Industrial Wind Turbines Once Again are Up to Their Old Tricks

Those IWT brought to Ontario by the McGuinty/Wynne led Ontario Liberals, during the time they governed the province, once again showed their ability to suck money from ratepayers and taxpayers pockets on December 12, 2021. 

The heavy winds arrived on December 11th and caused power outages to 280,000 customers due to broken poles, fallen trees and hazardous road conditions as reported by Hydro One.  While the winds decreased somewhat, IESO data indicates they were more than sufficient to allow them to generate 73,849 MWh the following day (December 12th) as well as what looks to be another 2,800 MWh of curtailed generation. The combined cost was approximately $10,306,000 and for 17 of the 24 hours they beat hydro generation.

Naturally, and as often occurs, we didn’t need the generation from those IWT so IESO were busy exporting surplus power for the full day and almost 52,000 MWh were sold to our neighbours in Michigan, NY and Quebec for the average price of $20.03/MWh (2 cents/kWh). What that tells us is we generated about $1,042,000 from the sale of those exports.

If one assumes (with a fair degree of confidence) those 52,000 MWh sold to our neighbours all came from the unneeded IWT generation for the day we basically gave away over $7 million of our ratepayer/taxpayer dollars and paid $388/MWh (38.8 cents/kWh) for the 23,849 MWh of IWT generation actually utilized in Ontario.  

I’m sure the owners of those IWT were delighted we Ontarians were so generous with the handouts we gave them instead of us giving gifts to those many families suffering from “energy poverty” throughout the province.

Perhaps the Ford led provincial government should have a serious look at how some of these wasted dollars could be recovered from the IWT owners to help those Ontario families and small businesses suffering from energy poverty caused by the intermittent and unreliable wind turbines.  

Norway’s Virtue Signal is Shallow Whereas Canada’s is Harmful

A press release from the Ontario Ministry of Energy, Todd Smith on December 1, 2021 bragged about the province’s support for the “Ivy Charging Network” (a joint venture between OPG and Hydro One).  The press release stated: “The deployment of charging infrastructure will see ONroute locations along highways 401 and 400 equipped with at least two EV chargers at each site, with busier sites equipped with more.“ The press release went on to quote Minister Smith saying; “This deployment will reduce barriers to EV ownership, supporting Ontario’s growing EV manufacturing market.“ Hopefully, the message was simply meant to augment the agreement by the Ford and Trudeau led governments to provide Ford Automotive with $295 million each to save the 5,000 jobs at their Oakville plant by converting it to manufacture EV!

The announcement brought to mind a recent article, with a related video, about Norway and their claim to be “the world’s top market for electric and plug-in hybrid vehicles by market share“!  The article was about testing 20 different models of EVs and hybrid vehicles to determine their loss of “performance” in cold weather (defined as from a high of 3°Cto -6°C). The short video in the article indicated the average loss of performance in that “cold weather” was in the order of about 20%.  Most Canadians would consider that to be classified as; mild winter weather! We should expect our colder winter temperatures would result in a much higher loss of performance should we push for more EVs to replace our dependable and winter reliable ICE automobiles.

Presently about 15% of all registered vehicles in Norway are EVs or hybrids and recent monthly sales of those are now over 80% of all vehicles.  That is seemingly causing some concern as EV and hybrid buyers receive lots of generous tax breaks (ie; the VAT of 25%, free parking, no toll road charges, etc. etc.) which led to a study which “estimated that the popularity of EVs was creating a 19.2 billion Norwegian krone ($2.32 billion) hole in the country’s annual revenue.“  They are suddenly noticing their tax revenues are falling.

Curiosity piqued, if one looks at Norway’s electricity generation one finds it is emissions free with 98% from hydro and 1.7% from other renewables and slightly better than Ontario’s. Annual consumption is 123 TWh (terawatt hours).  On a per capita basis (population of 5.4 million) that means each Norwegian consumes about 23 MWh (megawatt hours).  If one looks at Ontario with a population of 14.6 million, per capita consumption is only 9 MWh for the 132.2 TWh we consumed in 2020 which means the average Ontarian consumes only 39% of the average Norwegian!

