Final Report: LETTING EVERYONE HELP: REMOVING BARRIERS TO CONSUMER PARTICIPATION IN ENERGY CONSERVATION [pdf file: 0.46mb]
PIAC, February 2006
The necessity to reduce overall consumption of energy is a goal common to Canadian governments at all levels. This goal is driven, in part, by the duty to reduce emissions pursuant to Canada’s international agreements and the stark economic reality of the costs associated with construction of new power generation to meet increasing demand.
With rising energy prices beginning to mirror such increases in demand, efforts to reduce consumption have taken on new urgency for Canadian consumers. Not only are conservation efforts essential as part of an overall strategy for meeting Canadian energy needs, but they are increasingly necessary for Canadian households to undertake to avoid economic burden.
However, not all Canadians may have the ability to reduce household energy consumption because of barriers to participation. These barriers may include the inability to finance changes to heating equipment or household features that would reduce energy bills. There can be language and educational barriers which may constrain take-up. As well, there are structural barriers to many rental households participating in conservation programs. Landlords that pass on energy costs to tenants may be ambivalent about making expenditures to benefit such tenants and tenants whose energy costs are included in their rent have little incentive to expend household income on conservation.
Statistics Canada defines low income as “an income threshold below which an average family will likely devote a larger share of its income to the necessities of food, shelter and clothing that an average family would”. In 2000, the incidence of low income households among the Canadian population was 16.2%. The average Canadian household expended 20.4 % on shelter costs (including utilities) .
It is unlikely that energy costs are going to be reduced in the near term. Analysts predict that the long term prices for natural gas and energy are up and are likely to stay that way. In the Northeastern United States, low income customers have already experienced potentially catastrophic increases in heating between 9.4% and 113.6% in heating bills since 2001 with the likelihood of more such increases occurring as demand increases . The need for the removal of barriers, and in particular financial barriers, to access to energy conservation measures is likely becoming acute in Canadian jurisdictions as well.
An Ontario-based study in 2004 proposed a package of basic and extended measures which involved home assessments, energy conserving equipment and education. The cost of basic measures was $1000 and those of extended measures including the replacement of furnaces and appliances was $3700 . These monetary amounts show a requirement for external funding for low income customers to access the conservation savings conservatively estimated in this report at 20% of energy costs. The structural problems associated with the misplaced benefit incentives referred to above also has to be solved for low income tenant renters.
There are numerous examples of successful programs that have been undertaken in various jurisdictions to address the problems of barrier reduction. One of the most successful models has been undertaken in the United Kingdom associated with the policy concept of “fuel poverty”. Fuel poverty is said to exist where a household has to spend over 10% of its income on all fuel use to heat the home to an adequate standard of warmth. The major causes of fuel poverty has been identified by the government as poor home energy efficiency and low incomes. The U.K. program to end fuel poverty has set definite goals for ending fuel poverty within a fifteen year window.
This report also describes programs that address the energy needs of disadvantaged groups; such needs that may, if not remedied impair their ability to participate in conservation programs. These include emergency programs, energy bill assistance, and consumer protection measures. Emergency programs address particular crises, chiefly financial that may result in the disconnection of customers from the network. Energy Bill assistance programs attempt to remedy systemic financial ability to pay energy bills from meager household income. Consumer protection programs cover a wide variety of programs from protection of customers from disconnection in winter to implementation of higher efficiency standards for housing or electrical appliances.
The report principally concentrates on programs associated with enabling conservation efforts on the part of utility customers who would otherwise be unable to do so. The measures described include those offered in the United Kingdom, the United States and Canada. In the United States, there are four major mechanisms for addressing the removal of barriers. These are Low Income Home Energy Assistance Program (LIHEAP), Weatherization Assistance Program (WAP), System Benefits Funds, or Utility financing. The conservation and weatherization services funded by these programs generally involve common sense measures that are made accessible to program participants. These measures include energy audits, fuel switching including hot water conversion, insulation for attics, compact fluorescent lighting, energy efficient refrigerators, energy efficient furnaces, water heater blankets, weatherstripping, caulking, and repairs to reduce air infiltration.
