The Winnipeg Free Press ran a series of articles (and here) and an editorial last week devoted to Green Action Centre and Time to Respect Earth’s Eco-system’s joint submission of evidence on affordable energy for low income Manitobans. The report, authored by North American energy expert, Roger Colton, was delivered to the Manitoba Public Utilities Board (PUB) last fall. It has since generated comment on a few Manitoba-based blogs, as well as wider public interest in the report. We believe that the discussion is useful, but so far understanding of our proposal has been limited and marred by several errors of fact. We would like to clarify some of these misconceptions to foster more fruitful discussion on affordable energy policy in Manitoba.
Myth 1: Affordable energy would encourage wasteful energy use
Some of our supporters are concerned that lower energy rates for low income households will promote a waste of valuable resources. One of the basic principles of environmental economics is that many natural resources are already priced too low, and this discourages conservation. We recognize and support this principle.
In fact, we recommend the same rate for all users. Our energy affordability program proposes:
- A maximum affordability level for energy bills set at six percent of family income.
- A fixed credit to low-income households to offset energy bills above this amount, based the customer’s previous average energy bills
Under this program, low income households would have the incentive and opportunity to increase conservation as the benefit is fixed based on previous usage rates. Manitoba Hydro and all its customers would benefit as the credit could be reduced over time, taking into account reduced consumption as a result of conservation measures already taken. This program would be of assistance to the tens of thousands of Manitoba households who face crushing energy bills. Too many households face the choice between food and medicine and heat when energy bills are too high a per cent of their income.
We have also proposed an inverted rate structure so that the cost for energy beyond a basic level is increased. Manitoba Hydro already uses a moderately inverted rate, charging more for consumption in excess of 900 kilowatt hours (kWh) per month. We would like to see a sharper inversion, and a smaller first block of energy.
Myth 2: Low income energy affordability will unfairly raise energy costs for middle-income Manitobans
Currently, all Manitobans receive energy at below the cost of its production, and cheaper than almost anywhere in North America. Our electricity is subsidized by the profits from exports to the US and other markets. It is a legitimate question to ask how those profits should be distributed. The PUB and Manitoba Hydro have come to recognize that subsidizing every kWh of electricity for unlimited consumption is a bad idea, because it works against efficiency and conservation and allows the biggest users to impose costs on others. Such rates are also inequitable, because those who consume more grab a larger portion of Hydro’s export earnings – the biggest piggy gets the most slop. Why should the largest users be subsidized more than the poor, for example, in the setting of just and reasonable rates?
Our proposals show how to bring down the energy burden of low-income customers to affordable levels while (a) preserving the same marginal price incentive to conserve that others face and (b) having them pay more of their bills than otherwise, i.e. less write-offs, as well as creating savings in collection, disconnection and reconnection costs. When bills are affordable rather than hopeless, responsible bill paying increases. This is part of the business case for making low-income bills affordable.
Myth 3: The Public Utilities Board is not responsible for social policy
Affordable energy and conservation are already matters of public policy. It’s the Public Utilities Board’s job to set just and reasonable rates taking into account many considerations including what they consider relevant policy. Several important public policy initiatives, including existing Manitoba Hydro low income programs are already regulated by the PUB. Green Action Centre and TREE’s aim is to improve on programs within the existing structure. This is why we are involved in the PUB hearings.
Another example of a policy question before the PUB, which has so far not attracted the attention of media or the bloggers, is whether or not to make permanent billing reductions made in 2009 to Manitoba Hydro’s largest industrial customers to help them through the recession.
The PUB is informed in its deliberations by extensive evidence, questions and answers, and arguments covering all aspects of Manitoba Hydro’s operations. A number of groups and organizations are interveners and several have expert witnesses to ensure that the PUB is able to make the best decisions possible in the interest of all Manitobans. Roger Colton’s report on energy affordability is part of that evidence.
