C8-4 THOMAS BUTLER LLP

THOMAS BUTLER700 – 1708 Dolphin Avenue, Landmark II Tower Kelowna, BC, V1Y 9S4 *Kelly Cairns, Partner Telephone: 250.763.0200 Email: [email protected] Facsimile: 250.762.8848 *Law Corporation (www.cairnslaw.ca)
May 24, 2007 BC Utilities Commission Attention: Commission Secretary, R.J. Pellatt Via email: [email protected] Re: Project No. 3698455 – BC Hydro 2007 Rate Design Application Dear Sir: Please find enclosed the E-Plus Group’s Information Request No. 1. Also attached are copies of four E-Plus brochures that are referred to in the IR’s. Yours truly,
Kelly A. Cairns Encl.
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1. Reference: Exhibit B-1, s. 3.8, and January 7, 1991 letter from J. Sheehan in Appendix I
Attached are photocopies of the following E-Plus documents which all appear to be publications of BC Hydro:
1. “Electric Plus Heating Program, Cut Your Heating Costs…” dated October 1987
2. “Electric Plus and Wood Heating” dated October 1987
3. “Electric Plus Heating Systems, A general guide…” undated
4. “Electric Plus Owner’s Guide” dated January 1989
1.1. Please confirm that these were in fact publications of BC Hydro.
We note that BC Hydro, in response to ESVI’s Question 1.2.5 seeking copies of all E- Plus documentation, did not provide any of the above four publications.
1.2. Please explain why the above four documents were not provided in response to
ESVI’s question.
1.3. Please provide copies of all E-Plus publications excluding the document provided to ESVI and excluding those attached to this Information Request.
1.4. Did BC Hydro conduct studies of any kind (marketing, policy, financial,
conservation, etc.) of the E-Plus program prior to its implementation? If so, please provide copies of those studies.
1.5. If BC Hydro did not conduct studies, please explain why the E-Plus program was
implemented without any studies.
1.6. See attached brochure “Electric Plus Heating Program, Cut Your Heating Costs…” dated October 1987 which makes several representations.
(a) Please provide the methodology used to support the representations that “Our Electric Plus program can cut your fuel bills as much as 50% if you now heat with oil or propane” and “You’ll save an estimated $200 to $450 a year over oil or propane on space heating, and another $110 to $130 in water heating if you add Electric Plus there too.”
(b) Did BC Hydro conduct follow up studies to measure whether the representations referred to above were actually achieved by customers? If
EPLUS GROUP Information Request No. 1 - Project No. 3698455
BC Hydro Rate Design Application Page 2 of 30
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so, please provide copies along with a summary of the results of those studies.
(c) Please provide the methodology used to support the representation “…$2,500 …will more than cover the entire cost of converting to dual- fuel Electric Plus, in most cases.”
(d) Did BC Hydro conduct studies or undertake any analysis of the actual conversion cost experience of its E-Plus customers? If so, please provide the results of those studies or analysis and copies of them. If not, please explain why not.
(e) Please provide the methodology used to support the representation “Return on Investment – Earn an attractive, tax-free return while adding to the value of your home.”
(f) Please explain what rate of return BC Hydro considered “attractive” at that time and compare it to the rates of return that were being offered by Provincial government bonds in 1987 and the then-equivalent to today’s S&O/TSX Composite Index.
(g) Did BC Hydro conduct follow-up studies to determine the actual investment experience of E-Plus customers? If so, please provide the results and copies of the studies.
(h) Please provide BC Hydro’s rate of return on equity that was approved by the BCUC in 1987.
(i) Please provide BC Hydro’s weighted average cost of capital in 1987.
(j) Please provide BC Hydro’s cost of borrowing new money (not its weighted average cost of its debt) in 1987.
(k) Please provide the reasoning and methodology behind the representation that adopting E-Plus would “…add[ing] to the value of your home.”
(l) Did BC Hydro conduct follow-up studies to determine if in fact the adoption of E-Plus added value to the homes of E-Plus customers? If so please provide the results of those studies and copies of them. If not, please explain why not.
(m) Does BC Hydro agree that phasing out E-Plus will reduce the value of the homes and businesses of E-Plus customers? If not, please explain.
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(n) How many Residential E-Plus customers accepted BC Hydro’s offer to finance their E-Plus conversions and back-up heating systems?
(o) What was the average amount borrowed by Residential E-Plus customers?
(p) Does BC Hydro have a record, or any measurement at all, of how much Residential E-Plus customers spent to convert to dual fuel systems? If so, please provide such record or measurements.
(q) How much money in total did BC Hydro lend to its E-Plus customers?
(r) How much interest did BC Hydro earn from its financing program?
(s) Did those interest earnings contribute to the operating results of BC Hydro and were they used to offset the operating costs of BC Hydro so that other rate classes benefited from the lending to E-Plus customers?
(t) The brochure states “Electric Plus is not available in areas served by local fuel-fired generating plants, nor to customers who now heat with natural gas.” How many of BC Hydro’s E-Plus customers that did not have natural gas available to them when they signed up for E-Plus, now have natural gas available?
(u) Does BC Hydro know whether any such customers can actually convert their homes to natural gas heating and what the cost will be for any such conversion?
(v) The brochure states “Since the surplus energy that makes Electric Plus possible is not always available, you’ll need to keep your present heating system in good working order to take over when necessary. Back-up systems must use fuels stored on your property [my underlining].” And further on “We intend to limit interruptions to no more than 120 days in total prior to March 31, 1991. After that they will still be kept to a minimum, because it’s in both your interest and ours to have Electric Plus used for heating whenever there is surplus energy.”
(i) Does BC Hydro agree that such back-up systems were intended only to serve as short-term heating solutions? If not, why not?
(ii) Has BC Hydro conducted any analysis to determine the extent to which such back-up systems are capable of providing heating to the homes of E-Plus customers on a permanent basis? If not, why not?
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(iii) Does BC Hydro know how many of its E-Plus customers, leaving aside financial considerations for the moment, can actually convert to another source of space and water heating other than electricity?
(iv) Does BC Hydro agree that the elasticity of demand for many E- Plus customers who have electric baseboard heating is, even over the long run, zero? In other words, does BC Hydro agree that there is no realistic possibility that price signals from BC Hydro to such customers will in fact lead them to replace their electric base board heating with another fuel source?
(v) Does BC Hydro agree that it does not know what impact the full residential rate price signal may or may not have on the consumption patterns of Residential E-Plus customers?
(w) The brochure talks about “secondary energy” being a “by-product of firm hydroelectric generation”. Please confirm if our understanding of the situation, as outlined below, is correct. If it is not correct, please provide the correct explanation.
BC Hydro estimated, based on historical stream flow data, an amount of electricity production which it was very confident would be produced, using its storage reservoirs, even in dry years. That was firm energy. “Secondary energy” then referred to energy produced from stream flow that exceeded this base “firm energy”.
(x) Is it true, particularly at the beginning of the program, that E-Plus customers purchased secondary energy that would otherwise have been sold to the export market at prices that were less than the prices paid by E- Plus customers?
(y) Isn’t it true in some cases that if BC Hydro had not created an E-Plus market to absorb surplus energy, BC Hydro would have had to spill water rather than generating electricity and revenue?
(z) Does BC Hydro agree that the two closest wholesale markets into which it can sell surplus power are the Alberta and Mid-Columbia markets?
(aa) Does BC Hydro agree that even in recent years there are times when the price of power in Alberta or at Mid-Columbia is less than the price paid by E-Plus customers? Please provide spreadsheets showing the day-ahead wholesale prices for both power markets beginning in January 2001 and ending on May 22, 2007.
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(bb) Isn’t it true that E-Plus revenue, obtained from E-Plus customers during times when export market prices were lower than E-Plus prices and during times when E-Plus customers absorbed power from hydro generation that would otherwise have been spilled, helped reduce the operating costs of other rate classes? In other words, the existence of the E-Plus program, at times, allowed BC Hydro to generate financial benefits to all ratepayers that it would not have otherwise been able to generate and those financial benefits helped keep rates down in other rate classes, correct?
(cc) Please calculate the additional profit BC Hydro earned from its E-Plus customers during the first five years of the program that BC Hydro would not have otherwise been able to earn.
