E-Plus Homeowners Group Gary McCaig 9277 Faber Road, Port Alberni B.C. V9Y 9C3

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1 E-PLUS HOMEOWNERS GROUP RECONSIDERATION & VARIANCE G-5-17 PHASE 2 EXHIBIT B-5 Homeowners Group Gary McCaig 9277 Faber Road, Port Alberni B.C. V9Y 9C3 eplusbcgroup@gmail.com July 4, 2017 British Columbia Utilities Commission 6th Floor 900 Howe Street Vancouver, BC V6Z 2N3 Attention: Patrick Wruck, Commission Secretary By commission.secretary@bcuc.com Dear Mr. Wruck, RE: Homeowners Group Application for Reconsideration and Variance of Order G-5-17 in the Matter of the 2015 Rate Design Application British Columbia Utilities Commission Information Request No. 1 to Homeowners Group Please find attached the response of the Homeowners Group to the subject document. Responses to individual questions have been inserted into the text of the document, in italics. Respectfully, Gary McCaig for Homeowners Group

2 Suite 410, 900 Howe Street Vancouver, BC Canada V6Z 2N3 bcuc.com P: TF: F: Homeowners Group Application for Reconsideration and Variance of Order G-5-17 in the matter of the BC Hydro 2015 Rate Design Application INFORMATION REQUEST NO. 1 TO E-PLUS HOMEOWNERS GROUP A. Homeowners Group (EPHG) APPLICATION FOR RECONSIDERATION 1.0 Reference: EPHG Application for Reconsideration Exhibit B-1, Section 3.0, pp. 4 and 5 Cost of joining and remaining in the program On page 4 of its Application, EPHG states that If the E-plus program had not been offered, many perhaps most of those who chose electric heat at that time would not have done so due to its high cost at regular rates. They would have chosen other heating systems that they thought were more economical, less expensive to install or offered some other advantages to them, such as oil, wood or propane heat (at that time [natural gas]) would not have been available to them). On page 5 of its Application, EPHG states that many customers have spent considerably more and gone beyond those most basic requirements of qualifying for the rate, for example installing second wood stoves, masonry chimneys, or other enhancements. Additionally, they have spent money maintaining their systems, over almost 30 years in some cases. 1.1 On page 5 of its application, EPHG references examples of capital and maintenance spending for backup heating systems required to qualify and remain in the residential E-plus rate program. Please discuss how these capital and maintenance costs differ from those that would have been incurred for heating systems in the event that the residential E-plus rate program had not been offered. Response: Basic maintenance requirements and costs of primary electric heating systems would in many cases be comparable to requirements for alternative heating systems. For example, both oil furnaces and electric forced air furnaces should be serviced annually, and at some point may require repairs or replacement. Differences arise first from the fact that customers must also maintain secondary (backup) heating systems and fuel supplies. The most common back-up systems are wood stoves which are maintenance intensive due to safety and environmental concerns. For example they require regular chimney cleaning to avoid fire hazards, and wood stove technology has changed substantially in recent years with more modern stoves being required in order to meet improved emission standards. Fuel supplies must be maintained for back-up systems and this has a limited shelf life. A second consideration is that customers have spent and are continuing to spend money on primary and secondary heating systems when one or both might become redundant with the elimination of rates. Whereas those without heating can view major maintenance, upgrades or replacement as investments in their homes, customers will see these as EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 1 of 6

