Thursday 20 January 2011

Of TREEs and inverted rates

If you were a tree, what kind of tree would you be? A willow? A boabab? A one-man environmental advocacy group?

In the Free Press story earlier this week Lower electric bill for poor urged, something seemed odd: why would environmental groups lobby the Public Utilities Board for lower rates for anyone? Lower rates encourage greater power usage, which is bad for the environment. So .. I decided to take a peek: Who are these groups? How can non-profit organizations afford to hire fancy American lawyers?

The first group -- Time to Respect Earth's Ecosystems (TREE) -- is very small. How small are they? They are soooo small that their head office is a nest. Haha. Oh, I kill me... Would you believe I just came up with that? Actually, this is their head office:

It turns out that TREE is actually just a guy: Peter Miller, Professor of Philosophy, University of Winnipeg. He doesn't even have a web site, but he does have a mission: "Advocacy for a sustainable forest agenda in Manitoba."

So he's a philosopher who is for sustainable forests, but he wants to help poor people. Okay. What about the other group?

Green Action Centre, formerly Resource Conservation Manitoba, is a much larger group. Or, I should say, they are a group. They have a web site with all kinds of information about their causes and activities, which include active transportation, recycling, reducing emissions, composting ... the list goes on, but oddly the list does not include anything about lower hydro rates for poor people. It's not on their blog, or their "events and actions" page, or anywhere else that I could find.

Why is this group hiring lawyers to lobby the government about a policy that's not even on their agenda? Well ... probably because the aforementioned Professor Peter Miller in on their board of directors. What appears to be happening here is that Prof Peter is leveraging the name of a well-known group to lend legitimacy to his personal quest.

On to the second question: how can they (he) afford to retain and pay these consultants and lawyers? Answer: he can't and he doesn't. Who does? You do. Indirectly.

It turns out that this thing about petitioning the Public Utilities Board isn't a one off. In fact, it's pretty much an annual event, and each time Peter Miller applies for and receives a full reimbursement of his costs:

Accordingly, the Board (Public Utilities Board) will award cost in full ... Costs shall be payable by Manitoba Hydro within 30 days of the date of this Order.
He did this in here, here, here, and here in 2008 when he was awarded an eye-popping $142,066 for lawyers and consultants from Arlington, MA, even though according to Hydro the value of their input was very questionable:
The evidence provided by Mr. Weiss to the GRA proceeding was not relevant ... Further, the evidence was duplicative, since it was virtually the same evidence provided by Mr. Weiss, through RCM/TREE, in the 2007 Centra Gas General Rate Application.”
142 Grand for redundant information. Nice. Now, in relation to something like, oh .. I don't know .. bipole III, $142k is peanuts. Nevertheless this is a very expense hobby that Peter Prof has -- it has cost over $300,000 in the last five years alone ... but it hasn't cost him a cent.

So that's who they are and how they get their money. Now ... why? Why is a guy/group whose mission is to protect forests intervening in a PUB hearing to reduce Hydro payments for low income people? This is somebody who once said that supplying power below cost was a "crazy policy", and that "if no one is feeling the pinch from energy prices, why bother?" (source)

It's a tough question to answer. It's not immediately apparent why he's doing this, though I suppose I could phone him and ask him if I really wanted to. I think he's just bored. You may have guessed from my subtly sarcastic remarks two posts ago that I think a two tiered rate structure is a dumb idea. I don't doubt that Peter Prof would agree that it's a dumb idea. He's just run out of good ideas to lobby PUB for.

I actually happen to think that a previous idea of his is a good one ... or at least not a bad one: an inverted rate structure. This is where the first X amount of power is charged at a low rate, and the excess power is charged at a high rate.

If you really want to promote conservation while not bankrupting poor people, this is the way to do it, because as economists like to say: people make decisions on the margin. That is, it's your marginal cost of the next unit that you take into consideration, not the cost of all the units you bought before. Let me illustrate: when you go your friend's social and buy tickets for the 60-pounder of booze, you really only want to buy one ticket because your friend is a cheap skate and his fiancée is a bitch. But you buy three tickets, because the marginal cost of the two extra tickets is half what the cost of the first ticket is. It just seems stupid to buy only one ticket.

Manitoba Hydro actually does have an inverted rate structure ... sort of. There is a slightly higher rate for electricity use in excess of 900 kWh per month. I just checked my past two hydro bills and I use about half that, even though I routinely waste gobs of electricity. I leave my computer on overnight and while I'm at work. I never unplug anything. I have incandescent Christmas lights still, and they're set to turn on at 11 AM. Actually, they're set to come on at dusk, but you get the idea.

A far better idea than having separate low rates for poor people, or capping their payments at 6% of their income, or whatever dude is suggesting, would be for Hydro to lower the rates for a basic minimum level of monthly electricity use -- enough to run your fridge, stove, and lights. Nothing more. Set that at maybe 3 ¢ per kWh. Everything above that should be charged at cost, whatever that is, or maybe a little more. Probably something like 9 or 10 ¢ per kWh. If I'm paying three times as much for my marginal power usage, I may be more inclined to power down my PC at night.

Low income people should save money overall because presumably they don't have 60 inch plasmas sucking up megawatts every evening, so most of their power usage should fall within the lower rate bracket. The catch is that people who heat their homes with electricity will get screwed. Maybe something else can be worked out for them. It should be easier for Hydro to keep track of who has baseboard heat than how much everybody's income is, after all, Hydro is the gas supplier too.


bwalzer said...

In particular the inverted rate thing would be bad for people using geothermal heat pumps, which is something Hydro is promoting right now...

