Energy poverty — a lack of affordable access to the energy services that contribute to quality of life — is a condition that occurs at the nexus of high energy costs, poor energy efficiency in homes, and lower income households. As of October 2019, there were approximately 272,200 households in British Columbia facing energy poverty.[i] In the new context of the COVID-19 pandemic, it is reasonable to assume that the incidence of energy poverty — and the gravity of its effects — are being further compounded by the job losses and increased residential energy consumption associated with the pandemic.[ii]
Households in British Columbia facing energy poverty are currently provided limited options for support and protection. Based on a review of programming across Canada and the United States, and interviews with program administrators in a number of key jurisdictions, this research considered model programs and best practices that could help inform British Columbia’s approach to energy poverty going forward. This report considers measures that can help lower energy costs through both ongoing subsidy and emergency relief programs. We believe that both of these measures are essential to address energy poverty, and are especially needed during the current period of economic vulnerability and ongoing recovery from the COVID-19 pandemic.
This research has found that BC’s current body of initiatives aimed at relieving energy poverty is inadequate when compared to other jurisdictions in North America. As such, it is imperative that the Provincial Government rethink its current suite of energy cost protections as part of its economic recovery strategy, and act to update the suite of energy support programs available to vulnerable households.
Our research underlined the need for a breadth of programming to reduce costs for customers facing energy poverty at various stages on both an ongoing and urgent basis. British Columbia currently has no ongoing bill support program, and the high rejection rate of BC Hydro’s Customer Crisis Fund — when viewed alongside the prevalence of energy poverty in the province — suggests that this pilot program is suffering from an insufficiently comprehensive eligibility mechanism. BC Hydro’s current tiered residential rate structure also penalizes electrification of space heating for many customers, further compounding the issue of high energy costs. Based on energy costs from April 2020, heating with natural gas in British Columbia costs on average one third of what it costs to heat with older electric heating technologies.[iii]
Several other provinces, many US states, and the US federal government have established successful programs that provide assistance on a monthly basis to those that are unable to pay part of their electricity or heating bill. Considering the extensive electrification of space and water heating planned as part of the CleanBC climate plan, introducing an ongoing assistance program for electricity bills, together with the implementation of high-efficiency electric heating appliances, could also act as a means of advancing British Columbia’s electrification goals by encouraging fuel switching to electric heating.
We have identified a series of key recommendations for the improvement of British Columbia’s current approach to energy cost assistance. Those recommendations are summarized below and discussed in more detail in the report that follows.
In summary, we propose the implementation of a sliding-scale percentage rebate for income qualifying electricity accounts based on household income, with increased rebate amounts available for a number of customer classes including those heating with electricity. We also propose a redesign of the existing Customer Crisis Fund.
Energy poverty can be broadly defined as a lack of affordable access to the energy services that contribute to quality of life. Essential energy services include thermal comfort, lighting, water heating, cooking, and transportation. Although there is no standardized definition or condition for energy poverty, it occurs at the nexus of low incomes and high energy bills, where households must spend a disproportionate amount of their income on meeting basic energy needs. A common threshold used to define energy poverty is when an individual or household spends at least twice the median household expenditure on energy.[iv] For the average British Columbian household this equates to spending more than 6% of one’s gross income on energy.
Based on these metrics, research indicates that at least one million low- and middle-income Canadian households experience energy poverty. However, individual circumstances vary widely, and a true definition should also take into account other socioeconomic factors and pressures experienced by vulnerable households. Importantly, households that experience disproportionately high energy costs are not always low-income, often as the result of poor energy efficiency in homes, or a lack of access to affordable heating fuels.
A lack of access to basic energy services can have profound impacts on human health and well-being. High energy costs exacerbate the social distress and impact of poverty in low-income communities, while inadequate heating systems lead to negative health and quality of life impacts stemming from lower air quality and mould. Households that experience energy poverty consistently report poorer overall health, both physical and mental.
Reducing the incidence of energy poverty requires that action be taken on all three of its major drivers: low household income, high energy prices, and poor energy efficiency in homes. However, this report will focus on policies that can reduce energy prices through a number of mechanisms, including emergency relief funds, rate subsidies, and rate reductions. These mechanisms are introduced below. A companion report will consider the role of energy efficiency in reducing energy poverty.
Programs designed to reduce or relieve energy bill costs broadly fall into two categories: one-time interventions for customers facing a temporary crisis, and ongoing support programs for customers facing chronic hardship paying their bills.
Emergency relief funds
These programs are designed to provide one-time relief for energy customers that are experiencing a temporary financial crisis, often as a result of loss of employment, a health emergency, or family concerns. Programs for those that have lost employment as a result of the COVID-19 pandemic can be considered a special case of emergency relief measures. In many cases, these programs apply a credit toward utility accounts that have already entered arrears, or are at imminent risk of disconnection. However, program requirements are typically imposed by utilities and are not universally consistent. Emergency relief programs can experience some design issues, particularly around eligibility criteria, which at times can be too restrictive to cover the gamut of temporary financial emergencies, or around administrative requirements — especially when the onus is on the customer to document and prove their emergency circumstances.
These mechanisms directly reduce energy costs for eligible consumers without altering the price structure of energy itself. This is accomplished either through a fixed or variable credit that is applied to energy bills, or provided directly to households. Fixed credits are typically established based on household income level and size, and are designed to offset a reasonable portion of monthly energy usage for essential services, like heating and cooking. Variable credits are based on a household’s previous energy consumption pattern, and refund a percentage of this consumption. Variable credits better take into account a household’s energy use based on energy efficiency and size of the home, but are administratively more complex and can lead to issues around privacy and access to historical energy bills.
These mechanisms involve a systemic restructuring of the way energy is priced for certain customers. In the context of reducing energy poverty, new or modified rate classes could be created in order to alleviate high energy costs for the most at-risk customers. The most obvious example of a unique rate class would be a low-income rate, or “lifeline rate” for qualifying households, which would apply a lower energy rate up to a certain reasonable consumption threshold, or reduce/eliminate fixed charges. Special rate classes could also be created for certain end-use cases, for example, a lower rate could apply to households that use electricity as their primary heating fuel, or to customers that have installed high-efficiency heat pumps.
READ the full report: Rethinking Energy Bill Protections in British Columbia (August 2020)
[ii] Limited, H. (2020, May 19). COVID-19: Shifting how we use energy. Retrieved July 17, 2020, from https://hydroottawa.com/blog/covid-19-shifting-how-we-use-energy
[iii] FortisBC. (n.d.). Fuel cost comparison. Retrieved July, 2020, from https://www.fortisbc.com/services/natural-gas-services/why-choose-natural-gas/annual-fuel-cost-comparison
[iv] Rezaei, M. (2017). Power to the people : thinking (and rethinking) energy poverty in British Columbia, Canada (T). University of British Columbia. Retrieved from https://open.library.ubc.ca/collections/ubctheses/24/items/1.0351974