3 wasted money if they are forced to move to alternate systems in the event their electric heating becomes unaffordable. 2.0 Reference: EPHG Application for Reconsideration Exhibit B-1, p. 5 Cost of exiting the residential E-plus program On page 5 of its Application, EPHG submits that the cost of fully priced electric heat at regular rates is about 2.5 times that of heating with [natural gas], an additional $1150 per year in a representative home. On page 5 of its Application, EPHG submits that the cost of fully priced electric heat at regular rates is about 2.5 times that of heating with [natural gas], an additional $1,150 per year in a representative home. On page 5 of its Application, EPHG submits that Costs will vary with home design factors such as available space, existence of heating vents and chimneys etc., but could easily run to the $10,000 - $15,000 range. 2.1 Please provide an estimate of the pay-back period required to recoup the cost to convert to natural gas, based on the estimated annual savings of $1,150 referenced on page 5. Please provide EPHG s estimate of the cost to convert from electric space and water heating to natural gas that is used in the analysis. Response EPHG emphasize that conversion to NG heating is a practical option only for a limited number of customers, and is an expensive option for many of those who can convert. Note that considerations relating to water heating have not been included in any of our analysis or arguments as we understand there are relatively few customers who use for this purpose. Also, Question 2.1 can only be answered in a general sense because there are so many factors that are different from home to home (see also response to question 2.3). For customers who currently have natural gas in their area, but are not connected, who have homes with interior locations suitable for installation of a natural gas forced air furnace and vent to outside, and who have existing ductwork to distribute heat or the possibility to install these without major structural changes, the range of conversion costs would generally be in the range of: - gas hook up costs $ $ gas furnace, installed with controls, and accessories $ $5000 -ducting installation and related structural $ $4000 modifications Total cost - $5000 to $14,000 These estimates are based on the personal experiences of EPHG members, some of which were documented in Appendix A of the EPHG Submission of Evidence, May 1, 2017, Document B-3 ( EPHG Evidence ). For customers who meet the criteria above, we believe the payback would therefore be in the range of 4.5 to 13 years based on the average savings stated in the question and on current low interest rates. For clarity, this payback refers to the hypothetical case of customers who having lost the E- EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 2 of 6

4 Plus rate were being billed at Step 2 rates for electricity used in heating their homes and who were considering making the expenditure to convert to NG heating in order to save approximately $1150/year. It does not imply a payback from converting to NG at current rates. In many cases costs would greatly exceed the above estimates and conversion to gas would be financially impractical. For example while gas is nominally available in the Victoria area, some E- Plus customers living in rocky areas of that city have been quoted costs as high as $10,000 simply to hook up to mains, due to the difficulty of installing the underground service. Others report that gas is simply not available on their street, due to similar installation issues. In many cases home design makes it impossible (without major modifications) to install the hot air circulation ducts that would be required for a gas furnace. An example would be a home without a basement or crawl space. 2.2 Please elaborate on what is meant by fully priced electric heat at regular rates. Response This statement refers to electric heat charged at Step 2 of Rate Schedule 1101, which EPHG believe to be the appropriate measure for the vast majority of homeowners once is phased out. (Note - EPHG has submitted an IR to BC Hydro to verify what percentage of heating electricity use would exceed Step 1 levels for average and median households of those currently on the rate.) 2.3 Please explain how EPHG arrived at the $10,000 - $15,000 referenced on page 5 of the Application. Response The reference was Costs will vary with home design factors such as available space, existence of heating vents and chimneys etc., but could easily run to the $10, $15,000 range. As explained in the subject Application this amount was intended to quantify the upper end of the range for the most likely heating system conversions that would be considered by homeowners in response to the higher costs of electric heat once the rate was phased out. These responses were identified as conversion to natural gas heat, adding heat pumps and installing emerging technologies. The cost of a conversion to NG is discussed in our response to question 2.1 above. The cost of adding a heat pump (e.g. as a supplement to an electric forced air furnace) is in the range of$10,000-15,000 based on the personal experience of a number of homeowners as reported in EPHG Evidence. Emerging technologies refers to just that; these are options that might be considered but which at this point are in limited use, still generally expensive, and difficult to evaluate. It must be stressed that the costs discussed are for those instances where conversions are practical and would be seriously considered. In many cases conversions would be extremely expensive, far in excess of $15,000, giving customers no practical alternative to retaining their electric heating systems, regardless of increasing heating costs. An example given was customers whose homes had baseboard electric heaters and whose homes were built on concrete slabs without basements or crawl spaces to install heating ducts. To assist the reader in understanding the difficulties faced by customers in converting from electric heat to alternative heating systems we provide the table below which illustrates the basic home design and construction requirements for installation of common heating systems. As shown, electric baseboard heating, for example, has few requirements other than enhanced EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 3 of 6