(dd) Didn’t the existence of the E-Plus program contribute positively to other rate classes in other ways such as increasing the certainty of forecasting sales volume and revenue?
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1.7. See attached brochure “Electric Plus and Wood Heating”.
(a) Isn’t it true that the brochure outlines some additional home modifications and costs that customers would need to consider if they signed onto the E- Plus program such as venting modifications, smoke detectors, upgraded fire insurance, safety inspections, a signal light, and new wiring for the E- Plus meter. And that these costs were in addition to the costs of the backup heat source?
1.8. See attached brochure “Electric Plus Heating Systems – A general guide…”
(a) The brochure states “Costs given are for heating equipment alone and exclude installation, which will vary from house to house. To make a complete appraisal of installation costs, your contractor will need to make a site visit.” Did BC Hydro estimate these additional costs and include them in the calculations used to support the claims identified in questions 1.6 (c) and (e)? If not, why not?
1.9. See attached brochure “Electric Plus Heating Systems – Owner’s Guide”.
(a) The brochure states “Electric Plus also helps B.C. Hydro because it provides an attractive British Columbia market for this energy.” Please expand upon the representation that Electric Plus helped BC Hydro.
(b) The brochure states “Additional brochures and technical data sheets on Electric Plus equipment, savings, and wood back-up are also available through your local B.C. Hydro office.” Please provide copies of all such brochures and technical data sheets.
(c) Describe the extent to which federal and provincial energy policy in 1987, which required federal export licences (and the potential of public hearings on the matter) and provincial energy removal certificates prior to export of firm or interruptible power, contributed to the bottling up of surplus power in B.C. and contributed to BC Hydro’s initiative to create the E-Plus market.
(d) Describe the extent to which the air quality and other environmental benefits of having customers switch from polluting heat sources, such as oil, propane, wood, coal, and butane, to clean, renewable hydro electricity contributed to BC Hydro’s creation of the E-Plus program.
1.10. Does BC Hydro agree that many E-Plus Residential customers could, even in the late 1980’s, be fairly characterized as environmentally and energy conscious consumers who were attracted to the program not only for its purported financial benefits but
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also for the environmental benefits associated with clean, renewable hydro electricity?
1.11. The brochure makes the following representation – “Attractive, tax-free return while adding to the value of your home” Please provide BCH’s calculations of the day regarding what the range of returns would be for EPlus customers that led to inducement of attractive tax-free returns. And what did BCH calculate to be the additional value to the home and what was the logical basis on which that claim was made?
1.12. And were those loans added to BC Hydro’s rate base?
1.13. On page 4 “The cost of converting will usually range from $1,300 to $2,800.” Please calculate what those amounts would be in 2007 dollars.
1.14. How many people converted?
1.15. How many people already had dual fuel heat sources?
1.16. How many financed their conversion using BCH’s loan offer?
1.17. How many financed their conversion themselves?
1.18. What was the total amount invested by all EPlus customers in converting to dual fuel?
1.19. What was the average investment?
1.20. See attached brochure “Electric Plus Heating Program” dated October 1987. On page 3 – financing – what was BCH’s allowable return on equity at that time? What was BCH’s weighted cost of capital at that time? What was BCH’s cost of borrowing funds at that time?
1.21. “Attractive, tax-free return while adding to the value of your home” Please provide BCH’s calculations of the day regarding what the range of returns would be for EPlus customers that led to inducement of attractive tax-free returns. And what did BCH calculate to be the additional value to the home and on what was that additional value based? And were those loans added to rate base?
1.22. On page 4 “The cost of converting will usually range from $1,300 to $2,800.” Please calculate what those amounts would be in 2007 dollars. How many people converted? How many people already had dual fuel heat sources? How many financed their conversion using BCH’s loan offer? How many financed their conversion themselves? What was the total amount invested by all EPlus customers in converting to dual fuel? What was the average investment?
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1.23. In reference to the representations in Brochure No. 1 about the permanence of the program, the comments by some E-Plus customers that they thought the deal was permanent, and the John Sheehan letter at the end of Appendix I, we have the following questions and requests:
(a) How does BC Hydro reconcile the following statements in Brochure No. 1 – “…the electricity you use for heating will be metered separately [and] billed at the special rate, which we expect will remain fixed until at least March 31, 1991. Even after that, Electric Plus will cost substantially less than your other electricity” and “Electric Plus is a permanent program” with BC Hydro’s position that E-Plus customers were made aware that the E-Plus program had the potential to be terminated?
(b) Please provide the evidence upon which BC Hydro will rely in order to demonstrate that E-Plus customers were aware that the program could be terminated.
(c) Please identify which paragraphs in the E-Plus contracts set out the possibility that BC Hydro could terminate the E-Plus program.
(d) Is it BC Hydro’s position that its E-Plus customers understood that the program could be terminated at any time?
(e) Does BC Hydro propose to lead any evidence to support this position and if so, what is it?
(f) BC Hydro appears to be taking the position that the E-Plus contracts could somehow be terminated because they were “subject to BCUC jurisdiction.” Isn’t it true that unless BC Hydro itself took the initiative to “phase out” or terminate the E-Plus contracts in this Rate Design Application, the BCUC would not likely, on its own initiative under s. 58 of the Utilities Commission Act, have moved to eliminate such a program?
(g) Is BC Hydro aware of any instance in which the BCUC, on its own motion under s. 58(a) of the Utilities Commission Act, initiated a hearing into BC Hydro’s power rates?
(h) Is BC Hydro taking the position that, as the test is set out in s. 58 of the Utilities Commission Act, current E-Plus rates are “unjust, unreasonable, insufficient, unduly discriminatory or in contravention of this Act”?
(i) Is BC Hydro taking the position that it had to initiate a review of the E- Plus rate because it was concerned the BCUC was poised itself to do so under s. 58 of the Act?
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(j) Is it BC Hydro’s position that somehow the BCUC has the power to terminate these E-Plus contracts? If so, please explain.
(k) Isn’t it true that all BC Hydro’s energy supply contracts from independent power producers are subject to the approval of and under the jurisdiction of the BCUC?
(l) Is it BC Hydro’s position that because BC Hydro’s long-term energy supply contracts too are “subject to BCUC jurisdiction” that BC Hydro can terminate them at any time?
(m) Is it BC Hydro’s position that somehow the BCUC could terminate BC Hydro’s long-term energy supply contracts?
(n) If the answer to 1.17 (g) is “Yes” and the answer to 1.17 (j) is “No”, please explain the difference in principle, legal or otherwise, that led to the two different answers.
1.24. Was the E-Plus program approved by the BCUC? If so, please provide a copy of any order approving it and any reasons given in support of it.
1.25. Were the terms set out in the above brochures, such as keeping backup heating systems, also approved by the BCUC?
2. Reference: Exhibit B-1, s. 1.1 – “Efficient”
“• Efficient means that the rates and Terms and Conditions provide efficient price signals at the margin, including appropriate price signals to encourage energy conservation and load management, to the extent practicable. BC Hydro is proposing to restructure the rate for large general service customers over a three year period and to phase-out the E-Plus rates over a ten year period in order to provide better price signals to these customers.”
2.1. By “efficient price signals at the margin” does BC Hydro mean that the intention of the price signal is to motivate customers to use the lowest marginal cost source of energy?
2.2. Does BC Hydro agree that moving from one source of energy to another, such as from electric base board heat to a forced-air oil furnace, will most likely require the investment of new capital?
2.3. Does BC Hydro agree that unless an E-Plus customer can switch heat sources for a financially feasible sum, the price signal that will be sent by the prevailing residential
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rate will be insufficient to cause that customer to switch from electrical space and water heating to another fuel source?
2.4. Does BC Hydro recognize and agree that for those E-Plus customers for whom it is not economically feasible to switch from electricity to other heat sources, that the “price signal” simply becomes a punitive measure?
2.5. Has BC Hydro analyzed whether or not it is economically attractive for Residential E-Plus customers to switch from electric space and water heating to another source of space and water heating? in other words has BC Hydro actually evaluated whether the residential rate price signal will be effective to encourage conservation among Residential E-Plus customers?
