Ontario’s complicated (and expensive) struggle with energy poverty

In a recent article on CBC Sudbury, Wendy Watson, Director of Communications for Greater Sudbury Utilities, was quoted as saying there are 590 customers in Sudbury who could face possible disconnection this spring, compared with just 60 when the ban against power disconnections started in November.

The Energy Minister responded saying, he hoped people having trouble paying their power bills will talk to their hydro utility and look at the numerous programs the government offers to help low-income citizens.

Coincidentally, a recent article in the Financial Post carried dire news: “The proportion of Ontarians living in low-income rose a scandalous 26 per cent from 2003 to 2016. No other province even comes close to performing that badly.” The article also noted “the latest Statistics Canada data show that in 2016, the percentage of Ontarians living in low-income exceeded the national average for the fifth straight year.”

Also in the CBC Sudbury article is an interesting comment from Ferio Pugilese, EVP Customer Care for Hydro One. CBC reported he said the company has worked hard to configure payment plans for customers over the last three years and find ways for them to pay “that fit their lifestyle.” Pugliese also told the CBC that disconnections and the amount owing from outstanding bills to Hydro One are down 60 per cent in the last year.

What Mr. Pugilese says sounds impressive — unless you look at a 29 page report the OEB (Ontario Energy Board) produced for the 2016 year (referenced in an earlier article about “energy poverty”).   The article didn’t specifically highlight Hydro One’s data but, needless to say, it stood out as the “winner” in most categories including: disconnections (up 407% from 2013 to 2016), number of customers in arrears at year-end (8.5% of all their customers or one household out of each 12 on a street), total dollar amounts of arrears (51.7% of all residential ratepayers but only 24.7% of all residential customers), number of arrears payment agreements (55.9% of all arrears payment agreements), total monies owing under arrears payment agreements (75.1% of all) etc., etc.

So, based on the horrendous results reported by Hydro One for 2016 in respect to customers arrears, the question is, how could they have possibly reduced their disconnections and the amounts owing by 60%?

Well, the answer is, Hydro One should send a big thank you to all taxpayers and future ratepayers as many of those arrears were picked up by via the Fair Hydro Plan and by several changes in the allocation of ratepayer costs to taxpayers.

Here are some that significantly benefited Hydro One!

The litany of band-aids                                                                                                                 

First look at an October 19, 2016 press release which states “The Ontario Rebate for Electricity Consumers Act, 2016 will reduce electricity costs by 8 per cent on the amount before tax, an average savings of about $130 annually or $11 each month, for about five million residential consumers, farms and small businesses.” On the “about five million” ratepayers, that $130 annual reduction represented about $650 million in foregone tax revenue and for Hydro One, it was a reduction of around $140 million they didn’t have to bill ratepayers for.

Now the second big benefit for Hydro One is found in another note in that press release: “Eligible rural electricity ratepayers will receive additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month.”

The ratepayers referenced were those under the RRRP (rural or remote rate protection program) which the Energy Minister in his May 11, 2017 press release (announcing the Fair Hydro Act) noted: “Enhance the Rural or Remote Rate Protection (RRRP) program to provide distribution charge relief to about 800,000 customers and shift costs from ratepayers to provincial revenues. This would include customers served by local distribution companies (LDCs) with the highest rates.” That translates to a cost of $670 million and for Hydro One, with over 300,000 of those customers, it represents taxpayer funding of $160 million annually.

The third benefit for Hydro One was the substantial (50%) increase in the OESP (Ontario Electricity Support Program) which will also be funded by taxpayers. When the plan was first launched, the estimate for annual costs was approximately $200 million, so the increase would drive that to $300 million. With Hydro One servicing 25% of Ontario’s five million ratepayers, they would again receive a minimum of $75 million from taxpayers.

Collectively, the above three benefits will result in taxpayer support for Hydro One of $375 million.

Reviewing Hydro One’s 2017 annual report discloses that 54% of “distribution revenue” came from residential ratepayers, which would amount to $2.36 billion. And, the cost of power (CoP) would represent $1.25 billion, meaning Hydro One’s net revenue from those customers was $1.11 billion. If one excludes the foregone sale tax of $140 million, it means Hydro One will annually receive subsidies from taxpayers of $235 million — that’s 19% of their net distribution revenue!

Due to the Green Energy Act, Ontario’s electricity ratepayers have subsidized renewable energy generation for years (principally wind and solar) and now, with the Fair Hydro Act, the government enlisted taxpayers to subsidize the local distribution companies, with Hydro One being the biggest beneficiary.

Knowing the intricacies as described, it is easy to understand why Hydro One’s EVP Mr. Pugilese can make the claim that disconnections and outstanding bills are down 60 per cent. Hydro One is being handed $235 million of taxpayer money, which must have gone a long way to reduce both the disconnections and amounts in arrears.

Parker Gallant

 

*At year-end 2016 Hydro One claimed they had disconnected 14,114 customers and at year end had 96,397 customer accounts in arrears that represented $69.7 million.

In writing these posts, I am an independent observer and commentator on Ontario’s energy sector.

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4 thoughts on “Ontario’s complicated (and expensive) struggle with energy poverty”

  1. It was so simple when it was all Ontario Hydro and we owned it. I worked for Ontario Hydro and a work mate said “What other business do you know where everyone is your customer, you sell everything you make and you don’t have to load it on a truck to deliver it?” If you needed money to fix or upgrade all you had to do was add a cent or two per kilowatt and you got millions. If the system was in good shape you sold power to the US and the Ontario Government made money. All the ratepayers money got recycled in Ontario. Now the money goes to the US, Korea, France, Spain etc.. What a mess!

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  2. No problemo!!!! Premier Wynndy will mandate the Energy minister glenny glen glen Thibeault to mandate the OEB to mandate the IESO to mandate Hydro One to get all those folks on “pay as you go meters” and that my friends will help those poor folks in sudbury to better manage their overconsumption and poor budgetting problems….
    Next problem please……
    Im on a roll!!!

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