Ontario’s energy poverty: how we got here and why government plans won’t work

 

Former Energy Minister Chiarelli told us not to worry about costs — now hundreds of thousands live in ‘energy poverty’

An OEB report dated December 22, 2014, completed at the request of the then Minister of Energy Bob Chiarelli opened with this remark: “The Minister asked the Board to provide advice on the development of an Ontario Electricity Support Program (OESP), which would assist low-income customers who are spending a disproportionate amount of their income paying for electricity.”

The report used various methods to determine the potential number of households in the province in that category and concluded: “Using LIM (Low Income Measure) as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households. The OESP is estimated to reach 571,000. This estimate recognizes that not all low-income households in the province pay their electricity bills directly (i.e. utilities included in rent).”

It went on further to state: “Using LICO, (Low-Income Cut-Off) Ontario has 606,100 low-income households, and the OESP would reach only 484,900. Using LICO plus 15 per cent, the current LEAP (Low-income Energy Assistance Program) measure of low-income, the number of households would be 687,300 and 550,000, respectively.” 

What that suggests is that, at the time of the OEB report the StatsCan data in 2014, using LICO, indicates approximately 13,5% of households were “spending a disproportionate amount of their income paying for electricity”. Using LIM, the number jumps to 15.8%! Rate increases from November 2014 to November 2016; according to the OEB, were 1.6 cents/kWh (+17%) for an average residential household, so we would expect more households were thrown into “energy poverty”!*

So what did the Ontario government do to alleviate the problem?

The LEAP (Low-income Energy Assistance Program) kicked off in 2010 requiring all local distribution companies (LDC) to contribute 0.12% of distribution revenue (net of the cost of power).  The total amount allocated for this program is less than $5 million annually.

The RRRP (Rural and Remote Rate Protection) has been around since 2003 and provided relief to some rural and remote residential ratepayers.  The annual cost of $170 million was paid by other ratepayers and was recently (January 2017) expanded by the current government to cover more Hydro One customers increasing the annual cost to an estimated $243 million now paid from tax revenues.

The OESP (Ontario Electricity Support Program) as noted above was triggered by a directive from Bob Chiarelli when he was the Minister of Energy and was estimated to cost between $175/225 million to support those hundreds of thousands of households living in energy poverty.  The program was initiated in January 2016 and paid for by all Ontario ratepayers via the regulatory charge on hydro bills. The program has been expanded to provide more support to low-income households and the costs are now paid out of tax revenues.  The projected cost increased to approximately $300 million per annum!

The First Nations On-Reserve Delivery Credit is a new incentive providing approximately 21,500 customers with free delivery charges (estimated at $85.00 per month) at an annual cost of $21 million.

The Affordability Fund is also a new program funded by taxpayers to provide qualifying households with: LED lights, appliance upgrades, insulation, heat pumps, etc., all for free at the taxpayers’ expense, estimated at $100 million.  It’s not clear if this is to be an annual or a one-time fund!

All of the above initiatives, with the exception of the LEAP program, are now funded by taxpayers, so about $370 million was transferred from ratepayers to taxpayers and annual funding costs increased to approximately $660 million!

That’s on top of the $40 billion deferred under the Fair Hydro Plan!

How was so much energy poverty caused?

The quick answer to the above question is, it was caused by the Green Energy Act (GEA) which gave long-term contracts to mainly foreign industrial wind and solar developers. Wind and solar provide unreliable and intermittent generation and must be backed-up by gas plants doubling up on the costs.  The results have been evident since those power sources were added to our grid in larger and larger quantities.   The following highlight some of the estimated costs for the first nine months of 2017:

  • Nine months of curtailed (could have been generated but wasn’t needed) wind of 2,209,000 MWh (megawatt hours) were paid $120/MWh so cost ratepayers $265 million.
  • Nine months of spilled (over the dam but not through the turbines) hydro power of 4,500,000 MWh by OPG cost ratepayers almost $185 million.
  • Nine months of subsidized surplus power of net exports (exports minus imports) of slightly over 9 million MWh to our neighbours cost ratepayers about $800 million.
  • Nine months of “conservation” spending is estimated to have cost Ontario ratepayers $300 million.