5 electrical service and wiring. An oil furnace has totally different requirements including a suitable furnace room, a chimney (usually masonry) in or adjacent to that room, an oil tank and ducting to distribute hot air. For these reasons it is unlikely that a house with electric baseboard heating could practically be converted to oil except at prohibitive cost. As another example, a house with an electric forced air furnace would have the furnace room needed to install an oil furnace but not have the chimney required. That same house many have a wood heater with a chimney but that is unlikely to be in a location or of a type that would suit the oil furnace. HOME DESIGN REQUIREMENTS FOR COMMON HEATING SYSTEMS Electric Baseboard Electric Forced Air Oil Furnace Gas Furnace Wood Heater Enhanced Electrical Service and Wiring Furnace Room some Ducting Chimney Vent Oil Tank Underground Service Line 3.0 Reference: EPHG Application for Reconsideration Exhibit B-1, pp. 7-8 Need to Mitigate Rate Shock On page 7 of its Application, EPHG submits that the correct measure of rate shock is the impact on that part of the bill relating to home heating costs which is the issue under question. On page 8 of its Application, EPHG submit that If the increase specified in the Order is phased in equally over 5 years it will represent a yearly increase in heating electricity costs of 26% (in additional to annual general rate increases). If the rate increase is phased in equally over 10 years the annual increase would fall to a still high 13%. 3.1 Please elaborate on why EPHG considers the correct measure of rate shock to be the impact on the part of the bill relating to home heating costs. Response - EPHG believe it is inappropriate and misleading to express the cost impact of the phase out of the rate as a percentage of total electricity cost rather than as a percentage of heating electricity cost. To do so has the effect of diminishing the apparent impact of these increases, by as much as half we believe. is by definition electricity used for heating purposes and nothing else. It falls under an entirely separate rate schedule from the standard residential rate and was dealt with separately in the 2015 RDA. The current Application for Reconsideration deals only with rates. EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 4 of 6

6 With few exceptions all homeowners in the province must purchase electricity to use in their homes for basic needs such as lighting, dish and clothes washing, refrigeration, operation of electronics and small appliances, air exhaust and circulation fans and in the absence of natural gas supply, for cooking, water heating and clothes drying. For some the list would include air conditioning and pumps for water or sewage. With very few exceptions there is no practical alternative to electricity for these uses. For heating, homeowners have a number of options other than electricity. Many, likely the majority of single family homeowners in the province heat their homes using other means. They consider their heating costs as a separate and major part of their household operating costs, entirely unrelated to their cost of electricity. Customers using electric heat think the same way and this is especially true of customers whose heating electricity is billed separately. All would be considering their heating costs separately when making decisions such as what kind of heating to use, or whether to invest in upgrading or replacing heating systems. They would see no more reason to average in their electrical heating costs with their basic electrical costs than they would to average them in with any other utility bills such as telephone or cable. 3.2 Please provide supporting calculations for the increase in heating electricity costs referenced on page 8 of 26 percent and 13 percent for 5 and 10 year phase out periods, respectively. Response This approximation is based on electricity used for electric heating being billed (at the time of Application) at the Step 2 rate of $ /kW.h. which is 128.9% higher than the rate of $ /kW.h. On a simple arithmetical basis (no allowance for compounding) this equates to 26% per year over 5 years or 13% per year over ten years, in addition to general rate increases. We note that detailed information on projected annual increases has been provided by BC Hydro in their Evidence submitted June 6, 2017 Document C2-3. For reasons explained in our response to 3.1 (above) we believe that the increase in heating electricity rates and costs (considered separately from other electricity purchased ) is the appropriate measure for purposes of this Application, and have made information requests to BC Hydro to provide analysis on this basis. We also believe that for most customers all or almost all of their heating electricity requirements would be billed at the Step 2 rate in the absence of the rate and this issue is also the subject of an information request to BC Hydro. 4.0 Exhibit B-1, p. 8 Natural Attrition On page 8 of its Application, EPHG submits: One of the arguments presented by EPHG in the 2015 RDA Hearings was that since the end of transferability of the residential rate in 2008 the rate was ending rapidly by natural attrition and therefore becoming less of an issue. This was based on BC Hydro data that showed that the number of customers had dropped over 37% between 2008 and 2016 and that the rate of attrition was in fact increasing, with a drop of 754 customers or 10% between 2015 and 2016 alone. This reduced the total number of customers to only According to demographic information provided by BC Hydro rapid attrition can be expected to continue. EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 5 of 6

