I was looking at my latest combined electrical and water bill the other day and, upon more careful examination and consideration, arrived at some startling conclusions. I don't know when it happened, but the change to cost plus billing (explained below) has significantly altered the economics of what we pay.

For the purposes of this discussion, I have to differentiate between utilities (electricity, water and sewer) and services (natural gas, fuel oil and telephone). The difference is that we've already PAID for the infrastructure of utilities via provincial and municipal taxes. That's in contrast to services, which are typically provided by companies which have invested private funds in order to build their infrastructure.

As long as there's market competition, fees for services will generally reflect the price of providing the service. Of course, this doesn't apply to a monopoly situation such as Bell Canada enjoyed for many years. In fact, the telcos (telephone companies) enjoy a special niche. I believe that my "carbon footprint" is quite small. I almost NEVER have more than one light burning in the house at any given time and it's typically a 40W bulb since I find 60W to be a bit too bright and harsh. I have a home computer and a television but don't run a full-size refrigerator; the miniature one I use is Energy Star certified.

I used 671 KWh over the last two months. The utility billed me for 691.44 KWh since they're downloading an estimated loss of 4.29% to the consumer. The charge for the electricity was $34.57. The delivery, regulatory and debt retirement charges totalled $52.25. With GST (taxes on fees!) that came to a grand total of $91.16.

So think about that for a moment: if I used no electricity whatsoever, I'd still be billed $52.25 bi-monthly, $313.50 annually, just to be connected to the grid! We're all going to retire at some point so can you imagine having to spend $313.50 a year, from a fixed income, just to have electricity available?! But here's the rub. Suppose that I used twice as much energy as I do. That would double the usage portion of the bill and, if my calculations are correct, result in a grand total of $127.46. So by doubling my consumption my bill only increases by 40%.

But let's look at the situation backwards. Suppose you've got a family using double my consumption. They would likely be using more, but I'm trying to make a point here. They buy into all the hype and decide to "go green". After spending perhaps hundreds of dollars on high-efficiency bulbs and the like, they're able to reduce their consumption by half. So does their electricity bill similarly get cut in half? Hardly! They end up saving about 28.5%. So a 50% reduction in usage, and a major crimp in their lifestyle, produces a savings on their electrical bill of a measly 28.5%, or $217.80 annually.

You have to appreciate that a family cutting their consumption in half represents a major lifestyle change. I'm not for a moment suggesting that it's not a noble endeavour. I'm merely suggesting that the reduction in their utility bills should reflect the effort. A more achievable target would be a 25% reduction. So let's crunch the numbers again. That should result in a bill of approximately $109.31. That's only a 16% cost saving, or about $108.90 a year. At that rate, it would take you years just to recoup the costs incurred by going green.

The savings are simply not very compelling. For the sake of $100 a year, most people I know would say "screw it" and continue in the style to which they've become accustomed. And I can't say that I blame them!

Things are no better on the water and sewer side of things. I'm paying significantly more for the base charges than I am for actual usage. Merely to be connected to the water supply and sewer lines costs me $235.32 a year! Combine that with the electrical base rates and you're looking at $548.82 per annum. My property taxes are approximately $2,400 per year so why am I also required to pay an additional $550 per year as base rates for the utilities which my property taxes are supposed to pay for?!

Again, when did this fundamental change occur? It's tempting to suggest that it was based on the telco pricing model but that can't be correct because, for a fixed monthly price, you can make unlimited local calls. More likely is that it derived from the cellular telephone model and their network access fee. In that model you pay a monthly fee PLUS your usage on top, or what I call cost plus. Depending on your plan, you get a certain number of minutes, text messages, etc., but woebetide you if you go over your limit.

So while there's not a great deal of incentive for consumers to reduce their consumption, there's even less for the utilities to improve their infrastructure. The utility beancounters are thrilled because they can accurately forecast revenue. They know that there's a minimum amount each household will be paying. Multiply minimum by number of customers and you've got your base revenue. If usage goes down then you just hike the base rate or the unit price for usage. You can't lose!

In the case of power companies, they're in an even better situation. They can raise their rates and justify it by suggesting that they're trying to get people to reduce their usage; doesn't that sound frighteningly like the justification for gas taxes? They can paint themselves "green" and pretend that they're being good corporate citizens. It also justifies lack of action insofar as bringing new generating capacity on-line. Why invest when you can just charge more for a fixed supply?

So do you feel more comfortable now? Does going green really pay off?