Myth 4: Social welfare is not an environmental issue
Some have questioned why Green Action Centre is getting involved in social equity issues and not sticking to strictly environmental issues. Several of the fundamental principles of our organization include recognition of the interrelation between social and environmental sustainability. Green Action Centre believes all sectors of society have a shared responsibility to preserve and protect our environment such that the needs of present and future generations are met. This formulation reflects the definition of sustainable development first coined by the 1987 Brundtland Commission report, Our Common Future.
Practically, it is impossible to ensure environmental sustainability so long as sections of our society are left out of the equation. The environmental movement suffered significant setbacks in the past when it forgot this basic principle. Conserving forests without considering the impacts this would have on logging communities, or bans on certain forms of hunting without working for alternatives for families who have known nothing else for generations has led to backlash against the environment and prevented progress towards positive solutions. Only by working together can we build a society of lasting prosperity on the principle of living green, and living well.
Finally one further factual note: in Bruce Owen’s January 15 article in the Winnipeg Free Press, he listed Roger Colton our lawyer. In fact, we commissioned North Carolina Social Security lawyer as a renowned expert on affordable energy policy in North America. Our lawyer in the PUB hearings is Bill Gange of Winnipeg.
Hello Mr. Cherenkov, thanks for your comments.
Precisely the issues you raise, and many more, have been and will be matters for evidence and debate before the Public Utilities Board (PUB).
Here, in brief, are some of the points we’ll make.
Regarding administrative problems, numerous utilities have administered low-income programs for decades and so, more recently, has Manitoba Hydro. You may have seen their ads on bus shelters or elsewhere. The affordability program that Roger Colton proposes requires two pieces of information, which Hydro collects from applicants or already has: (1) family income and size for comparison with 125% of StatsCan’s Low-Income Cutoff (LICO) table and (2) historic usage for each residence (based on a rolling average of the last several years adjusted for weather). The latter is used to calculate Hydro’s Equal Payment Plan and estimated bills between meter readings. You are right that calculations of energy burdens and credits from this information provide only rough justice because circumstances change (e.g. family income, size of family, and home efficiency from retrofits). But these changes can be accommodated over time as new family and usage data are provided. Rough justice is better than no justice. If other utilities can administer such programs, I would not make the presumption that Hydro is incompetent to do so.
Regarding financial accountability, Hydro regularly publishes quarterly and annual reports available on their website. At a high level, Hydro’s finances are incorporated into the Province’s public accounts (See http://www.gov.mb.ca/finance/pdf/annualreports/pubacct_1_10.pdf around p. 100.) But even more comprehensively, Hydro provides an unbelievable wealth of information on all aspects of their operations and finances as part of the rate application process. Go to http://www.hydro.mb.ca/regulatory_affairs/electric/gra_2010_2012/index.shtml, pick out whatever you want, and take it to your MLA to introduce it for question period or debate in the Leg.
Regarding implementation of policy, the legislature, in The Crown Corporations Public Review and Accountability Act, gave the PUB a broad range of considerations for arriving at decisions including:
“(viii) any compelling policy considerations that the board considers relevant to the matter,
(ix) any other factors that the board considers relevant to the matter”
You may want to campaign for a change in the legislation, but I like it as it stands. Good government appoints competent bodies who can make good use of evidence and balance multiple considerations to administer and adjudicate public issues like health, education, justice, regulation and the like. If government doesn’t like a PUB decision, they can always enact further legislation to block it and/or appoint different members to the PUB, and then face the electorate for their actions.
Thanks again for your interest in these issues.
Josh,
A credit based on a percentage of income, but calculated against historical energy use, would be an administrative nightmare. It also would be inequitable in very short order, because every time a person’s circumstances change their historical energy use ceases to be an appropriate baseline.
Further, using Hydro as a tool for public policy implementation, either through direct intervention in Hydro operations or through the PUB, is not appropriate because Hydro is not accountable to the voters, nor are it’s debts and losses generally included on the government’s published balance sheet numbers, or for compliance with balanced budget legislation. A government should be accountable to voters for it’s policies — good and bad. Offloading policy to arms-length organizations is a way of side-stepping responsibility. Just because they have done it in the past doesn’t make it right.