7 Over 50% of customers will be 67 years of age or older in 2017, entering the time when an escalating number will be downsizing homes, moving to other forms of accommodation or dying. 4.1 Please provide the original source for the information referenced in the preamble to this Information Request. Response - Information on customer demographics and attrition rates has been provided by BC Hydro in several instances including: 5.0 Reference: EPHG Evidence Exhibit B-3, p. 3 EPHG Members - Document titled Q & A dated April 15, 2015, distributed to customers and posted on BC Hydro website. A copy of this document is attached as Appendix A RDA Exhibit B-23, BC Hydro Response to BCUC IR #2 dated April 12, Please confirm the total number of EPHG members. Response There are currently approximately 162 members of EPHG. (This number could require slight adjustment due to members having died or sold their homes recently without notifying EPHG.) All EPHG members are Residential customers with a direct interest in the results of the subject Application. The names of those who were members at the time of the 2015 RDA were included as an Appendix to the EPHG Submission of Evidence, Exhibit C10-4 of the RDA. A number of new members have joined since then and a smaller number have left, primarily because of sale of their homes. Some earlier members have died and their spouses have taken their place as members. EPGH Application for Reconsideration and Variance of Order G-5-17 BCUC IR No. 1 6 of 6

8 Question 1 How many Customers were there on the date of the BCUC October 26, 2007 decision and order with respect to the 2007 RDA (or the last billing prior to that date)? On October 26, 2007 there were 12,155 accounts. Question 2 For each year from 2008 through 2014, how many customers were there as of December 31 (or the last billing prior to that date)? Date as of Residential Accounts Commercial & Industrial Accounts Total Accounts 31 Dec 07 11, , Dec 08 11, , Dec 09 10, , Dec 10 9, , Dec 11 9, , Dec 12 8, , Dec 13 8, , Dec 14 8, ,409 Question 3 For each year from 2008 through 2014, what was the annual electric usage (in kwh) of E- Plus customers for heating as shown by the separate metering? Date As Of Residential Heating (kwh) Commercial & Industrial Heating (kwh) Total Heating (kwh) 31 Dec ,893,308 37,929, ,822, Dec ,985,390 34,935, ,921, Dec ,153,697 32,643, ,796, Dec ,354,060 34,444, ,799, Dec ,465,559 30,839, ,304, Dec ,197,589 29,618, ,815, Dec ,320,107 27,970, ,290,951 Question 4 I would like to know how many households in BC are able to use [] and if possible an idea of the age range of the residents in those homes The total number of Residential accounts as of 31 December 2014 was 8,177, as shown in the response to Question No. 2. The rate was closed to new customers in April Please see the response to Question No.5, which sets out the age range of customers. April (v.3) BC Hydro 2015 Rate Design Application Rate Page 1 of 4