I point out the foregoing merely to show if EV sales in Ontario achieve what they are in Norway, Ontario may need a lot more electricity generation at a time when the Pickering Nuclear Station is slated to be shutdown. The Energy Minister’s press release noted as of October 2021 “there are 66,757 EVs registered in Ontario. By 2030, one out of every three automobiles sold will be electric.“ Those current EV registrations are less than 1% of vehicle registrations in Ontario so let us all hope his forecast is wrong!

If we look at Norway and compare it to Canada, we should note they are a major generator of oil and gas with the bulk of it sold to other European countries. In respect to oil and gas production the similarities are striking but while Norway increases their generation of oil and gas to sell to other countries Canada’s current government hamstrings our fossil fuel sector in a variety of ways. Norway’s exports of oil and gas represent about one third of all exports and in Canada’s case it was just north of 14% in 2019.

Interestingly, Canada was among 20 countries that signed on to the COP26 agreement to no longer finance fossil fuel projects abroad but it’s not clear if Norway was one of those countries.  Another article does however note; Norway has lobbied the World Bank to “stop all financing of natural gas projects in Africa and elsewhere as soon as 2025 — and until then only in “exceptional circumstances “ The article’s summary highlights the hypocrisy of Norway by summing up with the closing sentence: “It is antithetical to say you support energy development abroad — but only when it is green — while admitting green energy cannot be the only source. Norway can’t have its cake and eat it too, not when it comes to energy development.”

While Norway’s position is shallow it protects their economic wellbeing as a benefit to their citizens whereas, Canada under PM Justin Trudeau, seems determined to destroy our economy to the detriment of all Canadians!

The Niagara Independent

The captioned on-line news outlet is a great source of truthful news and excellent opinion articles and they reached out to me to seek my blessing to run one of my articles. I ageed and it is posted on their site today. You can find it here:

The Niagara Independent also frequently posts articles by Catherine Swift, former CEO of the CFIB (Canadian Federation of Independent Business). Co-incidently one of her articles was also posted today and is definitely worth a read as it covers a lot of ground. Find it here:

Strange Things that Caught My Eye Over the Recent Week

Should you, as I do, consider recent events to be off the scale of normal, it is worth pondering the cause!  Is it related to the Covid-19 pandemic, climate change, the “woke” generation, government bureaucrats or those in political power or perhaps a combination of some or all of them?  Some recent examples:

Planting Trees in Brampton as Part of Two Billion Trees                                                                             

I’m sure most will recall just before the last Federal election in 2019 our PM Trudeau met with Greta Thunberg and promised her we would plant 2 billion trees.  Well, it appears the process, under the Minister of Natural Resources, Seamus O’Regan has finally started according to a press release on August 4, 2021 which contained the following:

Today, Maninder Sidhu, Parliamentary Secretary to the Minister of International Development and Member of Parliament for Brampton East, on behalf of the Honourable Seamus O’Regan Jr., Minister of Natural Resources, announced $1,280,000 to the City of Brampton in support of the Government of Canada’s plan to plant two billion trees over 10 years. This project will see 8,000 trees planted across the region this year and contribute to the rehabilitation of the city’s urban tree canopy.”

Quick math on the cost per tree being planted comes to $160.00 each meaning if Minister O’Regan Jr. continues at this level the total cost to Canada’s taxpayers will be $320 billion for the 2 billion trees. Those 8,000 trees will, eventually, absorb about 174 tons of CO2 meaning the cost per ton of emissions removal is about $7,400. Pretty sure O’Regan could have purchased “carbon offsets” for a few dollars each from former Governor of the Bank of Canada, Mark Carney and saved the taxpayers money!

CONFIDENCE IN CHARITY LEADERS HAS FALLEN SHARPLY OVER THE LAST TWO DECADES – WHAT DOES THAT MEAN FOR THE SECTOR?

In late June Charity Village released a report that tracked “four research streams that asked about perceptions of charity leaders over time, representing 27 distinct surveys.” The surveys cited go back as far as 2000.  One of the comments in their report stated: “In 2000, 27% of Canadians reported a lot of trust or confidence in charity leaders, but in the Environics Institute’s research, only 8% reported having a lot of confidence in 2020,”. Another finding was, “between 2009 and 2020, confidence in charity leaders dropped by 22 percentage points, compared to only eight percentage points for business leaders, six for union leaders, and three for government leaders.” The preceding findings may (in my mind) be a reflection of the growth in eco-charities who provide no real charitable benefits to those in need and are well funded by domestic and foreign charitable foundations. The former includes many of Canada’s colleges and universities with departments focused on “climate change”! Needless to say, the drop in confidence has resulted in fewer Canadian tax filers donating: “In 2000, 25.5% of Canadian tax filers reported charitable donations, but by 2018 it was only 19.4%.” 

