Electricity Regulation and the Small Consumer: The View from Main Street,

in Saint John’s North End

A presentation byKurt Peacock2007/08 Crabtree Scholar in NB Public PolicyUNBSJ

A challenge rooted in history: how does regulation balance the needs of the small consumer against the regulated entity?

“…The specialists who were to staff a regulatory commission would be restrained by the data they commanded. Unhappily this need not be the

case. Emanating in large degree from the organizations to be controlled, the data explored by administrative commissions can often

capture them. In such a pass, regulation may approach consent, and stability becomes stultification. Nor do experts, any more than other men,

live by data alone. Besides common colds and ulcers, they develop loyalties and habits. In government, as in business or in education,

administrators become to some extent the victims of their institutions… [they develop] a fatal disinclination to innovation, sometimes to

formalized action beyond the shuffling of bureaucratic dust.” - historian John Morton Blum, writing on the challenge of effective

regulation in The Republican Roosevelt

Some Views of NB Power, both within and outside the Boardroom

• “New Brunswickers in all walks of life seem to agree that ‘electric power pioneers prosperity’ – that its greater use goes hand in hand with higher productivity, earning power, and a better standard of living for all its citizens.” - from a 1954 Annual Report

• “…We continue to make decisions that consider all options to build and sustain a power grid for the province that is safe, reliable, and fairly-priced for all New Brunswickers.” - from a 2005 Annual Report

• “With the last increase to the power rates in New Brunswick…we will not be able to heat our home…with our home being heated totally be electricity we will be in the position this coming winter to either heat our home or feed our bodies.” - signed Starving and Freezing in Saint John, a letter sent to the regulator in Fall 2006

• “It is simply morally wrong to manage a company in such a manner as to cause it to be in debt all the time and not make more meaningful action towards those who make the decisions to become more inwardly fiscally responsible. Any more hikes over the next 5 years is simply out of the question for those who barely stay warm now.” - a letter from the former director of the Fredericton Emergency Shelter, sent to the regulator in December 2007

The tension between small consumers and the public utility is one of the most pressing issues facing the

provincial regulator• 1/3 of province’s public debt is owed by the NB power group.

These billions, combined with escalating fuel costs, are creating significant rate pressures on the utility...

• 60% of low income quintiles rent, according to Statistics Canada. This population, which includes a number of seniors, lone parent families, and other demographic groups, is often vulnerable to rate shock…

• While major users routinely take part in the regulatory process, the vast majority of the population is far removed from the public hearings. This usually means that hard questions surrounding rate equity - not to mention less-defined issues related to customer service (disconnects, interest penalties) - are often under-examined at rate hearings

This report was developed throughpartnerships with:

In Saint John’s very high poverty neighbourhoods, the majority of dwellings are rented. These

neighbourhoods

are more dependent on government institutions like the Rentalsman, and they are more

vulnerable to issues like energy poverty.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

CMA City G.B.-Westfield

Rothesay Quispamsis Very HighPoverty DAs

Fredericton Moncton NB Canada

Percentage ofdwellings thatare rented

The Energy Challenge is especially pressing on low- income households, whose incomes are not keeping

pace with expensesNB Minimum Wage in Constant 2008 $

$5.13$5.69

$6.48

$7.29

$9.01$8.70 $8.66

$7.90

$6.94 $6.70$6.99 $6.86

$6.59$7.02 $6.95 $6.87 $6.77 $6.84

$7.24$7.75

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

1965 1967 1970 1972 1975 1978 1980 1982 1985 1987 1990 1992 1995 1997 2000 2002 2005 2006 2007 2008

The Energy Challenge is seen in the number of NB households whose power is

disconnected

A question of equity: NB Power charges its consumers a much higher monthly service charge than its provincial counterparts

This represents an effective toll on the right to use electricity

A question of equity: under its current rate design, NB Power charges a higher rate per kWh to its smallest customers than to its largest

The declining block rate represents an income redistribution from poor NB residents to large consumers of energy

If we can have a consumer advocate for car insurance, why not energy?

•The current provincial government pledged a more activist role in energy, but so far has been principally focused on energy generation, promoting an ‘energy hub’•New Brunswick residents need a full- time consumer watchdog on the energy file, to ensure that the decisions being made by NB Power and at the EUB are in the best interests of small consumers •An ‘energy hub’ should not simply benefit those involved in production, but should also extend its benefits to the small energy consumer

How can we ensure that electricity regulation benefits Main Street? Some Ideas…

• The level of co-operation between Efficiency NB and energy utilities should be examined by the regulator. Low-income households are often found in older, drafty units, yet they are arguably more likely to face disconnection than participate in a residential efficiency upgrade.

• The regulatory process must ensure that the rate design is not discriminatory toward small consumers (i.e. no declining block rate, lower monthly service charges)

• Pressure should be put on utilities to lower their interest penalty from credit card levels, and disconnections should be closely monitored

• Non-traditional interventions, including public comment days, should be welcomed by the regulator

• Stronger oversight on the energy file should be encouraged, including the establishment of a consumer advocate

• The idea of a provincial ‘energy hub’ should recognize that the energy consumer comes first

A final word from Ms. Christina Payne, who participated in the 2006 PUB rate hearing

• “…[being disconnected] was not a pleasant experience. This could have been life-threatening for my daughter…In Manitoba they have a law that prevents disconnections in the winter. Why can’t we have the same law?…We need more rules, regulations and laws to prevent my situation from happening again…The point is fairness. Think about families that are struggling to get by, especially in the winter…This rate increase is something I can’t afford and neither can other residents in New Brunswick. My daughter needs power to live. Power is not only for the wealthy, but for low income families as well.”