Jun 28, 2016

The international trend to public energy

By policynote-jun2016-international-trend-to-public-energy

The most Canadians probably know about the new mayor of London, England is that he is the city’s first Muslim mayor and that one of his first public actions was to scrap with Donald Trump over the Donald’s promise to block Muslims from entering the United States.

But there are a lot more interesting things going on in London (besides the Brexit vote). Mayor Sadiq Khan has promised to create a city-owned energy company, Energy for Londoners.

Protecting the environment has been the focus of cities around the world looking to bring energy management services in-house.

The Guardian newspaper describes the UK’s gas and electric market as “notoriously uncompetitive.”

If London proceeds with the project, it will be following the example of Nottingham and Bristol, which, according to the Institute for Research on Public Policy, “aims not just to supply energy at competitive prices—it reckons its tariffs can save customers an average of £250 a year—but to invest in community-based renewable generation and ultimately in renewable heat supply as well.” The Institute also states that “Bristol Energy forecasts a 12% return on the council’s investment after five years, rising to 35% after 10, with money reinvested for social good.”

Protecting the environment plays a big role in Mayor Khan’s plans, and this has also been the focus of other cities around the world looking to use energy programs for environmental purposes.

In Germany 170 local governments have brought energy management services in-house since 2007. In Hamburg in 2013, residents voted to buy back power, gas and district heating networks. The environment and sustainability played a major role in this decision, with Hamburg promising it would locally produce fifty per cent of the energy consumed by its clients.

Municipal management of energy systems in not limited to Europe. The New York Times reports American municipalities are showing increasing interest in taking over electricity companies from private utilities. And like Europe, the biggest benefits were described by Ursula Schryver, director of education and customer programs at the American Public Power Association, as climate and local control. According to the Federal Energy Information Administration, municipalities can offer power more cheaply than private utilities and can put more of the revenue back into maintenance and providing better service.

One of the latest American cities to move in this direction is Boulder, Colorado, which since 2011 has been looking to form its own electric utility with the goal of achieving 100 per cent clean energy and an 80 per cent reduction in carbon emissions by 2050. The city is currently going through challenging discussions with local private energy providers and the Utilities Commission.

In Canada Medicine Hat, Alberta is perhaps the most aggressive in providing energy. Medicine Hat not only has its own natural gas distribution system; it also owns natural gas properties to provide the gas. Its electric utility began generating electricity in 1910 using diesel fuel, and today its power plant uses natural gas to provide electricity. Medicine Hat also has a “Going Green” surcharge on electric bills for renewable energy purchased by residential, farm and business customers.

Municipalities can offer power more cheaply than private utilities and can put more of the revenue back into maintenance and providing better service.

How much room would there be for these sorts of activities in British Columbia? Here in BC most electricity is already provided by the provincially-owned utility, BC Hydro, and most of this comes from hydroelectric plants. (BC Hydro is not without controversy, however, with issues like Site C and the amount of revenue the province takes out of the utility.) As well a number of companies are licensed to provide natural gas in BC. The largest, FortisBC, is a private company that also provides electricity to some communities in the Okanagan and the Kootenays, and provides natural gas to nearly a million British Columbians.

BC Hydro used to provide at least some of the natural gas used in British Columbia until its Mainland Gas Division was sold in 1988 to Inland Natural Gas, which subsequently changed its name to BC Gas and then to Terasen Gas. Kinder Morgan acquired ownership in 2005 and in turn sold the assets to FortisBC in 2007.

Despite this concentrated market, some BC communities still offer energy utility services to their citizens. Nelson, New Westminster, Grand Forks, Penticton and Summerland purchase electricity and resell it directly to their communities. Nelson is one of the few municipally owned and operated utilities to have its own generation, transmission and distribution systems. As the community reports on its website:

Operating costs for generation include maintenance of the four generating units and of the buildings and property, water license fees and insurance. The power plant serves an important function in that it tempers the rate impacts that FortisBC increases would otherwise have on our customers.

In 2014, Nelson Hydro transferred $2,500,000 in dividends to the City General Revenue Fund.

New Westminster provides electricity to 31,000 residents. The city shows a surplus of $9.5 million on its Electrical Utility Fund. The City of Penticton reports it takes in roughly $6.5 million more from its electrical utility than it spends.

I can’t think of any municipalities that directly provide natural gas services to their citizens, however most benefit from a franchise fee from the private utilities to cover the costs involved for local governments (e.g. for digging up roads). At least five communities are involved in an arcane scheme with Terasen, in which the community borrows money from the Municipal Finance Authority and gives it to Terasen as a capital lease for the company’s infrastructure in their community. In return Terasen enters into an operating lease with the community to operate the facilities it just passed over in a capital lease. In effect, the company gets low-interest money and shares the savings from reduced borrowing costs with the community.

There are more innovative things happening in some communities. In 2013 the Village of Telkwa installed a biomass district heating system fueled by reject slabs from a local sawmill or from standing deadwood. The community estimates they’ve saved as much as 400 tonnes per year in CO2 emissions.

Biomass is becoming a more common fuel for communities, institutions and BC Hydro itself.

Some larger communities are also getting involved in energy programs. The City of North Vancouver operates a district heating system through the municipally-owned Lonsdale Energy Corporation. While still using natural gas as a fuel, the system is more efficient than separate heating plants for each building. The City requires all new buildings over 1,000 m2 to be connected to the district energy system.

In Vancouver, the city is using sewage as a heating source for the former Olympic Athletes’ Village project. The CCPA’s Marc Lee wrote a detailed report on this system in 2015.

From London to Bristol and from Hamburg to Boulder, Colorado, local governments are looking at ways to provide better energy services to their communities with less cost, more public input and fewer climate impacts. It is a trend to watch.

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