Toyota CEO Agrees With Elon Musk: We Don’t Have Enough Electricity to Electrify All the Cars

Toyota’s CEO at the company’s year-end press conference in mid-December 2020 said; “The current business model of the car industry is going to collapse. The more EVs we build, the worse carbon dioxide gets…When politicians are out there saying, ‘Let’s get rid of all cars using gasoline; do they understand this?” 

Interestingly enough, Elon Musk, the founder of Tesla just a couple of weeks earlier noted “Increasing the availability of sustainable energy is a major challenge as cars move from combustion engines to battery-driven electric motors, a shift which will take two decades, Musk said in a talk hosted by Berlin-based publisher Axel Springer.”  Musk also said; “electricity consumption will double if the world’s car fleets are electrified, increasing the need to expand nuclear, solar, geothermal and wind energy generating sources.” In respect to “wind energy” it is interesting to note the Global Wind Energy Council in an article claimed, at the end of 2020 there were “743 GW of wind power capacity worldwide”.  To put that in perspective the Federal Government’s “Canadian Centre for Energy Information” tells us at the end of 2017 Canada’s total electricity capacity was 145,214 MW which is only 145.2 GW! 

As industrial wind turbine’s (IWT) life span is around 20 years we should expect about 50% of those in operation globally will reach their end-of-life in the next 10 years and the rest by the time Musk forecasts capacity must double.   Approximately the same life-span applies to solar panel and batteries for storage. Those politicians and Musk should also understand the USA in 2020 generated 60.3% of it’s electricity consumption from fossil fuels!  I would therefore suggest the “politicians” cited by Toyota’s CEO along with Musk himself have no understanding of what EV will do to the electricity system globally and why both are way off base and have no bearing on getting us to “net-zero” emissions by 2050!

Hydro One submits five-year Investment Plan to the Ontario Energy Board to energize life for communities

Just a few days ago Hydro One issued a press release announcing they had submitted a 5 year plan to the OEB (Ontario Energy Board) seeking approval to spend $17 billion over that time to reputedly: “reduce the impacts of power outages for its distribution customers by approximately 25 per centand “enable economic growth and prepare for the impacts of climate change.” The proposed capital expenditures are about double what they have been over the past several years (eg: 2019 was $1.667 billion and 2020 was $1.878 billion).  The press release claims “If approved, the five-year Investment Plan will have bill impacts below the expected rate of inflation, with the monthly bill for a typical year-round residential customer increasing by an average of $1.68 each year from 2023 to 2027.” Reviewing the OEB’s Yearbook of Distributors to get a sense of how those “power outages” compare due to “defective equipment” the 2015 report states the hours interrupted due to “defective equipment” were over 4.6 million hours and in 2019 (2020 report is not yet published) they had dropped to just under 4.4 million hours.  Since 2015 Hydro One’s residential customer base also increased by 60,000 so hours per customer have dropped.

As a former banker I don’t believe the approximately $2 million the 1,2 million residential customers will cough up at the suggested $1.68 annual increase will be sufficient to pay the interest on the $1.9 billion of new debt (the foregoing additional debt assumes Hydro One will maintain is debt to equity ratio at 2020 year-end levels) they will incur annually.  By 2027 it will be a pipe dream!

Let us all hope the OEB does its job for the benefit of Hydro One’s customer base of which I am one.

Let’s thank our lucky stars Hydro One was not allowed to buy Avista

While on the subject of Hydro One it should remind all that back a few years ago they were intent on purchasing Avista Corporation via an all-cash purchase at $53 (US) per share.  The total cost for the all-cash offer was estimated at Cdn$6.7 billion.  The closing price on Avista’s stock on Friday July 7, 2021 and over three years after the purchase offer was $42.67 (US).  At the time the purchase offer was made Glen Thibeault was the Ontario Minister of Energy and was keen on the takeover saying: “One of the benefits of broadening the ownership of Hydro One was to unlock the potential for precisely this sort of transaction,”.  Thibeault went on to say; “As the single largest shareholder in Hydro One, the Ontario government would benefit from the company’s receipt of additional regulated returns expected to begin in 2019. Those benefits will be above and beyond the proceeds already attributed to the Ontario Trillium Trust as a result of the IPO and subsequent secondary offerings.”

