Saturday, July 26, 2014

Power providers ask regulators to scale back energy-efficiency deals.Toronto spurs on wasteful spending...

A recent article out of Florida reminded me I hadn't called out the Toronto Star on the ignorance of a June 18th editorial.

Power providers ask Florida regulators to scale back energy-efficiency deals:
TALLAHASSEE – Florida’s biggest electric providers are asking state regulators this week to let them scale back energy-efficiency programs — such as rebates for installing solar panels and power-saving appliances — that they say have become expensive and benefit few customers.
But conservationists argue that dramatically reducing energy-efficiency programs will only result in higher monthly bills for customers as the utilities eventually will need to build more natural-gas and nuclear power plants.
On Monday, Florida Power & Light, Duke Energy Florida, Tampa Electric Co., Gulf Power Co. and JEA in Jacksonville began presenting testimony to the Florida Public Service Commission that they should be allowed to roll back energy-efficiency goals, as demand for the conservation programs has declined.
“We think it’s in the best interest of our 1.7 million customers to reduce that energy conservation goal and let us look at programs that could benefit the whole entire customer base,” Duke spokesman Sterling Ivey said. “It could be a community solar offering versus a rebate to an individual to put a solar panel on a roof, perhaps we can build a community solar array that all our customers pay into it and all would benefit.”
The entire article could be of interest to people well beyond Florida’s borders as the issues are being experienced in many jurisdictions.
The mixing of solar panel incentives in with conservation jargon is reasonable, but probably should have been explained (see Why Aren’t We Talking About Net Energy Metering for LEDs?)

From my Ontario, and petty, perspective, it’s notable that the request to shield ratepayers from the unnecessary spending comes from the company that is essentially Nextera, which currently has ~260MW of wind capacity coming online in Ontario at contracted prices they would have vehemently opposed in their home market.

Valuing conservation programming is a tricky issue. Energy economist Severin Borenstein recently examined the popularity of one scheme that could be referred to as conservation, Peak-Time Pricing (PTR):
If PTRs are so bad, why are they so popular? Because they hide the cost. Rather than a higher price on the hottest days of the year — reflecting the truly higher cost of providing electricity on those days – PTR pays out for conservation (real or imaginary) on those hot days and raises the price a bit on all other days to cover the cost. Thus, customers who consume a higher share of their electricity on non-peak days (e.g., those who use less, or no, air conditioning) subsidize heavy peak-time users who manage to be slightly less heavy users on a specific peak day.
This is happening in Ontario, under other names.
It is notable that last week saw the highest summer demand of the year, but market pricing maxed out at only $42.53/MWh. That’s almost equal to the Ontario Power Authority’s claimed average cost of delivering conservation programs. It’s bad when conservation isn’t paying even at peak times as much of the claimed total negawattage comes in Ontario at times when the marginal cost of displaced generation is essentially nil.

Perhaps Ontarians, at least those proximate to its capital city, deserve to be conned. They seem to have made The Toronto Star the most distributed newspaper specifically to allow themselves to be conned. From the Toronto Star editorial titled “Don’t undermine electricity conservation”:
…a new draft policy proposal from the Ontario Energy Board recommends a fixed monthly fee for all energy delivery – no matter how much electricity is actually used.
For a board that is supposed to represent the needs of consumers, that’s a counter intuitive position. As its website says, the board is supposed to regulate Ontario’s energy sector “in the public interest.” In this case, though, apparently not.
The editorial, feigning reporting, says opposition to this Ontario Energy Board draft report, “has created an uproar among advocacy groups.”
It cites only the Charlatans of the Green Energy Coalition and the kooky Jack Gibbons – who is credited with this nugget:
“The utilities have been able to operate and be financially healthy for 100 years without a 100 per cent guaranteed revenue stream.”
Thus my connection of this story with the Florida article on the challenges of today, and the gems from the economists at the Energy Institute at HAAS. It’s not 1914 anymore – even if people are still being enlisted for battles they don’t understand.

Christina Blizzard has a report out on the subsidies Ontario’s government pays to purchasers of an expensive, electric, car – and how that kickback is rolled into solar panels paying a hefty return based on a guaranteed long-term contract multiples above market, and retail, electricity pricing. The Star has the Toronto Hydro president extending his dreams beyond phone books of data to the wonder of weekend vehicles coupled with batteries These are but some of the reasons the affluent need to pay their share of the grid based on something other than a per unit of electricity basis.

It’s not easy to know what change is necessary for paying for the grid in the coming market, but it is easy to know changes need to be explored.

I did write before on the Ontario Energy Board’s important rate design initiative; I’ll repeat my comments here:
From the Ontario Energy Board (OEB):
The OEB posted a speech delivered by it's Chair and CEO, Rosemarie T. Leclair; Consumer-Centric Regulation: From Vision to Reality. Some of the headings: 
  • "Consumer Centric Regulation at the Board",
  • "Energy Literacy":,
  • "Public Engagement and Public Trust"
... if you follow energy in Ontario at all, you know the spiel.

The limitations of "communication" strategies is apparent in an important initiative the OEB is undertaking, "Rate Design for Electricity Distributors." A deadline for written comments was extended this past week (to June 6).

The initiative is excellent, and the draft report explains why it's necessary.

But the draft report also repeats a lot of the nonsense from the time-of-use (TOU) planning, on the need for simplicity in rate structures and, particularly, a need for being revenue neutral.

Electricity pricing in Ontario used to be progressive. As TOU pricing bumped the old tiered rate, it meant a rate hike for a frugal consumer of electricity with a typical usage pattern and consumption entirely within the lower tier of consumption (600kWh per month in the summer, 1000kWh per month in the winter). As of May 1st the average rate in Ontario will be 9.25 cents/kWh; the lower tier price 8.6 cents/kWh; meaning a low consumption customer pays 7.5% more on the new, simple, revenue neutral TOU rates than under the older tiered structure.

The people paying less on TOU (because of the revenue neutrality basis) are those with significant consumption in the higher tier (10.1 cents per kWh). This is unnecessarily regressive because it's unnecessarily simple.

Similarly, the cost of distribution currently has a high component based on per/kWH charges on electricity consumption, and that has generally been a progressive pricing scheme. The OEB's draft report doesn't indicate any concern with creating another pricing policy that transfers costs to poorer, lower consumption households. 
I'd suggest either revenue neutrality needs to be abandoned, in order to recover additional funds to subsidize lower income households, or a more complicated pricing structure need to be implemented that guarantees little price movement in the lower consumption households.

The most complicated of the OEB's pricing plans for distribution is "Proposal 3 – a fixed monthly charge where the size of the charge is based on use during peak hours." It's also the closest to being fair - although I'd go by simply peak draw as opposed to draw at system peak (annual or, better yet, 2 periods a year for winter and summer).

Proposal 3 is also the most complicated; proposal 2 (size of connection) along with a recognition of the impact of the change on lower income households, and government action to compensate for the increase, may be more sensible.

Regardless of what is decided, communicability is not a greater goal than fairness - and fairness is not an easy thing to communicate.

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