
But it turns out that soaring hydro rates – which have increased by as much as 14 per cent annually, or 128 per cent since 2006 and about eight times faster than overall inflation – have been the real driver in getting ratepayers to take conservation seriously and look for ways to reduce their monthly bill. The conservation programs have become irrelevant in pushing consumers to control hydro bills.
Hydro One – the province’s largest distributor – conducted a survey of 11,000 of its customers and found that the conservation programs accounted for just 7 per cent of energy savings. The biggest contributors to energy conservation were building codes and what the distributor termed “naturally occurring conservation,” such as more efficient appliances, which accounted for 60 per cent of conservation by residential ratepayers. Nearly all of those energy savings would occur without the ratepayer-funded conservation programs.
The second largest contributor to energy conservation was what it called “customers own actions,” which it said accounted for about 19 per cent of the reduction in energy demand. These actions include investing in programmable thermostats, setting cooling and heating temperatures lower and higher, respectively, during the winter and summer seasons and investing in better insulation.
The province’s move towards time-of-use (TOU) billing accounted for about 14 per cent of energy conservation. TOU charges ratepayers higher rates when they consume power during periods of peak demand – such as a hot summer afternoon when air conditioners are turned on high or during winter evenings when baseboard heating is in use.
In another study using residential surveys, Hydro One found that its customers were increasingly performing a host of energy conservation actions on their own. The percentage of respondents who said they lowered the thermostat during the day when they are away increased to 95 per cent in 2012 from 65 per cent in 2003. The percentage of respondents who lowered the thermostat at night increased to 91 per cent from 63 per cent over the same period. Respondents who said they used cold water for laundry, hung out their clothes to air dry and performed regular maintenance on their air condition increased in similar degrees.
Conserving energy has become commonplace among Ontario’s ratepayers.
While critics of cutting conservation programs might claim that it would spur ratepayers to dramatically ramp up their energy usage, the Hydro One studies show that conservation is on the mind of ratepayers, regardless of conservation coupons and other ratepayer-funded programs.
Furthermore, conservation was supposed to save ratepayers money, but electricity rates have been on a near decade-long run of moving one way: up. The Ontario Energy Board – the province’s energy regulator – recently approved a 7.5 per cent electricity rate increase for the next year – or about six times the current rate of inflation. Additionally, many ratepayers will see near double digit increases to the cost of distribution, which covers the cost of delivering power to their home.
Ratepayers, in short, have every reason to continue to conserve without the $2.6 billion cost of conservation programs. They would get a boost – as would the Ontario economy – by converting those conservation dollars into a much needed stimulus in these times of economic uncertainty in Ontario.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI), a division of Energy Probe Research Foundation. You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236