Needless to say, those of us who felt Hydro One should focus on Ontario’s ratepayers were delighted US regulators in the states where Avista operated refused the takeover. Hydro One had planned to borrow $3.4 billion and issue another $1.4 billion of debentures convertible into Hydro One shares which would have, in all probability, detrimentally impacted all of their existing Ontario ratepayers.

Conclusion

Unfortunately, it appears those we elect as our representative politicians often are more influenced by those lobbying them continually such as the “climate change” advocates or they bow to the bureaucrats who are the beneficiaries of our tax dollars for their pay. Combine the foregoing with the “woke” generation screaming and their mainstream media support along with the push for globalization and we should unfortunately recognize what is continuing to happen appears to be the “new normal”!  

Another Broken Political Promise

Back in April 2018 Doug Ford, the then recently chosen leader of the Ontario PC Party promised “to cut hydro bills by 12 per cent if he wins Ontario’s spring election, saying it would be on top of a rate reduction from the governing Liberals, whose plan he has repeatedly criticized. The Progressive Conservative leader said Thursday that he would cut rates through a variety of measures that would save the average ratepayer $173 a year.”

So how has that promise turned out?                                                                             

A recent report from the C. D. Howe Institute titled; “Power Surge: The Causes of (and Solutions to) Ontario’s Electricity Price Rise Since 2006” reminded me of Premier Ford’s above promise. I decided to measure his promise against actual results from our personal Hydro One bills.

A quick calculation of our June 2018 bill indicated all-in costs on the Hydro One bill we received were 15.06 cents/per kWh (kilowatt hour) after being granted a rebate of the provincial portion (8%) of the HST and a further discount under the “Fair Hydro Plan”.  Collectively the two reductions represented 34.5% of what our bill would have been.  Without discount(s) costs would have been 22.6 cents/kWh!

Fast forward three years later to June 2021 and all-in costs were 14.99 cents/kWh or a drop of 0.07 cents not the 1.8 cents/kWh of the promised 12% reduction.  The strange thing about the latter bill however is on the actual calculations the amount deducted is referenced as the “Ontario Electricity Rebate” (OER) and if added to what we paid would have raised the price to 18 cents/kWh.  On page 1 of the bill however, there was a dollar amount cited (Total Ontario support) that was 3.5 times the amount of the OER and if added to what we were required to pay would have increased the costs to 25.5 cents/kWh or 12.8% more than the 22.6 cents/kWh of June 2018. 

What the foregoing suggests is the Ford government has done nothing to reduce the cost of electricity since elected and instead is simply burdening taxpayers at the rate of 10.6 cents/kWh (25.5 cents/kWh minus 14.9 cents/kWh) for electricity consumed by residential and (perhaps) other ratepayers.

In respect to the foregoing the C. D. Howe report contains the following about the taxpayer burden: “As system costs – particularly in energy generation – have continued to rise, the Ontario government has increasingly turned towards taxpayers to keep total bills down. The most recent estimates from the Ministry of Finance show the cost of subsides rising to a staggering $6.5 billion for the 2021/22 fiscal year – or nearly 3.5 percent of total government expenditures. To put this number in context, that same budget proposed to spend $5.8 billion in taxpayer dollars on long-term care.“

Premier Ford left Greg Richford in the portfolio for three years and this suggests he accomplished nothing other than burdening taxpayers with debt! With the advent of Todd Smith as the new Minister of Energy, taxpayers and ratepayers should hope he will somehow start the process of fixing the mess.

The time has come for the Ford led Government to recognize that taxpayers and ratepayers are normally one and the same individual!

Hydro One shareholders make bank as taxpayers get dinged

I was treated to another Marc Patrone radio interview on SAUGA 960 AM to discuss my recent article about Hydro One’s record profit in the 1st Quarter of the current year. We also looked at what the Ford led government has done to try to curb the rising costs of electricity as compared to his pre-election promise to lower rates. The big question is did he deliver or did those McGuinty/Wynne contracts for renewable energy cause him problems?

