When it comes to encouraging citizens to reduce electricity consumption, is BC Hydro like the fox being in charge of the chicken farm?

THERE CAN BE LITTLE DOUBT that we will pay a lot more for electricity before long, thanks to the Site C mess and declining revenues at BC Hydro.

This is in spite of December 1st news releases from both BC Hydro and BC Minister of Energy Bruce Ralston trumpeting a supposed rate decrease in Hydro rates, retroactive to April 1, 2020. As a result, residential ratepayers will get a credit in early 2021 of $4. 

Don’t spend it all at once, because you’re going to need it—to pay BC Hydro rate increases that took effect last year. The two releases omitted that minor fact. Decisions on rates are made, not by Hydro, but by the BC Utilities Commission—which gets its marching orders from the Province. The Commission made its rates decision on October 2, 2020, and issued a press release three days later. In that decision, the Commission did indeed approve a 1.14 percent decrease effective last April. But in the same decision, it also retroactively approved a 6.85 percent increase in rates, effective April 1, 2019. Had the Commission not approved that increase on October 2, we would likely be receiving a far bigger refund than $4. As well, the Commission said rates are subject to “adjustment” due to the cost of installing electric vehicle charging stations.

BC Hydro’s Site C dam and powerhouse under construction

In his cover letter for a July 31, 2020 report to the BC Utilities Commission, BC Hydro President and CEO Chris O’Riley said he had “serious concerns…regarding schedule, scope and budget” regarding the Site C project. O’Riley could not even estimate the final cost, let alone the completion date. Budgeted originally at $6.2 billion, Site C is now officially expected to cost $10.7 billion. A 2017 BC Utilities Commission report said the final price could hit $12.5 billion.

As well, BC Hydro’s revenue is falling, another fact omitted from the December 1 news releases. According to its September 17, 2020 financial report, net income for the three months ended June 30, 2020 was $6 million—$19 million lower than the same period a year earlier. That’s a 76 percent drop. Hydro is already using “deferral accounts,” which despite government protestations could well mean that future ratepayers and taxpayers will be dinged for the missing loot. In February 2019, then-BC Auditor General Carol Bellringer said that the utility had amassed a total of $5.5 billion in its 29 deferral accounts. Somebody is going to have to pay them off, and the tooth fairy doesn’t have pockets that deep. For these reasons, it is not unreasonable to expect sharp increases in electricity charges sooner rather than later.

My guess is that we will start getting dinged through sharp increases in electricity charges sooner rather than later.

Heat pumps may be one part of the solution to the looming increases. By transferring heat from the outside—even when the temperature is minus 20 degrees Celsius—they produce up to 5 times as much heat energy as they use in electric energy. This compares with electric baseboard heaters—the most common kind of electric heating in BC—which produce approximately the same amount of heat energy as they use in electric energy.

For those now heating their homes with natural gas, a significant benefit in replacing the furnace with an electric heat pump is the virtual elimination of greenhouse gas (GHG) emissions produced largely by problematic fracking. Heating BC homes results in total annual emissions of 2.6 million tonnes (Mt) of CO2 equivalent, plus an additional 1.8 Mt for water heating. (Figures are for 2017, from Natural Resources Canada.) Nearly all of these emissions are from burning gas. Emissions from residential space and water heating amounts to approximately 7 percent of BC’s total GHG emissions. 

But heat pumps are not cheap, even with rebates of up to $6,000 offered under the BC government’s Better Homes program. No qualifying heat pumps cost as little as $6,000, and not everyone can afford to pay $10,000 or more up front, no matter how much energy they would save by making the switch. The rebate scheme may in fact be supporting those who would have installed heat pumps anyway, then happily pocket the handout. (The program also offers up to $2,000 in rebates for heat pump water heaters.)

