Dear Editor:

I was pleased to read your editorial in the Osoyoos Times last week under the headline, “Public’s voice must be heard on electricity rates”, until I got to the part where you wrote “while we don’t agree with those Anarchist Mountain residents who argue for a return to flat rates across the board, we support the position – recently articulated by MLA Linda Larson – that there should be special consideration made for those without access to natural gas and those with low incomes.”

You didn’t explain why you support Larson’s position rather than mine, but I suspect it is due to the misconceptions that exist about two-tier rates.

FortisBC (FBC) wants the general public to believe that switching to a flat rate would mean abandoning the objective of “price signals to encourage efficient use.”

However, two-tier rates will encourage efficient use only if the cost of new electricity generation is greater than the cost of existing generation and if the second tier rate is equal to the former.

According to FBC, the cost of new electricity generation is roughly equal to the cost of existing generation and its second tier rate is 40 per cent above the cost of new electricity generation.

So, the two-tier rate is not encouraging efficient use, while a flat rate would produce the correct price signals because it would charge all customers a rate equal to the cost of electricity generation.

The flat rate is also the best option for mitigating harmful air emissions.

Two-tier rates have resulted in enormous bill increases for customers using electricity for space and water heating.

To avoid these major price hikes, such customers would have to reduce their consumption, in winter, by as much as 75-80 per cent.

Clearly, that is not possible through energy efficiency improvements.

These customers can only reduce their electricity bills significantly by switching to natural gas (where available) or to wood or heating oil.

The consumption of hydro electricity produces no air emissions, while the burning of natural gas and heating oil generate greenhouse gas emissions and the burning of wood produces harmful particulates.

Why did the Liberal Government support a two-tier rate system that was clearly not meeting its energy and environmental policy objectives?

Most likely because two-tier rates made it possible to shift a significant portion of the cost burden from the majority of customers (those using fossil fuels for heating rather than electricity) to the minority of customers (those using electricity for space and water heating).

The Residential Conservation Rate became the Residential Cross-Subsidization Rate enabling the government to claim that the majority of its customers were “paying the same thing for electricity in 2016 that they were paying in the 1990s.”

Of course, customers such as myself were now paying rates in 2016 that were about 100 per cent greater than the rates paid in 2008.

According to your editorial, you believe this Cross-Subsidization Rate should be retained providing it reduces the burden on customers without access to natural gas and those with low incomes.

But FBC is being truthful in stating that a special rate for customers without access to natural gas would be “administratively cumbersome” since the amount of electricity used for heating and air conditioning is dependent on external temperatures and would vary by region and by season.

Moreover, it’s not customers without access to natural gas that need a “special rate”, it’s those using electricity for space and water heating.

There are many customers without access to natural gas who burn wood to heat their homes. And there are customers with “access” to natural gas who still use electricity for heating.

Concerning a special rate for low-income levels, it is an accepted principle in market-based economies that support for low income residents is better provided through the tax system than by distorting the price signals that encourage efficient use.

I don’t think you would argue for a system whereby, when you go to purchase gasoline or bread, you pay a different price depending on your income and geographical location.

Why are you arguing for such a pricing system for electricity?

In its July assessment of rate design options, FBC ignored the efficiency and environmental objectives underpinning the Residential Conservation Rate; instead assessing each option against the “principle” that “95 per cent of customers should have bill increases no greater than 10 per cent as compared to existing rates.”

Thus, FBC’s sole criterion was that the minority should continue to subsidize the majority. Since the flat rate wouldn’t enable such customer cross-subsidization to continue, FBC dismissed it on the basis of “unacceptable bill impacts”.

Time-of-use rates are not intended to promote energy efficiency but rather the shifting of consumption from peak periods to off-peak periods.

Time-of-use rates are useful for getting customers to do their laundry on the weekend and to run their dishwashers at night.

However, if forced on electric heat customers, they could encourage inefficient behaviour such as raising thermostats overnight and lowering them during the day; burning wood in the fireplace to keep warm.

It’s my position that the flat rate (with optional time-of-use rates for those customers able to shift their consumption) is, by far, the superior residential rate design option for the reasons I’ve stated above.

Now, I’d like to hear FBC’s and Linda Larson’s reason for rejecting this option because, up until now, I haven’t heard one that makes any sense.

Nick Marty

Anarchist Mountain, Osoyoos, B.C.