You can listen to the podcast starting at 1:24:02 of the May 25, 2021 show here:

Or, if you ae a subscriber to NEWSTALK RADIO you can listen here:

https://newstalkcanada.com/?page_id=2527

Hydro One Shareholders Should Thank Ontario’s Taxpayers and Premier Ford for Seemingly Embracing the Circular Economy

Hydro One earlier this month released their 1st Quarter 2021 report and EPS (earnings per share) were up from 0.38 cents per share to 0.45 cents for an 18.4% increase and the highest 1st Quarter earnings since becoming a publicly listed company.  The net profit after financing costs and taxes of $273 million also appears to be a record as far back as Hydro One post their first Quarter financials which appears to be 2015.

Hydro One’s report noted the reasons behind the increase as: “Revenues, net of purchased power, for the first quarter were $74 million higher than last year, mainly due to higher distribution and transmission revenues as a result of OEB-approved rates including the timing of the OEB decision on the 2020 rates received in the second quarter of the prior year, and higher energy demand and consumption driven by favourable weather.  The reference to “favourable weather”, I believe, suggests it was colder and due to the Covid-19 lockdown meant ratepayers (particularly residential) consumed more kWh (kilowatt hours) then the prior year.  The results noted distributed power increased from 7,484 GWh (gigawatt hours) to 8,156 GWh for an increase of 9%. Average transmission “60-minute peak demand” also increased by almost 6%.

The reference to “purchased power” signaled costs dropped dramatically due to the Ford government changing the former Wynne led government’s “Fair Hydro Plan” into the Ford government’s “Ontario Electricity Rebate” increasing the taxpayer subsidization. What that did was, decrease the cost of “purchased power” for Hydro One from $1,007 million in 2020 to $894 million in 2021 (despite the 9% consumption increase) dropping the cost per kWh (kilowatt hour) from 13.5 cents/kWh to 11 cents/kWh.  That represented a taxpayer subsidy of around $203 million for the quarter (Hydro One customers only) more than doubling the Wynne subsidy! 

It also meant Hydro One’s ROR (return on revenue) and ROA (return on assets) look much better then past returns which presumably helped drive up the share price.  As an indication Hydro One’s stock exchange price closed at $30.40/share on May 21, 2021 whereas back when Ford declared the March 12, 2020 lockdown the share price was $24.50. What the foregoing $5.90 per share increase suggests is the (approximately) 40% ownership the province holds in Hydro One is now worth about $1.44 billion more (up 24%) than it was worth just over a year ago and will presumably reflect itself favourably on the province’s financial statements when they are released. To make matters even better Hydro One’s quarterly dividend on their shares increased from the comparable quarter and resulted in an approximate $60 million dollar payment to the province.

Boiling it down   

By using taxpayer debt to subsidize electricity costs the Ontario government has increased the value of the assets held in the monopoly where we taxpayers own 40%.  Couple the additional taxpayer debt incurred (to subsidize the per kwh charge), plus the OEB granting rate increases for transmission and distribution of electricity and Hydro One’s profit should increase further! Logically that should drive up the market (share price) value even more in the future!

Is this really what our Federal and Provincial politicians had in mind when they referenced the “Circular Economy”?

Ruminations on the Ontario Liberal Electricity Legacy and Premier Ford’s inactions to correct them

I was on the Marc Patrone Show at 960 AM March 23, 2021 to discuss the Ontario Liberal Party legacy in respect to the electricity sector in the province.  We pointed out the billions of dollars in costs of the OLP legacy and how they continue!  At the same time the discussion noted that after almost three years in power the Ford led Ontario Conservative Party has done hardly anything to change the system other than shifting billions of $$$ in costs from ratepayers to taxpayers.

You can listen to our conversation on Sauga 960 AM here on the March 23rd podcast starting at 46:1 ending at 1:02.

Laurentian Elites and the Circular Economy

A very recent article in the Financial Post caught my jaundiced eye not so much for what it said but who it was about.  The article noted: “Brookfield Infrastructure Partners LP launched a $13.5-billion hostile takeover bid for Calgary-based midstream company Inter Pipeline Ltd. to take the company private.” The striking point of this opening sentence seemed odd in that Brookfield with over $500 billion in assets under management had announced back in August of last year that none other than Mark Carney former Governor of the Bank of England had been appointed, “Vice-Chair and Head of Environment, Social and Governance, known as “ESG,” as well as impact fund investing.”

