FEI-FEVI 2010 EEC Report filed March 31, 2011 - FortisBC

3.2 Free Riders
Terasen seeks certain changes to the cost‐benefit analysis undertaken in respect of EEC
35
expenditures, including a proposal to “. . . eliminate the requirement to include free riders in cost‐
benefit tests, as the energy and emissions reduction goals of the government are absolute goals
and do not consider free ridership effects.” (Exhibit B‐1, p. 16)
The Application defines free riders as “. . . customers who participate in a program, but would have
undertaken the same conservation actions even if the program were not offered”. Terasen’s
proposal with respect to free riders includes two tables illustrating an estimated TRC benefit for the
EEC Portfolio of $165.149 million, excluding the effects of free riders, and of $139.448 million,
including the effects of free riders, a difference of $27.701 million. Terasen’s discussion concludes
with the view that “. . . the inclusion of the effects of free riders in the cost‐benefit test for EEC
programs distorts the value of EEC programs and is counter to the objectives of the energy plan.”
(Exhibit B‐1, pp. 85‐86)
Terasen responded in some detail to Information Requests concerning Free Riders, including the
statements that “[f]ree riders are one of the most‐debated aspects of DSM cost‐benefit tests as
they are challenging to establish” and “[e]stimating free rider rates . . . is more of an art than a
science.” (Exhibit B‐2, BCUC 1.3.1)
It is Terasen’s view that “it should be the outcome [energy consumption reduction] that matters,
not the way in which it was achieved.” (Exhibit B‐1, p. 86) Terasen states: “. . . . [Government] GHG
reduction goals make no mention of net‐to‐gross ratios – in fact they could be considered “gross”
GHG reduction goals, and presumably it is gross energy savings that will be counted towards
achieving those goals. It makes sense to align gross estimations of energy savings from utility DSM
programs with government’s gross GHG reduction goals.” (Exhibit B‐2, BCUC 1.3.1)