Totalling up the above, and forgetting about the costs of steamed-off nuclear or money paid for idling gas plants to back-up wind and solar, gets this result: Ontario’s electricity system paid for 15.7 million MWh that provided no power for Ontario’s ratepayers.

That 15.7 million MWh could have supplied over 1.7 million average Ontario households with power for a full year, but instead added their costs to our electricity system.   Those costs of an estimated $1.550 billion were 2.3 times the relief provided to households living in energy poverty!

To conclude, what created more “energy poverty” in the province is to simply point to bad planning (no cost/benefit analysis) by the incumbent government. Their plan to resolve it? I will simply repeat former Minister of Energy Bob Chiarelli’s promise, “it’s just the price of a Timmies cup of coffee”—every day of the year for many, many years!

 

* Energy poverty is generally defined as 10% or more of disposable income is spent on heat and hydro!

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Author: parkergallantenergyperspectivesblog

Retired international banker.

7 thoughts on “Ontario’s energy poverty: how we got here and why government plans won’t work”

  1. Reblogged this on ajmarciniak and commented:
    Former Energy Minister Chiarelli told us not to worry about costs — now hundreds of thousands live in ‘energy poverty’
    An OEB report dated December 22, 2014, completed at the request of the then Minister of Energy Bob Chiarelli opened with this remark: “The Minister asked the Board to provide advice on the development of an Ontario Electricity Support Program (OESP), which would assist low-income customers who are spending a disproportionate amount of their income paying for electricity.”

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  2. The Ontario Association of Food Banks had the following in their 2016 report: “Ontarians cite ‘no income’ when they visit a food bank today. As unemployment insurance runs out, and the job hunt drags on, individuals are turning to food banks to stretch whatever limited savings they have left. While unemployment rates for Ontario today are comparable to 2008, food bank use is almost seven per cent higher than before the recession started. This is a direct reflection of the type of employment available and the dramatic increase in cost of living, particularly related to housing and electricity. While many Ontarians have gone back to work, fewer have access to secure, full-time employment that allows them to afford their most basic necessities on an ongoing basis. And unfortunately, as the employment landscape shifts towards precarious wage work, the need for food banks will continue. The full report is here where several horror stories related to the cost of electricity can be found:
    https://oafb.ca/wp-content/uploads/2016/11/Hunger-Report-Digital.pdf

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  3. Sidenote…… says that Hydro One will begin “allowing” customers to prepay!!! Hogwash!!! If you were in arrears with Hydro One then you will be forced to switch!!!
    Forced!!!!!

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  4. Reminding people that this government has ignored/is ignoring the professional engineers of Ontario is important.
    Reminding people that this government has ignored/is ignoring the Auditor General is also important.
    Thank you Parker.
    I would like to know why this government is ignoring this well written paper regarding contracts?
    https://www.fraserinstitute.org/sites/default/files/cancelling-contracts-power-of-governments-to-unilaterally-alter-agreements.pdf
    I would also like to know why this government is so out of touch with reality when it comes to justifying these turbines as a way to ‘save the planet’ .
    This level of incompetency is downright embarrassing.

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  5. Take a look at the statement made on the PWU.ca website:
    “Billions of dollars have been spent on intermittent wind and solar and for backup natural gas generation. These new sources of supply are heavily subsidized by ratepayers and are significant contributors to Ontario’s rising electricity prices.

    Unspecified costs for smart grid/emerging technologies and transmission/distribution infrastructure necessary for integrating and managing variable electricity production and changing consumer demand will drive the price /kWh up even further.

    By 2030, ratepayers and/or taxpayers will be paying for the decommissioning and waste management costs for some of this wind and solar generation.

    Building more wind and solar generation will increase GHG emissions. These intermittent sources require backup more than 70% of the time, a role played by carbon emitting natural gas generation.

    No more wind and solar generation should be built. Any future investments should be based on affordability, solid cost benefit analyses and realistic targets.”

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