2.6. Please quantify the savings that BC Hydro predicts the average Residential E-Plus customer would realize from investing in the installation of non-electric space and water heating. Explain the methodology used to model those savings. And in doing so, please provide the futures prices used for each alternate energy source such as oil, natural gas, coal, propane and wood. And also provide the names of the organizations that provided those predicted futures prices to BC Hydro.
2.7. Did BC Hydro intend “energy conservation” in the context quoted above, to include forms of energy other than electricity such as oil, coal, wood, propane, and butane?
2.8. Why does BC Hydro now believe, after 20 years of leading of E-Plus customers to believe that they were “helping BC Hydro” and that they were acting in an environmentally responsible manner by consuming “Modern Electric Heat - …clean, quiet, 100% efficient…”, that its E-Plus customers need price signals to reduce their consumption of electricity?
2.9. Does BC Hydro now take the view that E-Plus customers are a conservation problem rather than the solution they appeared to be 20 years ago?
2.10. Does BC Hydro now believe that the E-Plus rate discourages conservation of electricity? Of energy? If so, please provide the analytical basis for that belief. If BC Hydro does not believe that the E-Plus rate discourages conservation of electricity, then does BC Hydro believe that the “price signal” of full residential rates will not be effective in encouraging conservation among Residential E-Plus customers?
2.11. If BC Hydro now believes the E-Plus rate discourages conservation, who or what does BC Hydro believe is the cause of the situation – E-Plus customers, BC Hydro, Provincial energy policy, or current market forces?
2.12. If BC Hydro now believes the E-Plus rate discourages conservation, who does BC Hydro believe should pay the capital costs of correcting the situation (that is, who
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should pay to retrofit Residential E-Plus customers’ homes – assuming they can be retrofitted at all) – E-Plus customers, all BC Hydro ratepayers, all non-E-Plus residential ratepayers, the classes of ratepayers other than E-Plus and residential, BC Hydro’s shareholder, or the provincial government?
2.13. Has BC Hydro conducted studies to determine the cost that E-Plus customers will face if they wish to switch from electric space and water heating?
2.14. Using data from the most recent five year period, please show the average annual electricity consumption of BC Hydro’s residential customers and compare that to the average electricity consumption of BC Hydro’s E-Plus Residential customers for the same time period.
2.15. Does BC Hydro, in this 2007 Rate Design Application, now view E-Plus customers as being wasteful consumers of electricity?
2.16. Has BC Hydro studied its Residential E-Plus customers to determine the extent to which its Residential E-Plus customers can respond to price signals in a financially and technically feasible manner? If so, please produce them. If no such studies were conducted, please explain why not?
2.17. Isn’t it true that E-Plus customers are already receiving the same price signal as ordinary residential customers for that portion of their electricity consumption not metered by their E-Plus meters?
2.18. How much aggregate annual energy savings for all Residential E-Plus customers, even if the E-Plus rate was eliminated April 1, 2008, does BC Hydro anticipate achieving as a result of these new price signals? Please produce the methodology and studies used to establish BC Hydro’s estimate.
2.19. In the quote from the RDA above, please explain what BC Hydro meant, in describing the purpose of price signals, by the phrase “…to the extent practical.”
2.20. If it turns out that the price signal to Residential E-Plus customers of the full residential electricity rate is not a “practical” means to reduce the consumption of electricity for space and water heating by Residential E-Plus customers, will BC Hydro abandon its application to phase out the E-Plus rate?
2.21. If the price signal is not a “practical” way to address Residential E-Plus consumption patterns and BC Hydro does not agree that it should abandon its application to phase out the E-Plus rate, please explain any remaining reasons why BC Hydro would continue to support the phase out of E-Plus.
2.22. Has BC Hydro assumed that Residential E-Plus customers are more electric-intensive consumers than regular residential customers or has BC Hydro conducted a study to
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determine if E-Plus customers are more electric-intensive consumers? If such a study has been conducted please provide it. If such a study has not been conducted, please explain how BC Hydro came to the conclusion that Residential E-Plus customers needed a price signal to reduce their use of electricity.
2.23. In 2006 did the average Residential E-Plus customer consume more electricity or less than the average residential customer did in that same year?
2.24. Does BC Hydro have a demographic profile of its Residential E-Plus customers? If so, please provide it. If not, does BC Hydro agree that the demographic make-up of its Residential E-Plus customers is likely comprised of retirement-age and older customers? And does BC Hydro further agree that as customers age they tend to consume less energy even in the absence of a “price signal”?
2.25. Is BC Hydro aware of how many of its Residential E-Plus customers are on fixed incomes?
2.26. Would the fact that some Residential E-Plus customers are on fixed incomes affect BC Hydro’s decision to apply to phase out the E-Plus program?
3. Reference: Exhibit B-1, s. 1.2 page 2 BC Hydro 2007 RDA
“On February 27, 2007, the Provincial Government released its 2007 Energy
Plan (“The BC Energy Plan: A Vision for Clean Energy Leadership”). The new
Energy Plan sets out a large number of policy actions that place emphasis on
energy conservation, energy efficiency and clean energy, and sets the direction to
make British Columbia electricity self sufficient by 2016. An energy conservation
target of meeting 50% of incremental resource needs through demand reduction
by 2020 is established. With specific reference to utility rates, Policy Action 4
addresses the use of pricing structures as a demand side management tool to
either discourage consumption overall, or shift demand to less costly periods. In
particular:
“all utilities are encouraged to explore, develop and propose to the Commission
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development of clean or renewable energy”.
In this policy context BC Hydro’s 2007 Rate Design Application sets the
foundation for BC Hydro’s future rate design proposals that will address the
opportunities to use rate structures to contribute to the implementation of the
government’s 2007 Energy Plan. As noted in the section below BC Hydro is
currently developing a long term rate strategy that will be informed by the 2007
Energy Plan and that will set the course for future rate changes and new rates
that are designed to promote energy conservation and load management.” Excerpts from the 2007 Energy Plan:
Message from the Premier The BC Energy Plan: A Vision for Clean Energy Leadership is British
Columbia’s plan to make our province energy self-sufficient while taking
responsibility for our natural environment and climate. The world has turned its
attention to the critical issue of global warming. This plan sets ambitious targets.
We will pursue them relentlessly as we build a brighter future for B.C. The BC
Energy Plan sets out a strategy for reducing our greenhouse gas emissions and
commits to unprecedented investments in alternative technology based on the
work that was undertaken by the Alternative Energy Task Force. Most
importantly, this plan outlines the steps that all of us – including industry,
environmental agencies, communities and citizens – must take to reach these
goals for conservation, energy efficiency and clean energy so we can arrest the
growth of greenhouse gases and reduce human impacts on the climate.
As stewards of this province, we have a responsibility to manage our natural
resources in a way that ensures they both meet our needs today and the needs of
our children and grandchildren. We will all have to think and act differently as
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we develop innovative and sustainable solutions to secure a clean and reliable
energy supply for all British Columbians.
Our plan will make B.C. energy self-sufficient by 2016. To do this, we must
maximize our conservation efforts. Conservation will reduce pressure on our
energy supply and result in real savings for those who use less energy. Individual
actions that reduce our own everyday energy consumption will make the
difference between success and failure. For industry, conservation can lead to an
effective, productive and significant competitive advantage. For communities, it
can lead to healthier neighbourhoods and lifestyles for all of us.
Message from the Minister of Energy The BC Energy Plan: A Vision for Clean Energy Leadership is a made-in-B.C.
solution to the common global challenge of ensuring a secure, reliable supply of
affordable energy in an environmentally responsible way. In the next decade
government will balance the opportunities and increased prosperity available
from our natural resources while leading the world in sustainable environmental
management. This energy plan puts us in a leadership role that will see the
province move to eliminating or offsetting greenhouse gas emissions for all new
projects in the growing electricity sector, end flaring from oil and gas producing
wells, and put in place a plan to make B.C. electricity self-sufficient by 2016.
Excerpt from the 2007 Energy Plan:
Policy Action Items:
18. All new electricity generation projects will have zero net greenhouse gas emissions. 19. Zero net greenhouse gas emissions from existing thermal generation power plants by 2016. 20. Require zero greenhouse gas emissions from any coal thermal electricity facilities.