The thing is, electricity rates in Manitoba are already some of the lowest anywhere. Is there any actual evidence that the cost of electricity is an actual problem for low income people? I've been living on a low budget the last few years and the only reaction I have when opening my Hydro bill is happiness at what a great deal I am getting. That's with an electric water heater and indiscriminate use of space heaters in the spring and fall.

cherenkov said...

The evidence seems to be that some people aren't paying their Hydro bills, and the suggestion is that if we lower the rates we'll see all of these savings from not having to hire bill collectors. I don't buy it, as I've commented elsewhere.

Brian said...


Re-read what you've got to clean up the couple of typos I see, because I'm about to recommend this piece as a shining example of what blogging should be in the 21st C.

Bang-up job. Bravo.

Anonymous said...

Excellent Blog post!

very nice work.

One Man Committee said...

Interesting post.

I wonder what Miller's end-game is, though? The conventional wisdom about the Manitoba environmental lobby is that they consider power rates too low - Miller even gets quoted to that effect in this interview with the FCPP:

So why the argument for two-tier rates? Does he want rates raised for the general public but kept low as a gesture of kindness for those with low incomes? Or am I missing something?

On another note, it is verging on scandalous that an individual can bring in high-priced lawyers and consultants from the US to rattle off some facts and figures and stick Hydro with the bill for tens, if not hundreds of thousands of dollars in fees. Something is wrong there.

Very interesting post.

cherenkov said...

Thanks for the comments, guys.

@Brian: I cleaned up some of the typos. If you see more let me know. Somehow my Firefox at home lost its spell check capability.

DriveGoddess said...

I want to look deeper into this given that I heat my home with electricity.....I wonder if I am being penalized as such. Last year I had to fight for seven years worth of being charged for gas which I do not have (I was being charged around ten bucks a month) and as well being charged for multiple meters which do not exist. The fuck ups just seem to keep on coming.

I took the credit they offered but in my estimation it was about five hundred dollars out.

cherenkov said...

@DG: I lived in a duplex once and was getting charged for the other guy's unit. Hydro had them mixed up. They did come out and fix it after I convinced them it was wrong .. which is a good thing because otherwise I would have just jacked my heat up to 100 degrees and let the other guys pay for it.

unclebob said...

The principle of inverse rates has a certain amount of merit if you want to lower consumption but this assumes that it is good to lower consumption so Hydro can sell the surplus. Unfortunately the nutbags at Hydro will go off and sell the surplus to the US at 3.5 cents which they are doing meaning that we have sacrificed so they can squander.

A second question surrounds the practice of not collecting which you mentioned. Again if Hydro is already squandering the resource for political or social purpose why shouldn't those people, who aren't going to pay anyway,turn their thermostats to 100 degrees and open the windows? It is not as if I haven't seen this the same as you.

Both circumstances screw up an otherwise meritorious idea and there are probably other consequences like having a second meter for my house and who knows what else creative to thwart the idea.

An alternative might be to export nothing and force economic activity to come here where we hold the resource for ransom.

Of course there are problems with that too but the fact that there is good discussion on the table about Hydro policy is encouraging.

I have very little faith that Hydro bureaucrats, if left alone will have even the lowest level of competence to deal with this.

cherenkov said...

Bob, in the short term if we reduce consumption Hydro has more to sell to the U.S. at whatever rate; but in the long term it could allow them to delay construction of a dam, perhaps saving them money.

You have no faith in their bureaucrats, but I don't think it's all the Hydro bureaucrats .. the province uses Hydro as a policy tool and I think a lot of the decisions are a result of pressure from the government. West-side Bipole III is the obvious one, but pressure to build money-losing wind farms, to sign money-losing export contracts, all so we can look green (but not actually be green).

The recent news that Hydro was delaying closing on export contracts because they couldn't get the price they wanted was encouraging to me. There's no need to rush into that. If you can't make a profit off the exports than don't sign.

RM said...

@Bawlzer, "In particular the inverted rate thing would be bad for people using geothermal heat pumps, which is something Hydro is promoting right now..." Hows that? Geothermal heat pumps use electricity to run the compressor as well as the fans. Quite a lot actually. for Hydro, a gas heated home is a far better option. Geo is political.

Regarding being green... Hydro doesn't really want you to be green unless it helps their bottom line. We can't run natural gas vehicle here, because Hydro has Centra and doesn't want you running it in your car/truck. Hydro won't let you have a wind generator or solar tied to the grid, claiming safety issues, but if you prouced enough to make your meter run in reverse you'd technically be selling it back to them at the same price and they can't sell the extra power for enough. "Green" has become a false ideology they exploit to their own ends.
Good post.

unclebob said...

I agree it is not specifically Hydro and more some influence from the current occupants of the legislature.

The problem in my view is that they are too fatally attached and because of this Hydro has become a social tool as opposed to a company responsible to its true stakeholders

Josh Brandon said...

There have been a number of misconceptions regarding the Green Action Centre/TREE report on affordable hydro programs. A blog entry on the topic is at: The full report can be downloaded from the section on the front page of our website titled "Electricity: How Affordable is Cheap?".

cherenkov said...

Thanks, Josh. I posted a reply on your website.

Peter Miller said...

Cherenkov, I've posted a reply to your comment at the Green Action Centre website.

I'll make another correction here though.

Steve Weiss cost only $5,400. Other costs were incurred by other experts and our Winnipeg lawyer. Although Hydro was dismissive of Weiss’s evidence, the PUB was not. See the PUB’s discussion of the issues he raised in Board Order 116/08, pp. 229-231 and Directive 18(d), which directs Hydro to propose a low-income bill assistance program for approval.

Rate hearings are a complex, contested process, which the Manitoba Legislature set up by The Crown Corporations Public Review and Accountability Act.

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