The attempt at a hostile takeover of Inter Pipeline Ltd by Brookfield seemed incongruous with Carney now ensconced in his new position. Did he bless this “fossil fuel” related hostile acquisition bid under his new ESG “accounting” rules?  Wasn’t he recently all preachy on BBC about us all having to exit fossil fuels or we will all die of “climate change”?

 Anybody who has had a serious look at Brookfield and its numerous entities dating back to it’s founding 120 years ago, will be impressed at the international reach it commands and gain a rough understanding of how it has created numerous multi-millionaires and billionaires along the way. An article from February 2020 in the FT partially highlights its organizational complexities!  

One of Brookfield’s offshoots; Brookfield Renewable Partners has investments in hydro. wind, solar and storage in Canada and elsewhere. Back in 2016 they sold one of their subsidiaries; Great Lakes Power transmission lines to Hydro One for $373 million.  That inspired Hydro One to apply to the OEB for a revenue increase which they were granted.

Brookfield Infrastructure Partners already has investments in significant oil and gas storage and processing infrastructure in Alberta and Inter Pipeline Ltd. operates oilsands pipelines connecting northeastern Alberta with the Edmonton and Hardisty oil storage   So, one should wonder why would Brookfield add Carney to their roster when he is reputedly anti fossil fuels?  Will he execute an ESG report on their behalf thereby blessing these investments?  Stay tuned!

Coincidently Brookfield Renewable Partners just held its fourth quarter conference call and the CEO Connor Teskey was excited! “The company generated a market-mashing 91% total return in 2020 and has now produced annualized total returns of 20% since its formation two decades ago.”  Teskey went on to say; “We look forward to a multidecade opportunity to advance decarbonization and assist with the transition of global electricity grids to a more sustainable future,” he said. “Advancing the transition to a lower-carbon future will require substantial capital, in excess of $100 trillion over the next three decades.”  Teskey suggests wind and solar generation as a means to achieve the transition!

One should suspect this will spawn the creation of more “Laurentian Elites” while increasing energy poverty?  

Pure speculation on my part but, with the expansion of the Trans Mountain pipeline in process and utilizing billions of taxpayer dollars one should ask, has our Prime Minister, Justin Trudeau, struck some kind of deal with Brookfield to sell them the pipeline once its finally completed and at what price?

Don’t be surprised if and when that happens, Trudeau will simply wave an ESG report Mark Carney will happily provide to assert the claim; it is contributing to Canada reaching “net-zero” emissions by 2050 and supports the Circular Economy. 

OPG Delivers lots of Cash to the Provincial Coffers

A recent article pointed out electricity generation costs in Ontario have leaped since 2009 by $6.5 billion or 74.6%.  The Ford government have reputedly noticed and we were told, via the Provincial Budget; they developed; “a comprehensive plan to address the job-killing high costs of electricity, saving medium size and larger industrial and commercial employers about 14 and 16 per cent respectively, on average, on their electricity bills (at an additional expense of $1.3 billion over three years);”.  The views on the cost were disputed with facts indicating the calculations were off and the actual expense would be closer to $1.3 billion per year.  On top of that taxpayers were earlier obliged by the Ford government to pick up other costs (Ontario Electricity Rebate) as a top-up of the Wynne led governments “Fair Hydro Plan” which represents about $5 billion annually.

The foregoing raised the question: is the public arm of the electricity sector contributing to the provinces revenue base and if so how much?

A look at the recent Provincial Budget along with OPG’s financial statements suggests Ontario’s ratepayers not only pay for the cost of electricity generated by OPG but also pay other costs.

Payments in lieu of Taxes

One example referenced in the budget is, “Electricity Payments in Lieu of Taxes” (PIL) and for the year ended March 31, 2020 it was $505 million (up $70 million).  OPG and all publicly owned LDC (local distribution companies generally owned by the municipality they serve) pay those “taxes” with the exception being Hydro One as Premier Wynne’s sale of 55% of it resulted in it becoming a “private” company.  Upon sale of the 55% ownership, Hydro One’s obligations to pay taxes became the same as all private companies.  OPG represents the major portion of the $505 million noted and for the first 9 months of the current year have allocated $325 million (up $190 million). In 2019 OPGs PIL was $190 million which when divided by the full generation of 77.8 TWh added 0.24 cents per kWh to ratepayer costs. The full PIL for 2020 will add a further 0.24 cents/kWh.