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21. Ensure clean or renewable electricity generation continues to account for at least 90 per cent of total generation.
Excerpt from the 2007 Provincial Speech from the Throne
“This government will firmly establish British Columbia standards for action on climate change.
It will aim to reduce B.C.'s greenhouse gas emissions by at least 33 per cent below current levels by 2020. This will place British Columbia's greenhouse gas emissions at 10 per cent under 1990 levels by 2020. [my bolding]
It is an aggressive target and will set a new standard. To achieve that goal we will need to be focused and relentless in its pursuit.
Interim targets will be set for 2012 and 2016.
Leaders from business, community groups, and citizens themselves are calling for a new environmental playing field that is fair and balanced but that recognizes we all need to change. We all need to be part of the solution.
The soon-to-be released new climate action and energy plans will be complemented by an air quality improvement initiative. [my bolding]
Each of those plans will aspire to meet or beat the best practices in North America for reducing carbon and other greenhouse gases.
Because our emissions have grown so much since 1990, our task of reducing emissions in percentage terms will be that much more difficult.”
Excerpt from B.C. Ministry of Environment website
Environmental Quality Branch
Last Updated: February 2007
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Wood Stove Smoke: A Burning Issue
How many times have you gone for a walk on a cold, still night, and caught the
scent of wood smoke in the air? Wood smoke curling out of home chimneys looks
and smells cozy, even romantic.
Appealing and "natural" as it seems, wood smoke has become the most serious
kind of air pollution in B.C. at present, causing more illness and deaths (from
lung and heart disease) than smog. That's because wood smoke contains fine
particulates, and a bewildering array of organic and inorganic compounds — the
normal byproducts of wood combustion. It may also contain minute amounts of
dioxins and furans, and a variety of other proven and suspected carcinogens.
The Ministry of Environment is committed to stopping smoke pollution, in order
to protect our health, the environment and the economy. Since 1992, B.C. has
been leading the way in Canada, taking action to reduce fine particulate
emissions from residential and industrial wood burning.
As we'll see below, this includes initiatives to control smoke from land clearing
fires, beehive burners, backyard burning and the wood-burning appliances used
to heat many of our homes. ("What's the Government Doing to Prevent Wood
Smoke Pollution.")
3.1. Does BC Hydro agree that the 2007 Energy Plan and the Province’s commitment to reducing greenhouse gas emissions mean that BC Hydro’s responsibilities include:
(a) promoting energy conservation, (b) reducing greenhouse gas emissions in its areas of jurisdiction, and (c) improving air quality?
3.2. Does BC Hydro agree that if E-Plus customers switch from electric space and water heating that they must increase their use of fossil fuels or wood and that doing so will increase the greenhouse gas emissions by E-Plus customers? If not, why not?
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3.3. Does BC Hydro agree that, other things being equal, E-Plus customers leave a smaller carbon footprint than do regular residential customers that use fossil fuels for space and water heating?
3.4. Has BC Hydro calculated the additional tonnes of greenhouse gases/carbon dioxide
equivalent that E-Plus owners would emit to replace the electricity that they currently use for space and water heating? If not, please calculate the additional tonnes of greenhouse gases/carbon dioxide equivalent that would be emitted for every 1000 kWh of electricity that was displaced by a fossil fuel source of space and water heating. For example, if an E-plus customer used 1000 kWh for space and water heating, but in response to BC Hydro’s “price signal” switched to a fossil fuel to heat that same space and water, how many tonnes of GHG/CO2e would that E-Plus customer now emit? Please ensure the calculation is done for each of the fuels that are eligible for E-Plus – coal, oil, natural gas, propane, butane, and wood.
3.5. Show the methodology and assumptions employed in making the calculations above.
3.6. Considering that Policy Action 21 of the Provincial Government’s 2007 Energy Plan
envisions that at least 90% of B.C.’s total electricity generation continues to come from clean or renewable sources, does BC Hydro agree that E-Plus customers are currently using clean, renewable sources of electricity to heat their homes thereby continuing to maintain a comparatively small carbon footprint?
3.7. Does BC Hydro agree that if Residential E-Plus customers switch from electric space and water heating to fossil fuel heating (particularly wood, coal, and oil) that such a switch will degrade air quality in the communities where Residential E-Plus customers reside?
3.8. Given the above excerpt from the BC Ministry of Environment’s website, does BC
Hydro agree that a Residential E-Plus customer who responds to a BC Hydro’s “price signal” by switching from electric heat to wood heat is likely to run smack into a punitive “signal” from the Ministry of Environment to avoid burning wood for heating? If BC Hydro does not agree, please explain.
3.9. Given 2007 Energy Plan Policy Actions 18 – 20 and the fact that E-Plus customers
have, at the urging of BC Hydro, invested in electric space and water heating, explain why it makes sense to signal E-Plus customers to burn coal or other thermal fuels when the electricity industry itself will not be permitted to do so?
3.10. Does BC Hydro agree that phasing out the E-Plus program will likely back E-Plus
customers into the following corner – as a result of the E-Plus program they may consume more electricity than average, to reduce their intensity of electric use they will have to pay once again to retrofit their homes, and finally they will have to resort
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to burning fossil fuels, an activity that is being increasingly regulated and discouraged? If BC Hydro does not agree with this characterization of the situation, please explain why.
3.11. Please explain how BC Hydro believes the phasing out of the E-Plus program fits
with or doesn’t fit with the various energy and environmental policies that are excerpted and referred to in the background to this series of questions.
3.12. Has BC Hydro studied how much it would cost to retrofit E-Plus homes and made a
determination whether such retro-fitting makes any financial sense? In other words, did BC Hydro evaluate the economic impacts on its E-Plus customers of phasing out the E-Plus program before it made its Rate Design Application? If so, please produce that study. If not, is it correct to say that BC Hydro is proposing to eliminate the E- Plus program without understanding the economic impact such a move would have on its E-Plus customers?
3.13. Has BC Hydro determined which of its Residential E-Plus customers have
economically feasible access to natural gas for heating? If not, wouldn’t the proposed price signal be imposed in the absence of knowing whether customers can actually respond?
3.14. Please produce any data, based on power consumption by E-Plus customers, that BC
Hydro is using to support its contention that the E-Plus rate is leading to higher consumption or waste of power.
3.15. Please produce any data that BC Hydro has that shows the separate percentages of
Residential E-Plus customers who use as their primary electric space heating – baseboard heat, electric forced air, and hot water.
3.16. Please produce any data that BC Hydro has that shows the separate percentages of
Residential E-Plus customers who use coal, wood, oil, propane, and butane as their back-up heat source.
3.17. Back in the 1980’s did the Province of B.C. provide any policy guidance to BC
Hydro that led to the establishment of the E-Plus program? If so, please summarize and provide copies of all documents that show that guidance.
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4. Reference: Exhibit B-1, s. 1.4
1.4 Mitigation of Customer Impacts In addition BC Hydro will provide all customers that are adversely affected by the proposed rate changes the opportunity to participate in Power Smart programs to increase their energy efficiency, thus reducing the impact of the rate changes.
Excerpt from 2006 BC Hydro Annual Report
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Page 102 2006 BC Hydro Annual Report
4.1. Please summarize the terms and conditions (rebates, conditions, time limits or expiry dates, etc.) of the currently-available BC Hydro Power Smart programs.
4.2. Is it correct that the only Power Smart program under which BC Hydro provides a
monetary incentive is the $30 old fridge rebate?
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4.3. It does not appear that there are any Power Smart programs that are of particular use
to Residential E-Plus customers who wish to switch from electric space and water heating, that are not already available to those customers. Please comment on whether this is a correct understanding.
4.4. How does BC Hydro envision using Power Smart to contribute to the refurbishing of
homes and heating systems required to enable Residential E-Plus customers to switch away from electric space and water heating? In particular, please address whether capital investments in home heating infrastructure will be funded by the Power Smart program.
4.5. Please confirm that for 2006, $269 million is included in BC Hydro’s rate base for
demand side management (DSM) investments? How much of that figure is attributable to Power Smart investments by BC Hydro?
4.6. Of the $90 million invested by BC Hydro in DSM programs in 2006, how much of
that was comprised of Power Smart investments?
