FortisBC watchdog from Anarchist Mountain sets record straight about its rates system

By on February 6, 2018

Dear Editor:

I read with interest your article in the Jan. 31 edition of the Osoyoos Times under the headline, “Some Anarchist Mountain residents will pay more under return to single-tier electricity rate, FortisBC says.”I suspect FortisBC’s sudden interest in Anarchist Mountain electricity rates has something to do with our upcoming intervention in the Fortis Rate Design Application.

However, instead of addressing our concerns, the intent seems to be to pit “lower” electricity users against “higher” electricity users to deflect the discussion away from the three real issues that need addressing.

The first issue is that the Residential Conservation Rate is a fraud as an energy efficiency measure.

You may have noticed that FortisBC never talks about the energy efficiency benefits of its two-tier rate system even though promoting “economically efficient electricity consumption choices” is its entire reason for being.

This is because there aren’t any efficiency benefits. FortisBC’s two-tier system, as designed, is actually promoting energy inefficient behaviour by virtually every customer.

The second issue is that the Residential Conservation Rate is, in reality, the Residential Cross-Subsidization Rate. Following the introduction of its two-tier rates, FortisBC stated: “the majority of our customers have benefitted with lower rates and that was the intent of the BCUC when it approved our application.”

FortisBC also stated that these customers benefitted from bill reductions “without having made any efforts towards conservation behavior.”

What happened was that FortisBC increased the rates of the five per cent minority of customers who consume the most electricity per household and used the extra revenue to subsidize the rates of the majority.

Who was this five per cent minority? It was primarily, residents who use electricity for both space and water heating.

Since 2008, the average residential rate has increased from 7 cents/kWh to 12 cents/kWh – an increase of more than 70 per cent.

Under the flat rate, both “lower” and “higher” using electricity customers experienced a 34 per cent rate increase from 2008 to 2012.

But following the introduction of two-tier rates in 2012, “lower” using customers only experienced a further rate increase of five per cent, while “higher” using electricity customers experienced a further rate increase of 50 per cent.

Thus, through the Residential Cross-Subsidization Rate, FortisBC created the illusion among the majority of customers that its rates had stopped increasing when in actual fact they continued to rise at the same rate – only now they were being borne almost entirely by the five per cent minority.

Your January 31st article quoted me saying that, “the system results in users without access to natural gas for heating subsidizing those who can use gas to keep their electricity consumption low.”

This is not accurate. The correct quote should have been, “the system results in customers using electricity for space and water heating subsidizing those who use non-electric sources of energy for that purpose.”

Many customers, without access to natural gas, burn wood for heating and so are on the receiving end of the cross-subsidies. Indeed, a number of Anarchist Mountain residents have increased their wood consumption significantly because of the two-tier rates and are now in this position. But they would still benefit from a return to the flat rate because then they will be able to afford to go back to using more electricity for heat, their preferred option.

The third issue is that charging different rates to different customers for the same service constitutes monopolistic price discrimination (ie price gouging).

And just because FortisBC doesn’t keep the extra revenue from this price gouging but instead uses it to subsidize other customers’ rates doesn’t justify it.

“Undue” price discrimination is forbidden under the BC Utilities Act. And charging customers, dependent on electricity for space and water heating, rates that are 40 per cent above cost is clearly “undue”.

FortisBC’s request to phase out the two-tier rate over five years is actually a request to continue for another five years to promote inefficient behaviour and the cross-subsidization of the majority through price discrimination against the minority.

All of FortisBC’s customers, even those who benefit financially, should be demanding an immediate end to such a rate system and a return to the flat rate. The flat rate will justly charge each customer the same rate (with no cross-subsidization) and, at the same time, promote energy-efficient behaviour by all residents.

I don’t expect FortisBC to respond to this letter but if they do, I would like them to address one additional point. Why has the cost of providing electricity to the residential sector increased 70 per cent over the past 10 years?

Thank you.

Nick Marty

Anarchist Mountain

Osoyoos, B.C.

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published. Required fields are marked *