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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Quarterly stats show wind power blowing Ontario electricity costs higher

A power project that began operating in 2017 … wind power causes waste of other, less expensive sources of clean power due to lucrative contracts

A cold, windy winter cost Ontario electricity consumers. And if the first quarter of 2018 is typical, we’ll pay even more…

The IESO (Independent Electricity System Operator) recently released the March Monthly Summary along with the Generator Output by Fuel Type Monthly Report, so that interested parties can see a year-to-year comparison for the first quarter of 2018 versus 2017.

What the “Generator Output” shows for the first three months of 2018 versus the same period in 2017 is, grid-connected generation output was up by over 600,000 MWh (+1.6%). That suggests the colder than normal winter created increased demand, which it did by just over 700,000 MWh.  As it turned out, gas generation increased year over year by about 750,000 MWh, while Hydro generation decreased by almost 200,000 MWh.

Grid-connected industrial-scale wind turbines (IWT) also generated almost 180,000 MWh* more in the first three months of 2018 versus 2017, and saw curtailed (paid for but not used) generation increase by over 50,000 MWh.

Both of those elements increased costs for ratepayers.

In 2017, the approximate cost of wind power generation in the first quarter, coupled with curtailed generation, was just shy of $532 million. In 2018 it was $30 million higher ($562 million). If the first quarter is typical, the cost to Ontario’s ratepayers for the full year could be over $2.2 billion — just for wind power! (Note the foregoing cost estimate does not include spilled water, steamed off nuclear or the high costs of back-up generation in the form of gas plants standing “at the ready” when the wind isn’t blowing.  On the latter issue a 2017 peer reviewed report by Marc Brouillette for the Council for Clean and Reliable Energy showed wind turbines produce power of value to the grid only 35% of the time.)

To reflect on what the IESO report suggests: even though winter months are considered high demand, the grid-accepted wind power presents 65% of the time when it’s not needed. Wind power, in addition to causing waste of other (clean) sources of power such as spilled hydro, steamed off nuclear, etc., results in the IESO selling surplus power to our neighbours at prices well below the cost of wind power production due to their lucrative contracts.  Proof? Look at the grid-accepted wind power versus Ontario’s net exports.   Grid-accepted wind in the first three months of 2017 was 3.46 terawatts (TWh) and net exports (exports less imports) were 2.92 TWh; the comparable period for 2018 saw grid-accepted wind generation of 3.64 TWh and net exports of 2.86 TWh.  In other words, the wind power, if all exported, was done with only partial recovery of its costs and was excess to actual demand.

That raises the question:

Why did Ontario contract for it in the first place and why was it given “first to the grid” rights? And, why don’t we cancel any outstanding contracts** that haven’t been started if what it generates is surplus?

Paying over $500 million per quarter and as much as $2 billion annually for wind power generation increases energy poverty and sends Ontario’s manufacturing jobs south.

Parker Gallant                                                                                                                                 May 1, 2018

*Thanks to Scott Luft for his data on wind generation and curtailment!

** The government awarded five contracts for almost 300 megawatts of new wind power in 2016, one of which has reached Renewable Energy Approval. The contracts will add $1.3B to Ontario’s electricity costs.

 

Are the executives in Ontario’s electricity sector befuddled?

The light still comes on when we flick the switch, most of the time, but perhaps someone needs to flick the switch in respect to some of the people in charge of the system.

I say that after recent observations of Ontario government bureaucrats. I do not, however, mean to slight  the engineers and power workers who are keeping the lights on.

A few examples…

IESO, its strange contract awards and accounting for surplus generation – Recently, Terry Young, VP of IESO, (“responsibilities include stakeholder and community engagement, communications, regulatory affairs, Indigenous relations, conservation, and other programs necessary for the implementation of effective energy policy”) was called upon by the council for a southwestern Ontario municipality to explain why a huge multi-million-dollar wind power contract had been awarded. The local newspaper, the Chronicle, had an interesting article about his presentation and Q & A session with Dutton-Dunwich council. The municipality of Dutton-Dunwich had held a referendum on wind turbines and 84% of the residents opposed them.