4.7. Does BC Hydro agree that its application to phase out the E-Plus program is in essence a DSM program? If BC Hydro does not agree, please explain why.
4.8. Why wouldn’t any investment that had to be made to retrofit a Residential E-Plus
customer’s home be a DSM investment and thereby eligible to be added to BC Hydro’s rate base?
4.9. Which Power Smart programs are available to and of most practical use to
Residential E-Plus customers who wish to switch from electric space and water heating to fossil fuel or wood heating?
5. Reference – Exhibit B-1, Appendix C, Schedule 7 on page 11 “Billing determinants”
5.1. Please confirm that the figure 140,390,627 is the 2008 forecast of the kWh that will be consumed by Residential E-Plus customers for the purposes of this Application.
5.2. Please confirm that the energy consumption figures in the remainder of that Billing
Determinants table on page 11 are for the 3 General Service Customers.
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5.3. Please produce a billing determinants tables like the one shown below, which differentiates, for the Residential E-Plus customer category (1105) the non-E-Plus energy consumption (that is the energy metered by the “regular” meters) and the E- Plus energy consumption (that is the heating and other load metered by the E-Plus meters).
Billing Determinants
Total consumption
1105 140,390,627
5.4. Using data from the most recently available year, please produce the following sets of graphs:
Energy Consumption – 5 graphs
(a) For the entire population of E-Plus Residential Customers, 3 bar graphs showing the distribution of:
(i) Annual energy consumption recorded by E-Plus meters only, (ii) Annual energy consumption recorded by the regular meters only,
and (iii) Annual energy consumption recorded by both regular meters and
E-Plus meters (that is total electrical consumption by customers in the Residential E-Plus customer category).
(b) Please prepare a similar graph, again based on 2006 data, that shows the
distribution of annual energy consumption by the Applicant’s Residential customers (excluding E-Plus customers), and
(c) Finally, a graph that compares the distribution of total electrical
consumption of E-Plus customers with the distribution of total electrical consumption of regular Residential customers (again, excluding E-Plus customers)
The level of annual energy consumption should be measured in kWh and appear on the y-axis. The number of customers should be plotted on the x-axis. Choose a reasonable number of intervals for the x-axis.
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Annual Electric bills
5.5. For the entire population of E-Plus Residential Customers, 3 bar graphs showing:
(a) The distribution of annual electric bill amounts for energy consumption recorded by E-Plus meters only,
(b) The distribution of annual electric bill amounts for energy consumption
recorded by the regular meters only, and
(c) Total annual electric bill for energy consumption recorded by both regular meters and E-Plus meters (that is total annual electric power bills billed to (ignore bad debts) customers in the Residential E-Plus customer category)
The level of annual power bills should be measured in dollars and appear on the y-axis. The number of E-Plus customers should be plotted on the x-axis. Choose a reasonable number of intervals. If you have any questions about what is being requested or require clarification about any of the graphs described above, please do not hesitate to contact the writer.
5.6. What is the annual attrition rate of E-Plus customers? 5.7. What is causing the attrition? Are the buildings being demolished or is BC Hydro
terminating the E-Plus contracts when people move or die? 5.8. Please provide the average annual electric bill for Residential E-Plus customers. 5.9. Please provide the average annual bill for the E-Plus component only of Residential
E-Plus customers.
5.10. Please provide the average annual bill for the non-E-Plus component only of Residential E-Plus customers
5.11. Please provide the average annual electric bill for Residential customers (rate 1105).
5.12. Using the same type of graph as used in BC Hydro’s response to BCUC IR 1.41.3
(weather normalized bill frequency analysis), please provide two separate graphs showing the total annual bill for the E-Plus portion of Residential E-Plus (rate 1105) customer’s accounts and the non-E-Plus portion for those same customers.
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5.13. Using the same type of graph as used in BC Hydro’s response to BCUC IR 1.41.3 (weather normalized bill frequency analysis), please provide a graph showing the total annual bill for residential customers (rate 1105).
5.14. Please produce two tables, as illustrated below, that show the total amount of revenue
that would be derived according to the forecast from each E-Plus customer category. The first table should show the revenue derived from the E-Plus meters while the second should show the revenue derived from regular meters. The object of the exercise is to differentiate between revenue derived from E-Plus heating consumption and revenue derived from non-E-Plus electrical consumption.
Rate Code Revenue from
Total revenue
1105 4,703,086 1205 253,822 1206 512,997 1207 266,203
6. Reference – Exhibit B-1, Appendix C, Schedule 11 on page 15
6.1. Using the same type of table shown in Appendix C, Schedule 11, please show the monthly bill impact on Residential E-Plus customers by E-Plus consumption only.
6.2. Using the graph described in paragraph 5.5 (a) above that shows the distribution of
annual power bills of E-Plus customers, for their E-Plus consumption only, plot a series of lines on that graph showing the increases in annual power bills that the proposed increase in E-Plus prices will have at the points in time set out in Table 4, page 44 of the Application.
6.3. For clarification, one would expect to see a normal distribution curve for the annual
power bills of E-Plus customers for their E-Plus consumption only. Above that curve will appear 6 lines showing the effect that each increase in price, using the discount rates set out in Table 4, page 44, is calculated to have on the annual distribution of E- Plus power bills (again, using only the consumption measured by E-Plus meters).
7. Reference – Exhibit B-1, page 44, lines 8 – 13, and page 45
7.1. Using only E-Plus consumption, produce a table showing the total annual average electricity bill for each quartile of customers under the proposed phase-out of E-Plus
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beginning at April 1, 2007 and including the points in time set out in Table 4, page 44. The table should look like this:
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile April 1, 2007 April 1, 2008 April 1, 2009 April 1, 2010 April 1, 2011 April 1, 2012 April 1, 2018 April 1, 2019
7.2. In addition to the above table, please calculate, at the same points in time, the forecast annual power bills for the Residential E-Plus customer with the lowest consumption and the Residential E-Plus customer with the highest consumption.
8. Reference: Exhibit B-1, page 1, lines 9 – 10, page 28, lines 4 -5, and page 42, lines 14 to 17
• Fair means that each customer bears a fair share of the costs caused by that customer, to the extent practicable.
E-Plus rates do not recover the cost of service, and this does not support the principle of fairness. Other customers within the associated rate classes subsidize E-Plus customers. Furthermore, in an environment of rising marginal energy costs, E-Plus rates do not align with the need to encourage conservation within B.C.
Fairness
8.1. In BC Hydro’s view, in evaluating the relative fairness among BC Hydro’s rate classes, is the definition of “fair” restricted to the meaning outlined in the RDA, or does it, depending on facts or circumstances that may arise, potentially include broader definitions of fairness?
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8.2. Is the test of fairness envisioned by BC Hydro restricted to this point in time or does it include an assessment of historical fairness or unfairness so as to arrive at a more fulsome evaluation and understanding of the current state of fairness among rate classes?
8.3. Does BC Hydro, having persuaded E-Plus customers to invest in various forms of
alternate energy infrastructure in the late 1980’s, believe that it is now fair and reasonable to ask (or force with a “price signal”) those same customers to invest their own money again to switch out of electric space and water heating?
8.4. Does BC Hydro believe that it is fair to give a “price signal” to customers, such as
those with electric baseboard heat and no economical way to switch fuels, who have no way of responding to such a price signal?
8.5. Does BC Hydro believe it is fair to give a “price signal” to Residential E-Plus
customers who invested their own money in E-Plus improvements and banked on the E-Plus rate to help them through their retirement years on a fixed income?
8.6. Does BC Hydro believe it is fair to give a “price signal” to Residential E-Plus
customers who chose to forego financial incentives to hook up to natural gas heating because they believed that their E-Plus rates would never exceed two-thirds of residential rates?
8.7. Does BC Hydro agree that for those economically unable to switch out of electric
space and water heating, the “price signal” amounts to nothing more than a penalty?
8.8. Does BC Hydro believe that it is fair to penalize E-Plus customers whose only fault was that twenty years ago they responded to BC Hydro’s marketing campaign to adopt electric space and water heating at their own expense?
8.9. Doesn’t the phasing out of the E-Plus program amount to an expropriation of the
economic benefits that E-Plus customers paid for originally?
