Illustration by David Henry Illustration by David Henry
Eco-Journal, v.16.4, September/October 2006
By Randall McQuaker, Resource Conservation Manitoba
It's obvious. Cheap electricity is a terrific bargain for Manitobans and a great incentive to grow the provincial economy. It has been a cornerstone of Manitoba's energy policy for years. Nobody with any sense would propose anything different. Would they?
Just when you think you have heard everything, along come two environmental groups with a different idea. Resource Conservation Manitoba (RCM) and Time to Respect Earth's Ecosystems (TREE) are aiming to turn upside down the notion that heavily subsidized electricity rates are actually in Manitobans' best interests.
In fact, say RCM and TREE, rates that reflected the full cost of energy production, coupled with generous financial support for conservation, would not only save electricity, they would also ease energy costs for low-income households, generate new revenues for the province, and reduce environmental harm.
RCM and TREE have embarked on a series of research-based interventions at Public Utility Board (PUB) hearings, challenging energy planners and regulators with a deceptively simple question: What would utility rates and programs for customers look like if the principles of sustainability and social justice were really taken seriously?
To explore that question, the PUB has awarded RCM and TREE joint intervener funding in several recent hearings. The two groups have tabled reports by consulting economist Jim Lazar of Olympia, Washington, Steve Weiss, senior policy associate with the Northwest Energy Coalition in Salem, Oregon, and the non-profit Pembina Institute in Alberta. Their evidence has helped to quantify the scale of hidden subsidies, identify opportunity costs and climate change externalities, and, surprising to some, flag the risk to the provincial economy posed by energy-intensive industry.
A key argument of RCM-TREE is that energy should be priced to take full account of all costs, consistent with the principles of stewardship and conservation contained in the province's Sustainable Development Act. They contend that the full cost of electricity in Manitoba is obscured by the domestic rate subsidy from export power sales and by the failure to incorporate environmental externalities (ecological costs) into rates. As a result, rates are artificially low and unsustainable over the long term.
One of the problems with low rates, according to Peter Miller, a University of Winnipeg professor who directed a recent RCM-TREE intervention, is that they reduce the incentive to conserve.
"Energy is wasted, because the payback to customers for investments in energy conservation is lower, and thus the economic incentive to conserve, relative to other investments, is less," Miller explains.
Simply increasing rates is not the answer. Aggressive conservation measures (sometimes called "demand side management") and special programs to assist low-income Manitobans are also needed. Explains Miller, "Social justice includes the recognition that a limited amount of energy is a basic need of Manitobans, which the energy system should make available at affordable prices."
Tools to assist lower-income customers include what are called "inverted rates," meaning that an initial block of energy is made available at lower rates, and subsequent blocks are priced to reflect the full social and environmental cost of energy production. As well, RCM and TREE have called for generous conservation programs to make efficiency upgrades affordable. And they have recommended consideration of special reduced rates for some customers, and even bill payment assistance as required. Evidence by Weiss in a hearing on natural gas rates showed that such programs not only benefit consumers, they can actually reduce costs for utility companies themselves.
Miller cautions that making basic energy affordable for residential customers "must be separated from the idea of making unlimited amounts of energy available at subsidized prices, which is unsustainable and uneconomic." For example, economist Lazar noted that luring energy-intensive industry to Manitoba (cited by some as a job-creation goal of cheap rates) could actually cost the provincial economy millions of dollars annually. Such losses would occur if surplus electricity were gobbled up at artificially low rates when it could be exported instead at much higher prices—with the resulting income used to benefit the province as a whole.
The RCM-TREE interventions have gained the attention of not only Manitoba Hydro but also the PUB itself. A recent Board Order instructs Hydro to research and report on environmental costs, climate change impacts, inverted rates for large volume customers, and implications of new energy-intensive industry, among other efficiency-related points.
A new approach to energy conservation and pricing will not be imposed overnight. Even the two groups urge further research and a gradualist approach to implementation. But in the end, say RCM and TREE, adopting full-cost accounting, accepting intergenerational equity, embracing social justice, and putting much more effort into conservation will not only help safeguard the earth for generations to come, it will also benefit Manitoba energy consumers in the here and now.
Documents prepared by RCM and TREE for PUB and Clean Environment Commission hearings are posted on the RCM web site under RCM Speaks at www.resourceconservation.mb.ca.