The following analysis by Peter Miller, chair of Green Action Centre’s policy committee, appeared in the July 28th edition of the Winnipeg Free Press.

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Challenges of Power Smart

Over a year ago the province agreed to a surprising recommendation of the Public Utilities Board (PUB) that Manitoba Hydro be divested of its demand-side management program (DSM or Power Smart). The PUB had compelling reasons some change was needed, but divestment threatens to destroy current Power Smart assets that are widely integrated into Hydro’s operations. The delay in implementing the recommendation has also been costly to staff morale and their readiness to undertake new measures – such as conservation rate incentives – that could yield higher energy savings.

Unfortunately no expert evidence addressed the prospect of DSM divestment and so the PUB proposal went unexamined at the “need for and alternatives to” or NFAT hearing on Hydro development. Efficiency consultant Philippe Dunsky and others noted Manitoba Hydro has a strong, award-winning history of delivering DSM, which covers the entire province, integrates conservation programs for all fuels, provides on-bill financing, has established relationships with customers, suppliers and tradespeople to promote DSM, and has experienced and capable staff.

Yet despite all these advantages, Manitoba Hydro’s DSM performance has been slipping relative to other leading jurisdictions. Why?

The PUB’s reasoning is “there is an inherent conflict of interest when a utility acts as both a seller of electricity and a purveyor of energy efficiency measures.” This generalization, however, is not true. Many DSM leaders, such as California, B.C., Minnesota, and Massachusetts, have programs administered by utilities selling electricity.

Electricity sellers can be efficiency leaders for several reasons. For starters, efficiency is usually the least-costly option when new resources are needed. Regulators can impose efficiency targets and find creative ways to reward utilities for energy savings that meet or exceed targets. For Manitoba Hydro, dependable saved energy can still be sold by rolling it into firm export contracts that yield more than double what Manitoba’s industrial users pay for power.

But even if the PUB’s generalization doesn’t hold, there have been conflicts between DSM and other corporate priorities. For example, in December 2012, Hydro CEO Scott Thomson indicated the provincial crown corporation was reluctant to undertake DSM expenditures that would drive up rates while they were investing heavily in new dams and transmission. However the PUB found DSM measures could free up to 85 per cent of the dependable energy to be produced by the Conawapa dam at only eight per cent of the cost.

What, then, is needed to promote a sustained high level of DSM in Manitoba?

A number of factors emerged in the NFAT hearing. The DSM entity (whether Manitoba Hydro, an external agency or something in between) needs to be committed to a clear mission with ambitious targets set by the PUB and externally monitored. The PUB recommended an energy savings target equal to 1.5 per cent of domestic sales a year. The entity should be innovative and entrepreneurial, and adequately resourced and rewarded for achieving or exceeding its targets. Other supporting factors are rate increases when consumption goes up and higher efficiency codes and standards for appliances and buildings.

How can these favourable conditions for high-level DSM be achieved without destroying Manitoba’s current DSM assets housed at Manitoba Hydro? Here are several possibilities.

First, have Hydro’s Power Smart program regulated separately, with a well-defined mandate and accountability to the PUB. The PUB would prescribe DSM targets and adequate resources to be included within Manitoba Hydro’s revenue requirement, in addition to conservation-rate designs. This structure would retain Hydro assets of people, rate design, customer service, financing, networks, database, and participation in integrated resource planning. A variation would add an independent advisory board of conservation experts for strategic advice on meeting ambitious targets.

Another possibility is to make more use of independent contractors like BUILD and Aki Energy, each with its own segment of the market. Aki Energy is targeting hundreds of geothermal conversions on First Nations. This more distributed organization would not put all the DSM eggs in one organizational basket.

If a completely separate DSM agency is created, links with Manitoba Hydro will need to be established to fulfill functions most-economically embedded within (for example, customer service, conservation rate design). One way to facilitate the links and retain expertise of existing staff would be to have some of them work on secondment to the new agency.

Finally, the call for an independent DSM agency has sparked calls for an agency with a broader mandate that includes: energy policy and planning for the province, promoting conservation and efficiency measures and the substitution of renewables in all domains, including, for example, acceleration of the electrification of transportation

This last proposal, modeled on the California Energy Commission, would complement, not destroy, Hydro’s capacity to carry out its mandate to ensure efficient end-use of power. It could draw staff from Manitoba’s climate and clean energy branches, Manitoba Hydro and elsewhere but report to independent commissioners who would insure transparency and progress in meeting ambitious conservation, clean energy and climate mitigation goals for Manitoba.

The premier promised to announce new climate targets shortly in preparation for the United Nations climate meeting in Paris later this year. Will he also announce an agency to drive the change?

Peter Miller chairs the policy committee of Green Action Centre.