8.10. Does BC Hydro believe it is fair to expropriate an economic benefit that was paid for by the individual rather than by BC Hydro?
8.11. Does BC Hydro believe it is fair to expropriate an economic benefit from its owner
and not pay that owner for the benefit expropriated?
8.12. Doesn’t BC Hydro agree that the E-Plus circumstances are difficult to reconcile within the utility rate design model because the customers themselves
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8.13. Are there, or have there ever been, any other BC Hydro programs under which customers of a certain rate class could obtain a reduced power rate if the customers of that class invested their own money in certain infrastructure? Please describe.
8.14. Since E-Plus customers paid to modify their homes and back-up heating systems in
the first place, doesn’t it seem fair that if BC Hydro is now asking them through its “price signal” to backtrack on those investments, BC Hydro should be paying for any such re-modification investments and adding those amounts to the DSM account on its balance sheet?
Conservation
8.15. When was the last time BC Hydro conducted a street light audit to determine whether it is recording and billing every street light? What were the results of that audit?
8.16. When was the last time BC Hydro conducted an internal or Measurement Canada
meter audit?
8.17. What were the results and what was the number, if any, of meters that were unaccounted for?
8.18. How much energy is estimated to be unbilled or lost due to unaccounted for meters? 8.19. Please produce BC Hydro’s latest Measurement Canada meter audit.
8.20. How much energy is estimated to be unbilled or lost due to other reasons? Please list
the top 10 causes.
8.21. Are any losses due to unbilled or unaccounted for power consumption included in BCH’s loss calculation? In other words, doesn’t the loss calculation include not only heat losses but also theft, unbilled and unrecorded power deliveries, unbilled meters, lost accounts?
8.22. When was the most recent time BCH conducted an internal or external audit of the
loss calculation? Please produce it. If such an audit has not been conducted in the last 5 years, please explain why not.
8.23. Has BCH estimated the amount of power that it suspects is annually being stolen,
what is that amount and what steps are being taken to reduce that theft? 8.24. How much power does BCH anticipate conserving by taking these steps to prevent
theft? Over what time frame will these steps be taken?
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8.25. Please list BC Hydro’s five largest opportunities, by volume, to conserve energy or stop the leakage of unbilled or lost energy.
8.26. Where does the potential gain from giving Residential E-Plus customers a “price
signal” rank in comparison to all the other potential conservation gains in the electricity value chain from water to wire to consumption to cash?
8.27. Referring to RDA paragraph 3.6 page 40 and Appendix C Schedule 3.1, please
confirm that street lighting consumes 232 GWh of energy according to the F08 Forecast (Appendix A page 14).
8.28. Is that only for street lights owned by BCH? 8.29. How much additional energy is consumed by street lights owned by others in B.C.?
8.30. What steps is BCH taking to reduce the number of hours that street lights are on? 8.31. What impediments exist if any to reducing street light hours of operation? 8.32. What purpose does BCH believe it is serving by keeping its street lights on between 1
a.m. and 5 a.m. each day of the week? What steps could be taken to conserve energy by turning street lights off during those hours. Please calculate the amount of energy that would be saved by turning street lights off during those hours.
8.33. Referring to Figure one on page 13 of the RDA, please confirm that the major
contributor to the winter demand peak is residential heating load (if you can quantify the heating portion of that demand load, please go ahead and do so).
8.34. Has the price signal that BC Hydro has been sending to residential customers (in the
form of the full residential rate) been effective in motivating consumers to move away from electric heating?
8.35. If it has been ineffective, please explain why BC Hydro believes E-Plus customers
would be more motivated to switch away from electric heat.
9. Reference: Exhibit B-1, page 43, lines 14 – 15
BC Hydro is proposing to eliminate the transfer of the E-Plus rate to the new customer when there is a change of customer at an E-Plus premise effective April 1, 2008
9.1. Does BC Hydro agree that terminating the E-Plus contract when an E-Plus customer sells his/her home, reduces the re-sale value of E-Plus customers’ homes?
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9.2. Does BC Hydro believe it is fair and reasonable to impose that loss of value on the E-
Plus homeowner or in some cases their estate?
10. Reference: Exhibit B-1, page 45, Figure 8
10.1. Please recalculate the average annual net bill impact on Residential E-Plus customers using only the E-Plus energy component of the average E-Plus and using a format similar to that shown in Figure 7 on page 39. Do not use percentages.
11. Reference: Exhibit B-1, Appendix I, section 4.3.1 E-Plus 11.1. Please provide a copy of the Decima Research survey. 12. Reference: Exhibit B-1, Appendix I, s. 4.3.2 12.1. Did the focus groups include E-Plus customers? 12.2. Did the focus groups hear the E-Plus customers’ perspective before being asked to
respond to the questions regarding E-Plus issues? If so, what were they? 12.3. What were the focus group members told about E-Plus issues prior to being asked to
respond to questions regarding E-Plus issues? 12.4. Does BC Hydro not agree that the way an issue is framed by the questioner can
substantially affect the answers provided to the questions? 12.5. Please provide the framing that Synovate used in asking questions about E-Plus. 12.6. Please provide the Synovate report. 13. Reference: Exhibit B-1, Appendix I, s. 4.3.3 13.1. Did the workshop participants include E-Plus customers? 13.2. Did the workshop participants hear any E-Plus customers’ perspective before being
asked to respond to the questions regarding E-Plus issues? 13.3. What were the workshop participants told about E-Plus issues prior to being asked to
respond to questions regarding E-Plus issues? 13.4. Does BC Hydro not agree that the way an issue is framed by the questioner can
substantially affect the answers provided to the questions? 13.5. Please provide the framing that BC Hydro used in asking questions about E-Plus.
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14. Reference: Exhibit B-1, Appendix I, s. 4.3.4 14.1. Please provide copies of all 1,500 emails and letters with the names, addresses, email
addresses, phone numbers and any other content by which the customer could be identified, blacked out.
EPLUS IR No 1 final.pdf
1. Reference: Exhibit B-1, s. 3.8, and January 7, 1991 letter from J. Sheehan in Appendix I
1.6. See attached brochure “Electric Plus Heating Program, Cut Your Heating Costs…” dated October 1987 which makes several representations.
(a) Please provide the methodology used to support the representations that “Our Electric Plus program can cut your fuel bills as much as 50% if you now heat with oil or propane” and “You’ll save an estimated $200 to $450 a year over oil or propane on space heating, and another $110 to $130 in water heating if you add Electric Plus there too.”
(b) Did BC Hydro conduct follow up studies to measure whether the representations referred to above were actually achieved by customers? If so, please provide copies along with a summary of the results of those studies.
(c) Please provide the methodology used to support the representation “…$2,500 …will more than cover the entire cost of converting to dual-fuel Electric Plus, in most cases.”
(d) Did BC Hydro conduct studies or undertake any analysis of the actual conversion cost experience of its E-Plus customers? If so, please provide the results of those studies or analysis and copies of them. If not, please explain why not.
(e) Please provide the methodology used to support the representation “Return on Investment – Earn an attractive, tax-free return while adding to the value of your home.”
(f) Please explain what rate of return BC Hydro considered “attractive” at that time and compare it to the rates of return that were being offered by Provincial government bonds in 1987 and the then-equivalent to today’s S&O/TSX Composite Index.
(g) Did BC Hydro conduct follow-up studies to determine the actual investment experience of E-Plus customers? If so, please provide the results and copies of the studies.
(h) Please provide BC Hydro’s rate of return on equity that was approved by the BCUC in 1987.
(i) Please provide BC Hydro’s weighted average cost of capital in 1987.
(j) Please provide BC Hydro’s cost of borrowing new money (not its weighted average cost of its debt) in 1987.
(k) Please provide the reasoning and methodology behind the representation that adopting E-Plus would “…add[ing] to the value of your home.”
(l) Did BC Hydro conduct follow-up studies to determine if in fact the adoption of E-Plus added value to the homes of E-Plus customers? If so please provide the results of those studies and copies of them. If not, please explain why not.
(m) Does BC Hydro agree that phasing out E-Plus will reduce the value of the homes and businesses of E-Plus customers? If not, please explain.