OPG and municipally owned LDC pay the PIL whereas other Crown Corporations such as the LCBO, Ontario Lottery and Gaming Corp, Infrastructure Ontario, etc. are all tax exempt! One should wonder why publicly owned electricity sector companies are obligated to pay taxes when other publicly owned companies are exempt?

Water fuel charge   

OPG’s hydro capacity was 6,420 MW per their 2019 annual report and generated 30.5 TWh (terawatt hours).* Another 3.8 TWh were spilled due to SBG (surplus baseload generation) probably due to wind and solar generation during low demand times. Fuel used to power the numerous hydro dams is water created by rain and snowmelt. In 2019 OPG’s annual report allocated the fuel (water) cost levied by the province for hydro generation was $336 million. The “regulated” price per MWh (megawatt hour) reported by OPG for hydro was $45.45 or 4.5 cents/kWh. If one calculates the “fuel charge” by simply dividing the $336 million by the 30.5 TWh one notes the cost of the “water” fuel was 1.1 cents/kWh meaning without the charge hydro costs would have been 3.4 cents/kWh.

The foregoing begs the question; why is hydro generation charged for fuel that falls from the sky, winds up in lakes and rivers with hydro dams and gives us cheap energy? On the other hand, fuel powering wind and solar generators get free fuel.  All three fuels are provided by Mother Nature but only one generator pays for the fuel they use!  Another subsidy penalizing ratepayers and taxpayers!  The State of Wyoming has been taxing their wind farms for a while and in a recent meeting of their revenue committee are considering a further hike in the tax. Perhaps Ontario should consider this or drop the hydro fuel tax.

Return on Equity

Another issue that should bother ratepayers is how the OEB regulates the electricity system in respect to setting the standards such as, an “acceptable” ROE (Return on Equity) factored into what is referred to as “the cost of capital parameters”.  For 2019 it was set at 8.98%, for 2020, 8.52% and for 2021 8.34%.  If one looks at the ROE for the 16 utility companies listed on the NYSE it is interesting to observe they have started the year trading at ROE multiples of 7.49%. So why does the OEB allow a higher ROE?  Allowing higher rate increases to meet the OEB standards extracts dollars from ratepayer and taxpayer pockets yet OEB’s “Vision” states “The OEB supports and guides the continuing evolution of the Ontario energy sector by promoting outcomes and innovation that deliver value for all Ontario energy consumers..”! 

Hmm, let’s ponder that “vision”!

OPG’s equity at the end of 2016 was $10.508 billion and at the end of 2019 it had grown to $14.275 billion for a gain of $3.767 billion. Generation by OPG accepted into the grid in 2016 was 78.2 TWh but it shrunk slightly in 2019 to 77.8 TWh. Net of fuel costs the revenue in 2016 generated a cost per MWh (megawatt hour) of $62.99 and for 2019 it increased to $68.71 a growth of just over 3% annually.  For the first 9 months of 2020 the cost per MWh (net of fuel costs) jumped to $77.60 MWh an increase of 11.8% from 2019 as the ROE achieved by OPG was 9.4%. **

 The OEB’s perception that publicly owned utilities should benefit more than private sector utilities should be recognized as a failure to “deliver value for all Ontario energy consumers”! Their delay in adjusting the ROE parameters impacted ratepayers to a much larger degree as OPG’s equity base grew by the aforementioned $3.767 billion meaning the impact of their delay effectively increased ratepayer costs.  OPG’s revenue in the 9 months ending September 30, 2020 shot up $876 million (net of fuel costs) or 19.5% over 2019 comparable revenue. Based on OPG’s generation for the 9 months of 2020 of 62.9 TWh that jump represents an increase in costs of $13.92/MWh and 1.4 cents/kWh.

As is obvious from all of the foregoing one of the reasons the cost of electricity in the province climbed in 2020 was the treatment of OPG by the OEB and the revenue gains of $500 million in the Province’s budget from the electricity sector reflect that! 

Now may be the time for the Ford Government to tax the wind and solar generators in an effort to increase the revenue base without bringing more pain to the ratepayers and taxpayers of the Province.

Oh, and while they are doing that instruct the OEB to better focus on their vision!  

* Enough to power almost 3.5 million average households for the full year. 

** The OEB failed to act on a rate application submitted to them by OPG for almost two years in respect to the nuclear refurbishments so granted a large increase to allow them to catch up.