McGill School of Environment - Regulation Reform in the Electricity Industry

Background of Project

The Project

The environmental, economic and social concerns that arise from the excessive use of energy have implications for all levels of society. The issue of energy is important to Canadians, especially when we consider the distances we travel and the severe climatic conditions that we experience throughout much of the year. These factors, along with some of the lowest energy prices in the world, have combined to put Canadians among the highest per capita consumers of energy in the world. Furthermore, energy issues have become synonymous with environmental issues. The need to become more energy efficient, either through improved energy-consuming technologies or the use of alternate sources of cleaner energy, has taken on greater importance, especially in light of the mounting evidence for global climatic change. Public energy utilities and other energy control boards have initiated many energy programs that have contributed to reducing environmental impacts and to lowering energy costs for consumers. In recent years, however, there has been a rapid reorganization of public energy utilities, with many of these utilities being privatized. There has also been a trend towards deregulation of energy prices. An evaluation of the potential impact of these changes on society is a major goal of this research project. Our client is an incorporated organization in Quebec that works to defend and promote interests of consumers, particularly those with low to moderate incomes, and to give these consumers a strong public voice in government policy decision making. The client would like to understand the socio-economic factors that determine which types of energy consumers use and what types of barriers prevent consumers from choosing more efficient forms of energy. They are also interested in trying to evaluate the effects of energy price deregulation on energy prices and the energy consumption practices of consumers.

Research Proposal

The first part of this research proposal revolves around the concept of energy efficiency and the ramifications for the consumer in terms of environmental impact and energy costs. The goal is to determine whether there are barriers that inhibit consumers from choosing more efficient forms of energy, and whether these barriers are related to the socio-economic characteristics of individual households. This will require an evaluation of which types of households across Canada are energy efficient. It will be necessary to collect and analyze energy efficiency information for households from various data sources, including government and university research centers. A second phase will be to identify the most important factors within various socio-economic groups that prevent these groups from adopting more efficient forms of energy. Finally, can the above information be used to develop methods and policies that would allow consumers to make better decisions in choosing more efficient forms of energy? The general objective of the second part of this research project is to determine if the changes in energy price regulation in the public utilities have benefited the consumers. A descriptive and analytical approach to evaluate the changes in the regulation of public utilities over the last ten to fifteen years needs to be carried out, and the effects of theses changes on consumers needs to be examined. It will be necessary to analyze actual examples of energy deregulation (California, Alberta) and to determine the effects of this deregulation on consumers. For example, what happens to the price of energy, the quality of service and the availability of a particular type of energy, when that form of energy is deregulated? Another question to be answered is “Who is really benefiting from price deregulation in the energy sector?” Finally, through the analysis of specific examples, are we able to make predictions about the global effects of energy deregulation on consumers both in terms of energy consumption and improved energy efficiency?