A simpler way of reducing BC Hydro payments is to generate your own electricity. Home solar power makes more sense these days, given dropping prices and increased efficiency. The cost of photovoltaic (electricity-producing) solar panels has dropped by 85 percent in the last 10 years, and their efficiency has doubled in the same period. Also, unlike Site C power, solar is genuinely green. 

Does solar power make sense for homeowners? Dozens of my neighbours in the Southern Gulf Islands think so. Tom Mommsen is the co-founder of the Southern Gulf Islands-based Salish Sea Renewable Energy Co-op (SSREC), which actively advocates for zero-emission energy. But SSERC does more than advocate. It makes bulk purchases of solar panels, and arranges inspections as well as installation and tie-in to the BC Hydro grid.

Tom Mommsen, co-founder of the Southern Gulf Islands-based Salish Sea Renewable Energy Co-op 

“Residential solar is already less than half the cost of retail solar from BC Hydro, with costs decreasing steadily while BC Hydro rates keep increasing,” Mommsen said in an email. “Solar power is considerably cleaner than mega-hydro, does not involve transmission losses, can be deployed quickly, and its production is under local control. All this is anathema to a utility like BC Hydro that runs centralized generation stations far away from the majority of its customers.”

At current costs, Mommsen said, homeowners with solar panels produce 1 kilowatt hour (kWh) of energy for less than 6.5 cents (after taxes), while they would have to pay 10 to 15 cents, plus taxes, for the same kWh delivered by BC Hydro.

Mommsen provided an example, based on his experience with recent solar installations, which are tied to the BC Hydro grid to ensure power is available at night and on cloudy days. 

Average BC annual residential electricity consumption is approximately 10,000 kilowatt hours (kWh), costing about $1,200 annually, not counting connection fees. To cut that bill in half, a homeowner could install a 4.5 kilowatt (kW) solar system, at a cost of $9,000, Mommsen suggested. Even with an interest-free loan, using the resulting annual BC Hydro savings of $600 to pay off the loan would take 15 years to repay the $9,000. (Energy output from the solar panels refers to installations in the Southern Gulf Islands.) 

Mommsen noted that financial assistance could make a huge difference in the uptake of solar power. (Oh, the BC government doesn’t have a lot of money to play with these days? I know where they could find around $6 billion to subsidize solar installations. Hint: It starts with ‘L’, ends in ‘G’, and has an ‘N’ in the middle.)

In practice, the savings from solar installations will increase, as BC Hydro rates inevitably grow and solar costs continue to decrease by at least 5 percent per year, Mommsen said. “Still, anyone with solar will have loans with very long terms unless financial backing is provided,” he said. Not only that, BC Hydro is unlikely to take widespread adoption of solar power sitting down. Said Mommsen: “You can rest assured that BC Hydro is already thinking about increasing the monthly connection fees for solar customers.”

Concludes Mommsen: “Anybody thinking about energy would be showing off their ignorance by not going solar.” 

BC Hydro did not respond to a Focus request for comment on financing energy upgrades by the time of publication.

Are reduced electricity costs from energy upgrades only for those who don’t need them: the wealthy? 

One way to encourage widespread adoption of home energy upgrades is to offer low- or zero-interest loans, repaid through the resulting energy savings. That means customers might no longer need to find large sums upfront, and once the loan is paid off via energy savings, they would end up with large reductions in their energy bills.

In fact, the Province’s CleanBC Better Homes program does have a low-interest financing program for switching from a fossil fuel heating source to a heat pump. Loans range up to $40,000. However, the amortization period is five years, meaning that even at zero interest, participants have to repay the entire sum in that period. For the maximum loan, participants would have to come up with an extra $8,000 per year for five years: The program is plainly not for the average BC household.

Besides the Better Homes loan, BC does have some experience in financing energy upgrades. In November 2012, the Province launched two pilot programs, using “On-Bill Financing” (OBF)—in which loans are repaid through utility bills. The pilots were in Colwood, involving BC Hydro, and in the South Okanagan with Fortis BC. How did they turn out? “Both pilots were major failures,” reported the Pacific Institute for Climate Solutions in a September 2015 study. A grand total of two residents took part in each program, who were lent a grand total of $20,000.