In the United Kingdom, the campaign against fuel poverty attempts to carry out the government directed strategy through mechanisms that include both public and private initatives. These include the establishment of energy efficiency obligations through Ofgem, the regulator of gas and electricity suppliers. Such obligations, called the Energy Efficiency Commitment (EEC), require and incent such suppliers to carry out improvements in energy efficiency by way of innovative actions. Over a three year period from 2002-2005, the EEC resulted in savings of approximately $70 CDN per year to low income households. The EEC programs consist primarily of the same menu of measures funded in the United States that are described above. Other programs include the funding of energy efficient partnerships to achieve energy efficiency in the building process by doing such things as developing national standards and best practices. Local authorities fund home inprovement agencies that provide cost effective repair and maintenance assistance to clients that are unsuitably housed.
The report also describes efforts to extend low income conservation programs to disadvantaged customers in various Canadian provinces. In Quebec, Equiterre carries out audits and follow up refits and education of customers which have achieved estimated savings in aggregate that are double the cost of the program. As well, the expenditures have been shown to produce job growth at a higher rate than power generation projects.
In Ontario, electric distribution companies have embarked upon major initiatives at the behest of the Ontario Energy Board to fund conservation programs from their rates. Social housing buildings have been targeted for energy audits to identify all possible ways to save energy from switching light bulbs to installing a new furnace. Natural gas local distribution companies (LDCs) have been delivering demand side management programs to gas consumers for over a decade. The report describes how one LDC, Enbridge will be attempting to make its residential conservation programs more accessible to low income customers through a strategy of education and outreach. In addition to the efforts by gas and electric LDCs the Ontario government’s own conservation bureau operated by the Ontario Power Authority will spend $235 million (with another 75 million dollars leveraged) over five years on low income programs addressing the needs of low income homeowners and low income and social housing tenants.
The OPA’s program measures derive from a study financed by the Ontario Government and the Toronto Atmospheric Fund referenced earlier. The study gave the following general recommendations for low income conservation programs:
- The focus should be on savings associated with energy for the safe preparation of food, home heating and cooling (for vulnerable groups)
- The plan should meet immediate needs of low-income and at the same time produce long term (but based on preventative measures)
- Prior to program implementation, the overall strategic program planning should be negotiated with low income and advocacy groups
- Clear and simple screening process for identifying program participants
- All low-income households need to be included (including renters)
- The program funds should not come out of other subsidies or financial support given to participants
- Upfront cost to participants will not be required for energy efficiency upgrade programs
- Energy efficiency and conservation programs should address the following components:
- Delivery of programs should be done by local community groups with experiences in delivering energy efficient programsIn assessing the cost effectiveness of low income conservation programs, it is important that the overall impact of conservation programs upon demand and the resultant avoided costs be considered. In Ontario, for example, every 1000 MWs of new electricity production requires an expenditure of at least $1.6 billion. It means that expenditures such as those of the OPA above are at least 50% justified by the avoided costs alone as they will reduce demand by 100 MW.Other studies have confirmed the viability of these programs. Assessments of California’s Low Income Efficiency Plan filed with the California Public Utilities Commission show bill savings to cost ratios which range from .31 to .97. This provides comfort that the additional avoided costs and societal benefits create a total amount that far eclipses the costs for the implementation of the usual range of conservation measures previously discussed.As well, an important 1999 study has shown that the non-energy, non-environmental benefits to the utility of investing in low income efficiency programs are substantial. These benefits include lower utility costs for accounts collection, emergency services, bad debts and reconnections and societal benefits mainly in the form of reduced social service delivery costs. The authors of the study conservatively estimate that such benefits, in aggregate should approximate 50% of the program costs for the utility .
While there is no formula for removals of barriers to access for conservation programs, the following should be considered as part of the package:
- Customer education and outreach, including home audits and follow up;
- Elimination or reduction of up-front costs
- Service delivery that is rationalized to involve delivery agents with experience with the communityFinally, there are two general observations that can be made about the effectiveness of such programs to date:
- The programs have a material effect upon the well-being of the consumer participants, including but not limited to a reduction in household expenses.
- The program outlays are easily justified financially from the standpoint of any reasonable accounting for benefits, and politically from its ability to provide a higher standard of living for those citizens who are too marginalized to obtain an equivalent positive effect on their own.