9 Question 5 Have you gathered any information on the age of customers? If so, provide that information. Based on the results of BC Hydro s Residential End-Use Survey (REUS), the estimated age distribution of Residential customers in percentage terms is as follows. For comparison, the estimated age distribution of all BC Hydro Residential customers in percent is also reported. Age Category (Years) Residential Customers Percent By Category All Residential Customers Percent By Category 18 to to to to to or older Total Question 6 How much would BC Hydro intend to save by phasing out? There will be no significant cost saving to BC Hydro from ending the rate. Question 7 What was the exact reason why the previous request for to be terminated was rejected and why is BC Hydro raising this again? BC Hydro periodically reviews all rates charged to customers to ensure that they are fair, efficient and balance the interests of all customers. Any proposed changes are included in a Rate Design Application (RDA) filed with the BC Utilities Commission (BCUC) for review. In 2007 BC Hydro filed an RDA with the BCUC, proposing to phase out service. The BCUC turned down BC Hydro s request because they believed BC Hydro had not adequately supported the proposal. You can read the Commission s decision (Order G ) on BC Hydro s 2015 RDA website ro/customerportal/documents/corporate/regulatoryplanning-documents/regulatory-matters/bcucorder-g and-reasons-for-decision.pdf Refer to pages 133 to 136. BC Hydro is currently preparing to file another RDA with the BCUC. As part of this process, BC Hydro is consulting with customers and stakeholder groups to gather their feedback, and some stakeholders have raised concerns about the continuance of the rate. BC Hydro is currently engaging with customers about the rate and will make a decision, after June 30, 2015, regarding whether phasing out the rate will be proposed in the next RDA. April (v.3) BC Hydro 2015 Rate Design Application Rate Page 2 of 4

10 Question 8 Does BC Hydro know what alternative heating fuels [are] available to users of the plan? BC Hydro does not record information about which alternative fuels customers use, however, natural gas, oil, propane, butane, wood or coal from a customer-owned or rented storage facility located on the premises, are potential fuels. The rate has never been interrupted, and E- Plus customers have never been required to use an alternative heating source. Question 9 Currently the program is not transferable. This means that over the next decade or 2, the plan will fade away anyway. How many users were there in 2007 compared to now? Please refer to the response to Question No. 2 above. Question 10 What is the estimate of natural termination of the program? A reasonable estimate of the natural termination of the rate for Residential customers is about years. Residential E- Plus accounts close for a variety of reasons. The table below sets out the annual attrition (reduction) in the number of accounts between 2008 and From the table the average annual reduction (attrition) in the number of Residential accounts since 2008 is 513 accounts. The number of Residential accounts at the end of 2014 was 8,177, which divided by the average annual reduction of 513 accounts equals 16 years. Year Residential Accounts Commercial & Industrial Accounts Total Average Annual Attrition Question 11 What will "the cost of providing electricity through the service not covered by the revenue collected through the rate" be each year over the extinction period for all remaining accounts combined? I am interested in the differential in the actual energy cost not simply the rate comparison that includes costs of transmission, capital and dividends paid to government. BC Hydro has not interrupted any residential customers since the residential rate was implemented in Given that there have been no interruptions, the energy cost to serve residential customers is the same as for all BC Hydro residential customers. April (v.3) BC Hydro 2015 Rate Design Application Rate Page 3 of 4

11 Question 12 If possible, could you tell me the areas of the province where service was originally offered for the period, I believe it was ? Is this correct? Yes, the period in question was The rate was closed to new customers in The table below highlights the percentage distribution of Residential and All Residential accounts by region. Region Residential Percent By Region All Residential Percent By Region Lower Mainland Vancouver Island Southern BC Northern BC Total Question 13 Who are the Commercial and Industrial accounts, do they include the province of BC, and did they all receive a copy of the February 24, 2015 letter with the attached questionnaire? Commercial Account Premise Type Number of Accounts Apartment Building 17 Boarding, Rooming, Lodging House 5 Church 11 Entertainment, Amusement, Recreation 41 Government 11 Hospital 5 Hotel, Motel, Resort 18 Irrigation Account or Bona Fide Farm 8 Manufacturing, Resources 14 Merchandising, Wholesale & Retail 31 Nursing, Retirement Home 2 Office Building, Business Block 41 Restaurant 7 School 15 Transp., Communication, Other Utilities 6 The following table reports the number of accounts and amount of heating load of Commercial and Industrial accounts, by premise type. All E- Plus customers received a copy of the letter and questionnaire. April (v.3) BC Hydro 2015 Rate Design Application Rate Page 4 of 4