(n) How many Residential E-Plus customers accepted BC Hydro’s offer to finance their E-Plus conversions and back-up heating systems?
(o) What was the average amount borrowed by Residential E-Plus customers?
(p) Does BC Hydro have a record, or any measurement at all, of how much Residential E-Plus customers spent to convert to dual fuel systems? If so, please provide such record or measurements.
(q) How much money in total did BC Hydro lend to its E-Plus customers?
(r) How much interest did BC Hydro earn from its financing program?
(s) Did those interest earnings contribute to the operating results of BC Hydro and were they used to offset the operating costs of BC Hydro so that other rate classes benefited from the lending to E-Plus customers?
(t) The brochure states “Electric Plus is not available in areas served by local fuel-fired generating plants, nor to customers who now heat with natural gas.” How many of BC Hydro’s E-Plus customers that did not have natural gas available to them when they signed up for E-Plus, now have natural gas available?
(u) Does BC Hydro know whether any such customers can actually convert their homes to natural gas heating and what the cost will be for any such conversion?
(v) The brochure states “Since the surplus energy that makes Electric Plus possible is not always available, you’ll need to keep your present heating system in good working order to take over when necessary. Back-up systems must use fuels stored on your property [my underlining].” And further on “We intend to limit interruptions to no more than 120 days in total prior to March 31, 1991. After that they will still be kept to a minimum, because it’s in both your interest and ours to have Electric Plus used for heating whenever there is surplus energy.”
(i) Does BC Hydro agree that such back-up systems were intended only to serve as short-term heating solutions? If not, why not?
(ii) Has BC Hydro conducted any analysis to determine the extent to which such back-up systems are capable of providing heating to the homes of E-Plus customers on a permanent basis? If not, why not?
(iii) Does BC Hydro know how many of its E-Plus customers, leaving aside financial considerations for the moment, can actually convert to another source of space and water heating other than electricity?
(iv) Does BC Hydro agree that the elasticity of demand for many E-Plus customers who have electric baseboard heating is, even over the long run, zero? In other words, does BC Hydro agree that there is no realistic possibility that price signals from BC Hydro to such customers will in fact lead them to replace their electric base board heating with another fuel source?
(v) Does BC Hydro agree that it does not know what impact the full residential rate price signal may or may not have on the consumption patterns of Residential E-Plus customers?
(w) The brochure talks about “secondary energy” being a “by-product of firm hydroelectric generation”. Please confirm if our understanding of the situation, as outlined below, is correct. If it is not correct, please provide the correct explanation.
BC Hydro estimated, based on historical stream flow data, an amount of electricity production which it was very confident would be produced, using its storage reservoirs, even in dry years. That was firm energy. “Secondary energy” then referred to energy produced from stream flow that exceeded this base “firm energy”.
(x) Is it true, particularly at the beginning of the program, that E-Plus customers purchased secondary energy that would otherwise have been sold to the export market at prices that were less than the prices paid by E-Plus customers?
(y) Isn’t it true in some cases that if BC Hydro had not created an E-Plus market to absorb surplus energy, BC Hydro would have had to spill water rather than generating electricity and revenue?
(z) Does BC Hydro agree that the two closest wholesale markets into which it can sell surplus power are the Alberta and Mid-Columbia markets?
(aa) Does BC Hydro agree that even in recent years there are times when the price of power in Alberta or at Mid-Columbia is less than the price paid by E-Plus customers? Please provide spreadsheets showing the day-ahead wholesale prices for both power markets beginning in January 2001 and ending on May 22, 2007.
(bb) Isn’t it true that E-Plus revenue, obtained from E-Plus customers during times when export market prices were lower than E-Plus prices and during times when E-Plus customers absorbed power from hydro generation that would otherwise have been spilled, helped reduce the operating costs of other rate classes? In other words, the existence of the E-Plus program, at times, allowed BC Hydro to generate financial benefits to all ratepayers that it would not have otherwise been able to generate and those financial benefits helped keep rates down in other rate classes, correct?
(cc) Please calculate the additional profit BC Hydro earned from its E-Plus customers during the first five years of the program that BC Hydro would not have otherwise been able to earn.
(dd) Didn’t the existence of the E-Plus program contribute positively to other rate classes in other ways such as increasing the certainty of forecasting sales volume and revenue?
1.7. See attached brochure “Electric Plus and Wood Heating”.
(a) Isn’t it true that the brochure outlines some additional home modifications and costs that customers would need to consider if they signed onto the E-Plus program such as venting modifications, smoke detectors, upgraded fire insurance, safety inspections, a signal light, and new wiring for the E-Plus meter. And that these costs were in addition to the costs of the backup heat source?
1.8. See attached brochure “Electric Plus Heating Systems – A general guide…”
(a) The brochure states “Costs given are for heating equipment alone and exclude installation, which will vary from house to house. To make a complete appraisal of installation costs, your contractor will need to make a site visit.” Did BC Hydro estimate these additional costs and include them in the calculations used to support the claims identified in questions 1.6 (c) and (e)? If not, why not?
1.9. See attached brochure “Electric Plus Heating Systems – Owner’s Guide”.
(a) The brochure states “Electric Plus also helps B.C. Hydro because it provides an attractive British Columbia market for this energy.” Please expand upon the representation that Electric Plus helped BC Hydro.
(b) The brochure states “Additional brochures and technical data sheets on Electric Plus equipment, savings, and wood back-up are also available through your local B.C. Hydro office.” Please provide copies of all such brochures and technical data sheets.
(c) Describe the extent to which federal and provincial energy policy in 1987, which required federal export licences (and the potential of public hearings on the matter) and provincial energy removal certificates prior to export of firm or interruptible power, contributed to the bottling up of surplus power in B.C. and contributed to BC Hydro’s initiative to create the E-Plus market.
(d) Describe the extent to which the air quality and other environmental benefits of having customers switch from polluting heat sources, such as oil, propane, wood, coal, and butane, to clean, renewable hydro electricity contributed to BC Hydro’s creation of the E-Plus program.
1.10. Does BC Hydro agree that many E-Plus Residential customers could, even in the late 1980’s, be fairly characterized as environmentally and energy conscious consumers who were attracted to the program not only for its purported financial benefits but also for the environmental benefits associated with clean, renewable hydro electricity?
1.11. The brochure makes the following representation – “Attractive, tax-free return while adding to the value of your home” Please provide BCH’s calculations of the day regarding what the range of returns would be for EPlus customers that led to inducement of attractive tax-free returns. And what did BCH calculate to be the additional value to the home and what was the logical basis on which that claim was made?
1.12. And were those loans added to BC Hydro’s rate base?
1.13. On page 4 “The cost of converting will usually range from $1,300 to $2,800.” Please calculate what those amounts would be in 2007 dollars.
1.14. How many people converted?
1.15. How many people already had dual fuel heat sources?
1.16. How many financed their conversion using BCH’s loan offer?
1.17. How many financed their conversion themselves?
1.18. What was the total amount invested by all EPlus customers in converting to dual fuel?
1.19. What was the average investment?
1.20. See attached brochure “Electric Plus Heating Program” dated October 1987. On page 3 – financing – what was BCH’s allowable return on equity at that time? What was BCH’s weighted cost of capital at that time? What was BCH’s cost of borrowing funds at that time?
1.21. “Attractive, tax-free return while adding to the value of your home” Please provide BCH’s calculations of the day regarding what the range of returns would be for EPlus customers that led to inducement of attractive tax-free returns. And what did BCH calculate to be the additional value to the home and on what was that additional value based? And were those loans added to rate base?
1.22. On page 4 “The cost of converting will usually range from $1,300 to $2,800.” Please calculate what those amounts would be in 2007 dollars. How many people converted? How many people already had dual fuel heat sources? How many financed their conversion using BCH’s loan offer? How many financed their conversion themselves? What was the total amount invested by all EPlus customers in converting to dual fuel? What was the average investment?
