Hard to imagine how a wind power contract handed out by the Ontario Power Authority could have a negative impact on Prince Edward County miles away, but it has! The contract was awarded to a shell company (Windlectric Inc.) owned by Algonquin Power. The approval granted Windlectric is to erect 26 industrial wind turbines (IWT) each soaring over 500 feet high with a capacity of 74.3 MW on Amherst Island. When completed, they would deliver unneeded surplus power intermittently and unreliably.
Needless to say, residents of Amherst Island have been fighting the IWT invasion. Unfortunately, even though the island is considered an Important Bird Area (IBA) and labeled the “Owl Capital of North America” the residents have been unable to stop the project. The power developer recently moved to start construction, first attempting to build a temporary dock enabling them to bring in the heavy equipment and supplies needed to erect the turbines.
The “temporary” dock and the IWT footings require tonnes of aggregate which it now appears they planned to source from Prince Edward County via barges. The first barge brought into Picton Bay on March 23 was badly damaged and sank, releasing what appeared to be oil into the bay. As time marched on, late on March 28 it was reported contaminants entered the Picton water intake zone. Due to overnight wind forecasts the County declared a “water emergency” halting water processing at the Picton-Bloomfield drinking water plant. The emergency continues and a “boil water” advisory was put in place on March 30th for residents of Picton and Bloomfield. The water advisory required utilization of trucked drinking water from other locations in the county.
It is interesting to discover Windlectric’s website, Facebook page and Twitter feed initially said nothing about this event, but they posted an apology letter on their site in respect to a power outage they earlier caused to the residents of Amherst Island. It is also interesting the Marine Logistics Plan is dated March 27, 2017, four days after the barge sinking. It suddenly appeared on their website but fails to mention Windlectric’s plan to source aggregate from Prince Edward County or the total tonnage of aggregate required for the dock and the footings for those 26 IWTs. It does say:“The Project estimates peak delivery requirements at up to six main barge round trips per day, six days per week, between the Project’s mainland dock and the Project’s island dock.”
Anyone familiar with the geography of Prince Edward County will recognize the “mainland dock” referenced has nothing to do with the supply of aggregate.
As the week went on, the County’s emergency team did its best to ensure drinkable water is readily available for the residents of both Picton and Bloomfield by opening bulk water stations and shuttling it to the Picton-Bloomfield water system from Wellington and Rossmore. The event has resulted in a massive effort to bring a team together to manage the problem(s). The team consists of not only the marine company McKeil Marine Limited, owning the barge and the County of Prince Edward. Additional involvement includes the Canadian Coast Guard, Transport Canada, the Department of Fisheries and Oceans (Eastern Canada Response Corporation), Environment Canada and Climate Change and the Mohawks of the Bay of Quinte First Nation.
One is hard-pressed to find a representative of the Ontario government in that list.
As it turns out, the provincial Ministry of Environment and Climate Change (MOECC) has jumped in, but not to help. They issued “an order to McKeil Marine under the Ontario Water Resources Act to retain qualified consultants to investigate the environment impact on the County’s water system and private shoreline wells.” It’s too bad the MOECC didn’t require the same when handing out Renewable Energy Approvals (REA) to the developers who rushed to Ontario to erect IWTs and solar farms due to the high prices being offered on the backs of ratepayers.
One should anticipate the MOECC will find a reason to issue a fine as a penalty to McKeil Marine for the accident, but the ironic (and truthful) issue is, the MOECC is the Ontario Ministry that granted the Renewable Energy Approval (REA) to Windlectric Inc. in the first place. The REA seems to not have required Windlectric to file a “Marine Logistics Plan” until after the accident and the one filed is incomplete. Should a fine be issued, it should be against the MOECC for their disregard for an IBA and the 34 species at risk when granting the original REA to Windlectric.
While issuing the REA was a flagrant disregard for the above reasons the other immediate issue that comes to mind is not recognizing Amherst Island is an “island” meaning supplies and equipment needed will have to travel by water. As just one example the 26 turbines being erected would require around 15,000 tonnes of concrete, slightly less than the foundation supporting the CN Tower and it will require approximately 1,000 concrete trucks to supply that amount! One should expect the local township roads will take a beating from all of that heavy (as in weight) traffic.
Makes you wonder how the MOECC officials issuing the REA, anticipated the concrete would get to Amherst Island if not by barge and cement trucks.