Despite that, Invenergy of Chicago was awarded a contract by IESO; the company had enlisted the support of four First Nations communities from hundreds of kilometers away to boost them in the bid process. Mr. Young was asked why three local First Nations were not approached by Invenergy. When questioned by council on this contract award all Mr. Young would say was, “I’m not here specifically to talk about the project, but I do understand the concerns that you have had”. He did say he would try and get an answer to the question.

In his presentation he noted generating more electricity than needed “has garnered a lot of attention and mostly for the price that is being paid that we export it at less than what’s being paid in Ontario.” He said exporting electricity is one way to “recoup costs.” What he didn’t say was exporting a product that costs ratepayers $135 and receiving say $35 is simply a dumb exercise, but that is basically what IESO does by contracting for industrial wind generation that offers power out of phase with demand 65% of the time, according to a peer-reviewed study doneby Marc Brouillette for the Canadian Coalition for Renewable Energy.

So, the question is: Why hand out additional contracts for intermittent and unreliable power when Ontario is in surplus?

Mr. Young’s answer, as reported: “As of March 2018, the system has an installed capacity to generate 36,945 megawatts. Yet consumption on a normal day runs closer to 29,000 megawatts, Young said. This over-capacity is further complicated because Ontario doesn’t have an efficient way to store power.”

Ontario’s power use in an average day in Ontario and can be easily supplied by a combination of our existing nuclear and hydro capacity (21,481 MW), without any need for wind or solar generation.

Hydro One hands out rate credits in four U.S. states but tell Ontario farmers to conserve –   The planned acquisition of Avista Corporation has senior executives travelling to the western U.S. states speaking to regulators and promising electricity rate credits extending out 10 years. At the same time in Ontario, they are telling local farmers to conserve or get hit with higher rates according to the Farms.com Newsletter.

In the former case, when the acquisition was announced Hydro One’s CEO, Mayo Schmidt claimed the transaction “will be accretive to earnings per share in the mid-single digits in the first full year of operation.” The rate credits offered in Washington State, alone, to Avista’s ratepayers* amounts to $31 million and 3.1% of Avista’s annual revenue. That was obviously put on the table to persuade state regulators to allow the acquisition. (One has to wonder if the “accretive to earnings” claim made by Schmidt was the reason he was given the large increase in his compensation in 2017 by Hydro One’s Board of Directors.)

Meanwhile, were Hydro One staff attempting to reduce Hydro One’s revenue in Ontario? Why else would they contact farmers, telling one of them he had “one year to lower my usage or they will be raising my hydro rates by 35-40%. They were calling me to ‘warn me’ .” Two other farmers advised the Farms Newsletter they received similar calls.

To be clear, any rate increase would require approval by the Ontario Energy Board (OEB) and while Hydro One have several rate increase applications before the OEB, it is doubtful they would seek that kind of an increase, or that the OEB would approve it. The nature of the report resulted in an inquiry by the writer with Hydro One to determine the extent of their tactics to reduce consumption and if this was a pattern!   No response has been forthcoming as yet.

There is also the issue of differing reports on how big Hydro One’s service area is, from its executives, which I previously documented.

Confusion seems to be a current event within Hydro One and transparency has become a forgotten term since they have become a publicly traded company.

We should be concerned at what the executive of both IESO and Hydro One are saying, and doing.

Parker Gallant

April 23, 2018

 

*Jan 2018 all-in us state prices show Washington as 7th lowest with all-i rates at 9.51cents/kwh. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

Class distinctions in Ontario’s electricity sector

Ordinary consumers try to conserve while …

Ontario: where the energy ministry robs Peter to benefit Paul

April 15, 2018

The data is out for the first two months of 2018 for both the consumption of electricity as well as the costs to Ontario’s upper and lower class of consumers.

According to Independent Electricity System Operator or IESO, consumption increased by 4.7% or 1.084 terawatts (TWh). That’s what 725,000 average households would consume for two months.

The annoying thing about the increase in consumption, however, is while Class B (that is, regular folks) ratepayers reduced consumption by 729,000 MWh Class A ratepayers (customers with higher demand such as businesses) increased their consumption by 1.813 million MWh.