This compares unfavourably with a highly successful Manitoba Hydro program, which consistently attracted 5,000 new participants annually, and lent a total of $300 million over a 13-year period. Average energy savings per household reached 825 kWh per year.

One drawback of BC’s 2012 OBF scheme was that the loans were taken out by individual homeowners, which can be problematic. For instance, what happens if they move before paying off the loan?  

The answer to this and related issues may be to register the loan against the property title.

That is exactly the thinking behind Property Assessed Clean Energy (PACE) programs, which now operate in 37 of the 50 US states. That way, when a house is sold, both the upgrades and any outstanding loan balance form part of the sale. So far, according to the PACENation website, more than $8 billion US has been invested in 280,000 programs across the US, producing more than 134,000 jobs.

Municipal governments are pushing PACE programs for energy upgrades. But they cannot launch in BC without enabling legislation from the Province. Required are amendments to the Community Charter and the Vancouver Charter. At the 2019 convention of the Union of BC Municipalities, delegates approved a resolution urging the Province to pass such legislation. In its response, the government waffled.

“The experience of other jurisdictions with PACE has been mixed, including some concern with unintended consequences…” said an unnamed spokesperson in the then-Ministry of Municipal Affairs and Housing, in a written response to the UBCM. “The Province is open to further discussions with UBCM about whether PACE, or a different approach, can best deliver on goals.”

Despite this lukewarm response, BC’s newly re-elected New Democrat government is now publicly acknowledging the importance of low-cost financing for building energy upgrades. Among Ralston’s tasks, as laid out in his November 26 mandate letter from Premier John Horgan, is to “enhance energy efficiency programs and incentives for residential and commercial buildings, including Property Assessed Clean Energy financing to help homeowners make energy-saving retrofits and repay the cost of them over time.” (In the November cabinet shuffle, Ralston continues his role as energy minister of the renamed Ministry of Energy, Mines and Low Carbon Innovation.)

As well, this fall, in its September 17 Economic Recovery Plan, the Province committed $2 million towards a “road map” and pilot PACE program. “PACE is a financing tool for home and building owners that addresses key market barriers to the adoption of energy efficiency and low-carbon retrofit measures in commercial and residential buildings,” an energy ministry spokesperson said in an email to Focus.

Madi Kennedy is an analyst with the Pembina Institute, a non-profit think tank that has long advocated for PACE programs, playing a leadership role in PACE BC, a coalition of environmental organizations and building owners, among others. She said in an email that PACE programs need to be scaled up considerably. “In BC, to meet climate targets, we need to retrofit 30,000 homes, 17,000 apartments, and 3 million square metres of commercial space every year until 2050,” Kennedy said in an email.

BC Green Party leader Sonia Furstenau said energy retrofit programs should treat all electricity customers equally. “It is important to make climate policies accessible to all—not just those who own their own homes and have disposable income,” Furstenau said in an email to Focus. “Enacting PACE-enabling legislation is one way to provide access to long-term financing, repaid through an addition to property tax bills and transferred from one owner to the next when properties are sold.”

SSERC’s Mommsen said much depends on whether BC Hydro is in charge of energy upgrade financing, noting that there is a clear conflict of interest between energy efficiency initiatives, BC Hydro’s business model, and government policy regarding fossil fuels and mega-hydro. 

“As long as efficiency, solar policy, and rebates are run by BC Hydro, there is no hope,” Mommsen said. “The foxes are in charge of the chicken farm.”

 Russ Francis wishes well-paid so-called “public engagement” staff—formerly called public relations experts—in the BC Government, BC Hydro and elsewhere would stop omitting highly relevant bad news in their “everything is wonderful” press releases. Doing so might boost their credibility.