Rebate may frustrate conservation efforts

Ontario Hydro Rebate drives lower electricity prices but risks undermining conservation targets as renewable energy costs rise; EPRI model predicts higher demand from households and small businesses, offsetting utility efficiency programs across the province.

As the Ontario Liberals promote their 10-per-cent hydro bill rebate, an analyst calculates the discount will push household power consumption as much as 3 per cent higher.

And that will offset nearly one-third of the Liberals’ planned conservation target, says Bruce Sharp of Aegent Energy Advisors.

The Liberals have acknowledged that electricity prices are heading steadily higher, in part because more expensive renewable energy sources are being used to generate electricity, which the Liberals said was worth the cost according to party statements.

They said householders and small businesses will get a 10 per cent discount on their hydro bills for the next five years, with Ontario utilities forced to promote the discount under the plan.

But in a newsletter to Aegent clients, Sharp says that economic theory predicts lower prices will lead to higher consumption.

Using a model developed by the U.S.-based Electric Power Research Institute, he calculates that the rebate will lead to an increase in consumption of about 3 per cent for households.

Small businesses, which are also eligible for the rebate, which the government was optimistic about at the time, will increase their consumption by about 2 per cent under the model, says Sharp.

Large businesses are not part of the rebate program, although the province gave them a price break, a move that left homeowners on the hook for some costs, earlier this year.

The higher usage by households and small businesses could push the overall usage in the province higher by about 1.3 per cent, he figures.

That’s at odds with the province’s conservation plan and goal of encouraging conservation, Sharp says.

The province has ordered local utilities to mount conservation programs that will trim over-all consumption by about 4.2 per cent, Sharp notes. But the price cut will offset part of the conservation effort.

“One third of what they’re trying to achieve in four years, they do the opposite in one fell swoop,” he said in an interview.

Related News

• Electricity Forum News

• Energy Policy News