FortisBC files residential conservation rate report with BCUC

Report moved forward after two tiered residential rate proves to be a controversial issue

 

On November 1, FortisBC filed the residential conservation rate report and analysis of the rate’s impact on electricity customers. The report also examined the rate’s effectiveness towards encouraging energy efficiency and included options for modifying the rate structure.

“We thank our customers and stakeholders for taking the time to provide input into the residential conservation rate report,” said Tom Loski, FortisBC vice president of customer service. “Based on our analysis, we have provided the BC Utilities Commission with background on how this rate is impacting some of our most vulnerable customers and options for modifying it.”

The BC Utilities Commission (BCUC) directed FortisBC to implement the residential conservation rate on July 1, 2012 with the goal of promoting energy conservation. The rate was designed to be revenue neutral, meaning FortisBC does not collect more revenue or profit because of this rate structure.

The findings of the report show that approximately 71 per cent of customers paid about the same or less under the residential conservation rate as compared to a flat rate; however, customers with electric heat and those without access to natural gas were more likely to be negatively impacted. These findings are similar to forecasts FortisBC presented during the initial regulatory process on the conservation rate.

The residential conservation rate is a tiered block rate. This means residential customers are being charged a rate for the first block of electricity they use in a billing period – up to 1,600 kWh – and a higher rate for any electricity they use above that amount. FortisBC was directed by the BC Utilities Commission to apply for and implement this type of rate because it is designed to encourage conservation and to incent customers to use less electricity.

The result is that if customers use less than 2,500 kWh every two months, they pay about the same as they would if FortisBC still billed using a flat rate. Conversely, if they use more, they will have higher bills than a flat rate. This change does not affect the rates for commercial, lighting, irrigation or industrial customers. More information is available at www.fortisbc.com/rcr, including a calculator for the residential conservation rate.

Fortis has discussed a number of options for adjustments or changes to the RCR including changing the level at the threshold at which the higher Tier 2 price comes into effect, changing the manner in which rate increases are applied to the RCR rate components, flattening the rate to reduce the spread between the Tier 1 and Tier 2 price, and changing manner in which the rate is applied such that monthly or seasonal variations in customer usage are considered.

In its report to the BC Utilities Commission, Fortis noted that many customers misunderstood where the increases in their bills were coming from.

“When faced with a high bill, customers often see only the dollar amount of the bill without properly attributing consumption and the level of rates generally as contributing factors. A customer that receives a $1,400 bill for two months of consumption can miss the fact that the roughly 12,000 kWh required to produce such a bill would result in a bill over $1,200 on the flat rate. The difference is not minor in terms of dollars, but it is certainly not the doubling or tripling of bills under the RCR that has been reported.

As shown (by data) no customer has seen an increase greater than 23.011 per cent due to the RCR as compared to a bill that would result under the flat rate. Most are much less even at very high consumption. Certain groups of customers have been affected more than others, however the fact that part of the issue is with customer perception means that changing the structure of the rate can only have an impact on the portion of the increase that is actually attributable to the RCR,” stated the report.

Additionally, it was noted three-in-ten (29 per cent) FortisBC electricity customers are aware of the RCR with older customers and those in the South Okanagan having the greatest awareness. Customers who had experienced either a decline or increase in their bill were also more aware of the RCR.

Among all customers, nearly six-in-ten support the RCR; while one-third oppose the RCR.

Those who support the RCR are more likely to: come from groups that have benefitted somewhat from the RCR:

• have smaller household sizes

• live in an apartment/condo/ row/town house/duplex/triplex, and

• be low consumption customers (bi-monthly electricity bill of less than $200)

They are also more likely to be: women; younger; live in the Kootenay/Boundary region; unaware of the RCR; and have noticed a decrease or no change in their electricity bills.

Conversely those who oppose the RCR are more likely to have higher bi-monthly electricity bills of $300+. They are generally more of, and familiar with the RCR.

More than eight-in-ten agree that the RCR penalizes those that must use electricity for heating (85 per cent) and larger households (82 per cent). Even among those who support the RCR, roughly eight in ten agree with these concerns. A majority of customers believe that the RCR results in higher electricity bills (68 per cent) and is a way for FortisBC to get more money from consumers (63 per cent).

In a general discussion contained within the report, Fortis acknowledged that, “Conservation results, while present, are uncertain and less than forecast.

Fortis recognizes that there is a segment of customers that due to their individual circumstances, which may be demographic or geographic in nature, will have a very difficult time changing consumption habits. These customers may experience negative bill impacts without an opportunity to take action to prevent that outcome.

Neal Pobran Corporate Communications Manager for Fortis, said with only a single year of data to examine, it was difficult to tell if the energy conserved was permanent or cyclical. He noted that  Fortis presented such options as compressing the the tiered rates or raising the onservation threshold, adding that any potential solution to the issue would involve “some sort of trade off between energy conservation and customers’ bills.

“The report revealed that the current rate is working close to the way we originally stated,” Pobran said, “we’re hoping as a result of the report that we will be able to begin a dialogue and discussion with BCUC over what trade off would best work.”

Pobran also noted that the idea of a conservation rate had a 60 per cent approval amongst members of the public, adding that it was also revenue neutral to Fortis.

A copy of the report is available at :

fortisbc.com.