So, why did consumption increase? If you guessed, Ontario’s energy ministry launched a “Black Friday” or a post “Boxing Day” sale, you would be heading in the right direction!  To explain: if one travels back to the days when Brad Duguid was the Minister of Energy he issued a directive to the OPA (Ontario Power Authority) instructing them to create and deliver an “industrial energy efficiency program” specifically for large transmission-connected (TX) ratepayers. He issued that directive and, as they say, the rest is history.   The resulting ICI (Industrial Conservation Initiative) granted the “A” ratepayers the ability to reduce their consumption during the “high five” peak hours and the reward was the GA (Global Adjustment) component would drop significantly for them.

Originally, Class A ratepayers were only the largest industrial clients (approximately 170) whose peak hourly demand was 5 megawatts (MW) per hour, or higher.   Since the launch of the new class distinction in January 2011, however, Class A clients have evolved further, to allow those with peak demand exceeding 500 kilowatts (kW) per hour. In other words, because industrial jobs were fleeing Ontario and various associations such as the Chamber of Commerce, the Canadian Federation of Independent Business, the Association of Major Power Consumers of Ontario, etc., made their concerns known, the ability to “opt in”’ to Class A was lowered. The results should have been obvious: Class B electricity costs would climb higher!

January and February 2018 saw the “B” to “A” Global Adjustment or GA subsidy transfer increase to $201 million compared to $179 million in the same two months of 2017. The full cost of the transfer and the extra $22 million (+ 12.3%) is allocated to Class B ratepayers, and probably includes some newly classified “A” ratepayers.

When you review the GA subsidy Class B ratepayers provided in 2017 compared to 2016, the increase year over year is up $369 million or 30%.   In 2016 Class B ratepayers absorbed $1.222 billion of the GA subsidizing Class A ratepayers and that support jumped to $1.591 billion in 2017. The $369 million increase occurred despite Class B ratepayers reducing their consumption by 9,976,000 MWh (what 1.1 million average households would consume in a full year) while Class A consumption went up by 5.146 million MWh.

No doubt most of this increase can be attributed to the lower “A” qualification level but IESO does not disclose that information.

For those of you who like to “connect the dots” here’s the puzzle: the almost $1.6 billion annual Class B subsidy added to the $400 million spent on “conservation” comes to $2 billion.   That $2 billion annual cost of 2017 comes very close to the Financial Accountability Office’s estimate of the annual cost of the Fair Hydro Plan at $2.1 billion.

Coincidence?

As it turns out, the outcry from Class B ratepayers about high electricity costs started to result in negative media attention which presumably brought about the concept of the “Fair Hydro Plan” which actually kicks about $2 billion of annual costs down the road for the next ten years.

Despite the obvious Class B to Class A subsidy highlighted above, the Fraser Institute’s* recent report on Ontario’s electricity system notes in the Executive Summary: “In 2016, large industrial users paid almost three times more than consumers in Montreal and Calgary and almost twice the prices paid by large consumers in Vancouver.” So, even though Class B ratepayers contributed $1.222 billion in 2016 to help reduce electricity rates for Ontario’s large industrial users, they still paid almost three times more than their counterparts in Montreal and Calgary.

Parker Gallant

*From the Fraser Institute report: “The centerpiece of the GEA was a Feed-In-Tariff program, which provides long-term guaranteed contracts to generators with renewable sources (wind, solar, etc.) at a fixed price above market rates. In order to fund these commitments, as well as the cost of conservation programs, Ontario levied a non-market surcharge on electricity called the Global Adjustment (GA).”

Dicey math in ECO report on Ontario’s electricity costs

Appalling math supports agenda-laden report from the Environmental Commissioner of Ontario

How does a car in a driveway explain millions lost selling off surplus power? You have to read the ECO report to understand. Maybe. [Photo G Hills Law]
April 11, 2018

The 322-page report Making Connections Straight Talk About Electricity in Ontario is mind boggling in its attempt to redefine simple mathematics.

As one example, the Environmental Commissioner of Ontario or “ECO” deals with “energy poverty”: “According to 2015 data, Canada’s National Energy Board found 7% of Ontarians to be energy poor”.

Checking the Ontario Energy Board (OEB) annual Yearbook of Electricity Distributors for 2016, Ontario had 4,612,551 residential customers — so, 7% would represent 322,878 “energy poor” households in the province.