1.23. In reference to the representations in Brochure No. 1 about the permanence of the program, the comments by some E-Plus customers that they thought the deal was permanent, and the John Sheehan letter at the end of Appendix I, we have the following questions and requests:
(a) How does BC Hydro reconcile the following statements in Brochure No. 1 – “…the electricity you use for heating will be metered separately [and] billed at the special rate, which we expect will remain fixed until at least March 31, 1991. Even after that, Electric Plus will cost substantially less than your other electricity” and “Electric Plus is a permanent program” with BC Hydro’s position that E-Plus customers were made aware that the E-Plus program had the potential to be terminated?
(b) Please provide the evidence upon which BC Hydro will rely in order to demonstrate that E-Plus customers were aware that the program could be terminated.
(c) Please identify which paragraphs in the E-Plus contracts set out the possibility that BC Hydro could terminate the E-Plus program.
(d) Is it BC Hydro’s position that its E-Plus customers understood that the program could be terminated at any time?
(e) Does BC Hydro propose to lead any evidence to support this position and if so, what is it?
(f) BC Hydro appears to be taking the position that the E-Plus contracts could somehow be terminated because they were “subject to BCUC jurisdiction.” Isn’t it true that unless BC Hydro itself took the initiative to “phase out” or terminate the E-Plus contracts in this Rate Design Application, the BCUC would not likely, on its own initiative under s. 58 of the Utilities Commission Act, have moved to eliminate such a program?
(g) Is BC Hydro aware of any instance in which the BCUC, on its own motion under s. 58(a) of the Utilities Commission Act, initiated a hearing into BC Hydro’s power rates?
(h) Is BC Hydro taking the position that, as the test is set out in s. 58 of the Utilities Commission Act, current E-Plus rates are “unjust, unreasonable, insufficient, unduly discriminatory or in contravention of this Act”?
(i) Is BC Hydro taking the position that it had to initiate a review of the E-Plus rate because it was concerned the BCUC was poised itself to do so under s. 58 of the Act?
(j) Is it BC Hydro’s position that somehow the BCUC has the power to terminate these E-Plus contracts? If so, please explain.
(k) Isn’t it true that all BC Hydro’s energy supply contracts from independent power producers are subject to the approval of and under the jurisdiction of the BCUC?
(l) Is it BC Hydro’s position that because BC Hydro’s long-term energy supply contracts too are “subject to BCUC jurisdiction” that BC Hydro can terminate them at any time?
(m) Is it BC Hydro’s position that somehow the BCUC could terminate BC Hydro’s long-term energy supply contracts?
(n) If the answer to 1.17 (g) is “Yes” and the answer to 1.17 (j) is “No”, please explain the difference in principle, legal or otherwise, that led to the two different answers.
1.24. Was the E-Plus program approved by the BCUC? If so, please provide a copy of any order approving it and any reasons given in support of it.
1.25. Were the terms set out in the above brochures, such as keeping backup heating systems, also approved by the BCUC?
2.1. By “efficient price signals at the margin” does BC Hydro mean that the intention of the price signal is to motivate customers to use the lowest marginal cost source of energy?
2.2. Does BC Hydro agree that moving from one source of energy to another, such as from electric base board heat to a forced-air oil furnace, will most likely require the investment of new capital?
2.3. Does BC Hydro agree that unless an E-Plus customer can switch heat sources for a financially feasible sum, the price signal that will be sent by the prevailing residential rate will be insufficient to cause that customer to switch from electrical space and water heating to another fuel source?
2.4. Does BC Hydro recognize and agree that for those E-Plus customers for whom it is not economically feasible to switch from electricity to other heat sources, that the “price signal” simply becomes a punitive measure?
2.5. Has BC Hydro analyzed whether or not it is economically attractive for Residential E-Plus customers to switch from electric space and water heating to another source of space and water heating? in other words has BC Hydro actually evaluated whether the residential rate price signal will be effective to encourage conservation among Residential E-Plus customers?
2.6. Please quantify the savings that BC Hydro predicts the average Residential E-Plus customer would realize from investing in the installation of non-electric space and water heating. Explain the methodology used to model those savings. And in doing so, please provide the futures prices used for each alternate energy source such as oil, natural gas, coal, propane and wood. And also provide the names of the organizations that provided those predicted futures prices to BC Hydro.
2.7. Did BC Hydro intend “energy conservation” in the context quoted above, to include forms of energy other than electricity such as oil, coal, wood, propane, and butane?
2.8. Why does BC Hydro now believe, after 20 years of leading of E-Plus customers to believe that they were “helping BC Hydro” and that they were acting in an environmentally responsible manner by consuming “Modern Electric Heat - …clean, quiet, 100% efficient…”, that its E-Plus customers need price signals to reduce their consumption of electricity?
2.9. Does BC Hydro now take the view that E-Plus customers are a conservation problem rather than the solution they appeared to be 20 years ago?
2.10. Does BC Hydro now believe that the E-Plus rate discourages conservation of electricity? Of energy? If so, please provide the analytical basis for that belief. If BC Hydro does not believe that the E-Plus rate discourages conservation of electricity, then does BC Hydro believe that the “price signal” of full residential rates will not be effective in encouraging conservation among Residential E-Plus customers?
2.11. If BC Hydro now believes the E-Plus rate discourages conservation, who or what does BC Hydro believe is the cause of the situation – E-Plus customers, BC Hydro, Provincial energy policy, or current market forces?
2.12. If BC Hydro now believes the E-Plus rate discourages conservation, who does BC Hydro believe should pay the capital costs of correcting the situation (that is, who should pay to retrofit Residential E-Plus customers’ homes – assuming they can be retrofitted at all) – E-Plus customers, all BC Hydro ratepayers, all non-E-Plus residential ratepayers, the classes of ratepayers other than E-Plus and residential, BC Hydro’s shareholder, or the provincial government?
2.13. Has BC Hydro conducted studies to determine the cost that E-Plus customers will face if they wish to switch from electric space and water heating?
2.14. Using data from the most recent five year period, please show the average annual electricity consumption of BC Hydro’s residential customers and compare that to the average electricity consumption of BC Hydro’s E-Plus Residential customers for the same time period.
2.15. Does BC Hydro, in this 2007 Rate Design Application, now view E-Plus customers as being wasteful consumers of electricity?
2.16. Has BC Hydro studied its Residential E-Plus customers to determine the extent to which its Residential E-Plus customers can respond to price signals in a financially and technically feasible manner? If so, please produce them. If no such studies were conducted, please explain why not?
2.17. Isn’t it true that E-Plus customers are already receiving the same price signal as ordinary residential customers for that portion of their electricity consumption not metered by their E-Plus meters?
2.18. How much aggregate annual energy savings for all Residential E-Plus customers, even if the E-Plus rate was eliminated April 1, 2008, does BC Hydro anticipate achieving as a result of these new price signals? Please produce the methodology and studies used to establish BC Hydro’s estimate.
2.19. In the quote from the RDA above, please explain what BC Hydro meant, in describing the purpose of price signals, by the phrase “…to the extent practical.”
2.20. If it turns out that the price signal to Residential E-Plus customers of the full residential electricity rate is not a “practical” means to reduce the consumption of electricity for space and water heating by Residential E-Plus customers, will BC Hydro abandon its application to phase out the E-Plus rate?
2.21. If the price signal is not a “practical” way to address Residential E-Plus consumption patterns and BC Hydro does not agree that it should abandon its application to phase out the E-Plus rate, please explain any remaining reasons why BC Hydro would continue to support the phase out of E-Plus.
2.22. Has BC Hydro assumed that Residential E-Plus customers are more electric-intensive consumers than regular residential customers or has BC Hydro conducted a study to determine if E-Plus customers are more electric-intensive consumers? If such a study has been conducted please provide it. If such a study has not been conducted, please explain how BC Hydro came to the conclusion that Residential E-Plus customers needed a price signal to reduce their use of electricity.
2.23. In 2006 did the average Residential E-Plus customer consume more electricity or less than the average residential customer did in that same year?
2.24. Does BC Hydro have a demographic profile of its Residential E-Plus customers? If so, please provide it. If not, does BC Hydro agree that the demographic make-up of its Residential E-Plus customers is likely comprised of retirement-age and older customers? And does BC Hydro further agree that as customers age they tend to consume less energy even in the absence of a “price signal”?
2.25. Is BC Hydro aware of how many of its Residential E-Plus customers are on fixed incomes?

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C8-4 THOMAS BUTLER LLP