Does Hydro One Encourage Conservation? Komorowski’s Korner

RK Here is the latest from our Columnist Richard Komorowski:

In the last column, we discussed how smart meters, which Hydro One is expected to start using in 2010 or 2011, are going to have a major impact on your electric bill. At the moment, Hydro One customers pay a fixed monthly service charge of $16.35 per month, if they live in an urban area. Rural residents can find themselves paying a much higher monthly fixed cover charge, $21.31, or even $27.16, depending on the location.

The justification for these cover charges is that they help cover the cost of delivering the electricity to your property, and in this case Hydro One deserves some credit for making their bills transparent. On the other hand, this kind of pricing scheme discourages conservation.

According to Hydro One, each residential customer uses an average of 1000 kilowatt hours per month, for which they pay $123.56 per month, plus tax. If you were to cut your electricity use by 10%, it’s reasonable to expect your bill to drop by 10%. Wrong. If you dropped to 900 kWh per month, the monthly saving would be 100 kWh x $0.1131/kWh, or $11.31 per month, or only 9.15% of your bill. In other words, you’ll still be paying a dollar a month more than you should.

Now, if you are lucky enough to be served by Cornwall Electric, your monthly 1000 kWh would cost only $111.25, and if you reduced your consumption to 900 kWh, your saving would be $10.42, or 9.37%.

As you can see, you can save a greater portion of your electric bill if you live in Cornwall – 9.37% compared to 9.15%. Not a great deal, but it all adds up. The reason for this is that Cornwall Electric does not impose the $16.35 cover charge – it’s all included in the price per kilowatt, so small residential users don’t have to pay relatively more than larger users. The only reason a Cornwall consumer will not save the full 10% is because Cornwall Electric charges relatively more for the first 250 kWh used each month.

The following chart illustrates the difference in rates between Cornwall Electric and Hydro One for a month’s electricity. Notice that regardless of how much you use, Hydro One customers will always pay more than Cornwall Electric customers.

hyd If Hydro One were to remove this cover charge, which actually discourages conservation, and increase the price per kilowatt proportionally, but in such a way that the bottom line does not change for the average 1000 kWh per month user, their rate per kWh would increase to 12.36¢/kWh. Now, if this customer were to reduce his or her electric use to 900 kWh/month, the saving would be $12.36 a month, or 10% of the bill.

Hydro One claims to be making a genuine effort to reduce peak electricity demand throughout the province, which will reduce costs for everyone and result in a better environment and less carbon dioxide. But to do this, they are imposing Smart Meters at an enormous cost to the consumer, both in terms of cost of the meter itself, and the over elaborate price structure, which will be very difficult to understand and take advantage of.

If they were really serious about reducing demand, they would eliminate their $16.35 per month cover charge, so that the owner of a small, two-bedroom home in, for example, Long Sault, is not subsidising the owner of one of the million dollar mansions along Highway 2 towards Lancaster. Secondly, they would revise the Smart Meter tariffs so they could be understood and easily applied by everyone.

By the way, there is some confusion in Cornwall about Smart Meters. If your electric meter has a series of dials to indicate consumption, it is not a Smart Meter. Smart Meters are digital and record not only how much electricity you use, but also when you use it. Some households in Cornwall do have digital meters, but these are not Smart Meters. Cornwall Electric has no plans to introduce Smart Meters any time soon, and their billing is based solely on the electricity you use.

In the next issue, we’ll discuss electricity prices and Smart Meters in the UK, and how the rate structure really does encourage conservation and load balancing. In further issues, we’ll discuss ways to conserve energy (i.e. DOLLARS), without reducing comfort.

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