The OEB’s December 22, 2014 report noted: “Using LIM* 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).”  Those 713,300 low-income households represented about 15.5% of all households in the province.

So, in one simple sentence, the Commissioner’s reference to energy poverty makes almost 400,000 “energy poor” households simply disappear!

Yet another claim is made in the report where in large bold letters it states: “Ontario sells its surplus power to other jurisdictions for more than it costs to make that power.” Here is the analogy used to explain this claim in the commissioner’s report: if you lend your car to a friend to drive when you are not driving it and he pays you $20 it reduces your annual cost.  The reasoning related to the electricity sector is explained by the ECO:

“The surplus power that we export costs us little or nothing extra on top of the fixed costs, because: Our renewable power has extremely low operating costs; and Our nuclear plants cost virtually the same whether they are making power or not.”

What is deliberately omitted in the report is the unreliability and intermittency of renewable energy; favouritism towards industrial wind turbines is clearly visible in the text. ECO Dianne Saxe has demonstrated support for wind power development and even invested in one that stands at Exhibition Place in Toronto (which seldom generates power).  A plaque at the bottom bears her name.

The “how” we lose money on industrial wind is easily visible to most with a little effort. As an example, IESO rates the ability of wind to be counted on to produce power only 12.9% of the time when it will be needed.  What that means is, while average generation of wind power over one year may amount to 30% of capacity, IESO’s reliance on wind dependable for planning purposes is about one third of its probable annual output.

The foregoing has been borne out by others including a peer reviewed paper titled Ontario’s High-Cost Wind Millstone prepared for the Council for Clean and Reliable Energy. Author Marc Brouillette states: “Two-thirds (65 per cent) of wind generation is surplus to demand and must be wasted or dissipated either through forced curtailment of hydro and nuclear generation or by increased exports to Quebec and the United States, generally at low prices.”

Another recent report I wrote suggests forced curtailment of hydro, nuclear, wind, net exports, conservation and costs of backup for wind and solar generation, i.e., gas plants, were more than $6 billion in 2017 added to our electricity bills.

In other words, the ECO’s claims are not only incorrect, they are an insult to common sense and math literacy.

Parker Gallant

* Statistic’s Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income. Adjusted means family size has been factored in.”

**Ontario Electricity Support Program

Sales of public assets: benefits for Ontarians or kudos for bureaucrats?

Selling off assets shouldn’t mean bonus time for senior bureaucrats

SOLD! But where did the money go?

April 9, 2018

Back on December 14, 2015 Energy Minister Bob Chiarelli directed OPG to sell its head office on University Avenue in Toronto, also directing them to pay all of the net proceeds “to the government”.

Just before Minister Chiarelli was moved from the Energy portfolio he issued yet another directive to OPG: sell off the Lakeview lands and pay all of the net proceeds to the government, “subject to any requirements under the Trillium Trust Act (2014) Ontario”.

In both cases the minister was using his authority as an elected representative of the province with responsibility for managing certain government-owned assets, which the government had presumably decided were not core assets of OPG.

The Head Office was sold in 2017 as stated in OPG’s annual report where they noted: “Higher earnings of $377 million from the Services, Trading, and Other Non-Generation segment, primarily as a result of the gain on sale of OPG’s head office premises and associated parking facility, a non-core asset of the business. A gain on sale of $283 million, which is net of tax effects of $95 million, was recognized in net income upon completion of the transaction in the second quarter of 2017.”

So, the payment(s) under that sale to be made to the province were $283 million plus the PIL (payments in lieu of taxes) or $378 million.

OPG’s press release of January 9, 2017 announcing the sale said not much more than “OPG would lease back four floors plus ancillary space.”

A couple of weeks ago in 2018, OPG announced in a press release they had sold the Lakeview lands for $275 million, subject to closing adjustments, and stated “The net proceeds from the sale of Lakeview lands will be transferred to Ontario’s Trillium Trust to fund transit, transportation and other key infrastructure projects across the province.”

The press release went on with quotes from Finance Minister Charles Sousa, Ehren Cory, CEO of Infrastructure Ontario, the Mayor of Mississauga, the President of the buyers group, Lakeview Community Partners Limited and Jeff Lyash, OPG President and Chief Executive Officer. (No quote came from the current Minister of Energy.)

