A NEW STRATEGY TO ADDRESS BC’S CONSUMPTION PATTERNS (2007)

With a strong desire from the business community to meet BC’s new public policy goal of self-sufficiency, combined with the requirement for BC Hydro to meet 50% of our incremental demand for new energy by 2020 through conservation there is a growing sense of urgency from the business community on the need for a comprehensive demand-side management strategy for all sectors and consumers across British Columbia.

In the past BC’s increasing demand for power has been met through the capacity of our heritage assets. In more recent times this need has been served by increased levels of imported power.

While BC Hydro is currently looking at adding significant new generation capacity, reducing our demand for electricity is our best chance to address the current and future supply gap. With this in mind the new Energy Plan calls on BC Hydro to acquire 50% of incremental demand through conservation. There is now a need for the government to take a proactive approach to ensuring all British Columbians have the resources and incentives to view energy efficiency as an integral part of planning for the future of their homes and their businesses.

The Chamber is fully supportive of the efforts, effectiveness and funding of Demand Side Management (DSM) programs at BC Hydro such as Power Smart. There is always room for improvement, but in this day and age – where environmental and energy costs are significant concerns – BC Hydro continues to be a national leader in sustainable DSM programs. This is no longer enough.

Each program must meet the rigors of a “Total Resource Cost Test”, which means Power Smart must deliver energy savings at a ratio of greater than 1:1 relative to supply additions. In many cases, investments in energy efficiency programs far exceed the fundamental benchmark for new additions.

The best way for BC to promote the development and use of new energy technologies is to support DSM programs. To that end, The Chamber endorses the success and effectiveness of programs such as Power Smart and encourages BC Hydro to focus its future marketing efforts on small- and medium-sized enterprise, as both residential and industrial programs are ostensibly mature.

British Columbians have some tough choices ahead. To be able to make these choices we need to be clear about where we are going and what we need to do to get there.

The new Energy Plan provides both the impetus and the requirement for a significant public information campaign to educate British Columbians on the importance of achieving the governments goal of self-sufficiency by 2016. The Chamber believes an education campaign that clearly points out that we are a significant net importer of electricity and that this electricity may come from coal burning plants in Alberta or even nuclear facilities in Washington State would begin to make British Columbians think about their consumption.

While education and existing programs and initiatives such as Power Smart are important elements of meeting these targets the key to our success will be ensuring that the behaviour of British Columbians changes. One of our primary challenges in changing behaviour is that BC continues to enjoy low electricity rates compared to other North American jurisdictions. This competitive advantage has been driven by our access to a heritage asset that has produced significantly lower-cost electricity than that enjoyed by other jurisdictions.

The Chamber remains concerned that this low-cost electricity will be unsustainable as BC adds new generating capacity that will inevitably see an increase in the cost of electricity. The Chamber is clear in its message; the increased cost of electricity must be reflected in the price signals provided to consumers. Without this change in pricing, individuals will have no incentive to change their consumption patterns; this will, in turn, continue to drive increases in demand while also detracting from individuals ability or desire to view conservation and energy efficiency as a cost-effective and necessary priority.

The Energy Plan states that to ensure BC maintains its competitive advantage in energy the provincial government will work with BC Hydro “to ensure utilities have effective processes for securing competitively priced power.” While The Chamber needs more detail on the practicalities of this statement our members remain concerned that without a clear recognition of the serious limitations placed on BC Hydro via the “least cost supply measurement” (LCSM), we will continue to seriously limit the economic potential of the sector.

Both BC Hydro and the BCUC are bound to the principles of “least cost” and “cost containment”. Unfortunately, these principles are anachronistic in light of the market potential that surrounds the province and in light of BC’s economic resurgence. The fact is that BC’s energy deficits have increased significantly, without an increase in capacity as well as a reduction in demand our supply will be unable to support economic and population growth.

The other side of the challenges faced by supply side additions is the nature and extent of public and business participation in demand side management strategies. Central to this challenge is the lack of incentives and awareness for the options provided to them by energy and service providers.

For The Chamber the central issue remains BC Hydro’s pricing of electricity. The Chamber believes that BC Hydro has attempted to construct a level of accurate price signals through their application to modify its pricing for industrial users through the creation of a “stepped rate”. However, without an extension of this concept to all customers, including residential, along with an introduction of time-of-use pricing BC Hydro will remain incapable of providing incentives to initiate the change in behaviour required to meet our targets for conservation.

The Chamber notes the substantial success of BC Hydro in encouraging conservation and energy efficiency. However, in the absence of an ongoing surplus of capacity and energy generation capability, combined with prices that do not demonstrate the true cost of the power used, The Chamber must question the backup plans of the provincial government and BC Hydro in the event the DSM results fall short of the ambitious targets set by The Energy Plan.

THE CHAMBER RECOMMENDS

That the provincial government:

1. through the BC Utilities Commission, should direct BC Hydro to introduce pricing of electricity that reflects the true cost of consumption patterns to all consumers of their energy decisions;

2. modify the BCUC’s “least cost supply measurement” to ensure a portfolio of generating capacity at reasonable cost for future generations;

3. work with BC Hydro and Fortis to increase awareness and accessibility to Power Smart and other DSM programs to encourage greater energy conservation in domestic and commercial sites; and

4. provide greater focus of Power Smart expenditures on small- and medium-sized enterprises, as both residential and industrial programs are ostensibly mature.