The quote from Jeff Lyash, OPG’s CEO, was particularly laudatory: “OPG is proud of its role to transform Lakeview, a major source of carbon emissions for over 40 years, to a vibrant mixed-use community that will become the jewel of Mississauga’s waterfront. This site is one of the largest undeveloped parcel of waterfront lands left in the GTHA and the fourth former OPG coal plant site to transition to a new, environmentally friendly use.”

All ratepayers, who are also taxpayers, should be upset with how the sale proceeds of OPG’s two properties, were/are either being paid into the Ontario Treasury or into Trillium Trust. Those assets were paid for by ratepayers through their electricity bills, but they will see no benefit as the $653 million generated from the sale presumably went towards balancing the budget just concluded on March 31st.

Is it too much to ask that the electricity system be managed for the benefit of ratepayers?

Parker Gallant

Side note: Mr. Lyash topped the Sunshine List and was paid $1,554,456.95 last year up almost $400,000 from the prior year while Ehren Cory, CEO of Infrastructure Ontario’s bump was $60,000 to $470,758. Both received nice year over year increases!

NextEra renewables sale to CPP speaks volumes

Canada Pension Plan’s investment in part of a wind-solar power portfolio seems to ignore a lot of negatives, including the energy poverty rising in Ontario due to electricity bills

Canada Pension Plan contribution rates are rising again, as reported by the Financial Post December 14, 2017: “the contribution rate (i.e., the CPP tax) has increased from 3.6 per cent when the CPP was launched in 1966 to its current rate of 9.9 per cent. It will increase further to 11.9 per cent beginning in 2019.”

The Canada Pension Plan Investment Board (CPPIB) is an active investor, looking for good rates of return without taking “excessive risk.” So they either searched for assets that pay guaranteed above market rates, or were approached by U.S. Power giant NextEra who sold them their Ontario portfolio of 396 MW of wind and solar contracts. CPPIB paid $1.871 million per MW for a total of $741 million CAD and also assumed the debt (US$689 million) attached to the NextEra portfolio. The press release associated with the acquisition had this quote from Bruce Hogg, Managing Director, Head of Power and Renewables: “As power demand grows worldwide and with a focus on accelerating the energy transition, we will continue to seek opportunities to expand our power and renewables portfolio globally.”

Perhaps Mr. Hogg was unaware “power demand” in Ontario has actually fallen from 153.4 TWh in 2004 to 132.1 TWh in 2017 despite an increase in our population of approximately 450,000.  He may also be unaware industrial wind turbines create health problems, cause property values to drop and kill birds and bats including those on the endangered species list.

What the CPP acquisition means is Ontario ratepayers will be indirectly contributing additional funds to the CPP without the benefit of reducing either their annual tax burden or increasing their future pension benefits. A “win, win” for CPP and a “lose, lose” for Ontario’s taxpayers. The sole redeeming feature is that the money will stay in Canada instead of flowing elsewhere.

Ironically, the CPP by acquiring and holding those assets will also be showing their support for energy poverty. The Ontario Energy Board (OEB) in their December 2014 report noted: “Using LIM* as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households.” At that point in time the 713,300 households represented almost 16% of residential ratepayers in the province and one should suspect that number has increased over the past three years.

So, one should also wonder why NextEra, headquartered in Florida, sold those assets and their above market returns? The press related to their announcement of the sale speaks volumes: “As discussed during our earnings call in January, we expect the sale of the Canadian portfolio to enable us to recycle capital back into U.S. assets, which benefit from a longer federal income tax shield and a lower effective corporate tax rate, allowing NextEra Energy Partners to retain more CAFD** in the future for every $1 invested.”

No doubt the NextEra sale may be a sign of the future as the Canadian economy has shown serious signs of slowing as taxes rise and foreign investment falls. The bulk of the investment in the renewable energy sector in Ontario came from offshore companies who rushed to take advantage of the above market rates and guaranteed prices offered under the Feed-in-Tariff (FIT) program available under the Green Energy Act.

Those investors will look to cash in on the sale of those assets, so we should expect to see more public and private Canadian pension funds stepping up to purchase them.

Parker Gallant

*Statistics Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income.

**Cash Available for Distribution