It is clearly time for Energy Minister, Glenn Thibeault to cancel this contract!
April 2, 2017
Thanks to “countylive.ca” for their continuing updates!
The headline on the Hydro One February 10 press release was: “Hydro One Reports Positive Fourth Quarter Revenue and Operating Cost Trends.” Annual “revenues, net of purchased power” came in at $3,125 million, an increase of $37 million (.4%) over 2015, while Net Income rose from $714 million to $746 million, and “adjusted” earnings per share increased to $1.21/share up from $1.16/share.
If you believe the reporting by Hydro One, you are led to believe a small increase in revenue translated to an almost identical increase in after-tax income.
A closer look is necessary to determine how that happened. As it turns out, transmission revenue was up $48 million and distribution revenue was down $11 million, accounting for the revenue increase. Regulatory assets1. climbed $130 million while operations, maintenance and administration (OMA) apparently fell by $66 million. It is not clear how many millions of OMA expenses were placed into “regulatory assets,” but we should assume a portion of salaries, pensions and benefits were.
As a result, it is impossible to determine whether Hydro One has become more or less efficient, despite this claim in the press release: “Our fourth quarter results demonstrate favourable revenue growth and operating cost control.” We can quickly see “favourable revenue growth” was small potatoes!
There are ways of using information in that press release and annual report to allow for calculations. One area that affects ratepayers is “delivery” costs which is reflected in Hydro One’s “distribution” business line. The annual report indicates the amount of electricity distributed to their 1.3 million residential and business customers fell 8.6% from 28,763 gigawatts (GWh) to 26,289 GWh while distribution revenue fell by $11 million from $1,499 million to $1,488 million. Using simple division one is able to calculate the cost of distribution per megawatt (MWh) increased from $52.05/MWh to $56.60/MWh for an increase of 8.7% or $4.55/MWh.
Not all of that increase was paid for by Hydro One customers, however, as Hydro One receives revenue from all of Ontario’s ratepayers via the OESP (Ontario Electricity Support Program) which presumably resulted in the year over year drop (at a minimum) of $26 million in Hydro One’s “Allowance for doubtful accounts” from $61 million to $35 million. As well, all Ontario ratepayers pick up the costs of the RRRPP (rural and remote rate protection plan) which was $125.4 million for Hydro One in 2016 and will increase in 2017 to $243.4 million. Adjusting the distribution revenue to reflect contributions to Hydro One by all Ontario ratepayers would reduce their distribution costs to about $54/MWh (5.4 cents/kWh) and bring it almost in line with the claim by Hydro One their distribution/delivery costs represent about 37% of their customer’s electricity bills before HST. If one does the calculation on the OEB’s website however the actual cost of the “delivery” line for a “medium density” Hydro One ratepayer is 43%!
Another asset that showed a big jump on Hydro One’s balance sheet in 2016 was “goodwill” which more than doubled to $327 million, despite their having recovered $60 million in goodwill from the provincial acquisition of Hydro One Brampton before Hydro One went public. This also occurred just before the arranged merger of Hydro One Brampton with PowerStream, Horizon and Enersource. Hydro One has been snapping up some of the small local distribution companies (LDC) such as Norfolk Power, Woodstock Hydro, Haldimand for the past few years and recently applied to the OEB for acquisition of Orillia Power. Hydro One also just completed acquisition of Great Lakes Transmission improving the monopolistic control they hold in this business line to over 98%. The LDC acquisitions were made well above book value and many of them had their delivery rates frozen for five years.
With Hydro One’s success at being the second most expensive hydro distributor we should expect the ratepayers in the locales of the acquired LDC will see their future delivery rates jump significantly.
On the liability side of Hydro One’s ledger, 2016 saw the acquisition of about $1.7 billion of increased and mainly long-term debt yet, their negative working capital position only improved $716 million. The additional debt raised during the year caused their Debt/Equity ratio to rise from 1.45:1 at the end of 2015 to 1.52:1 at the end of 2016 and brought with it increased interest costs. A rising D:E ratio often precedes a credit rating drop!
Dividend promise impossible, unless …
All this points to a company whose future is dependent on the OEB granting their every wish to increase delivery/distribution rates. If not, the promise to dividend out 70/80% of their annual net profits becomes impossible unless they either: forgo proper maintenance of the infrastructure, or reduce OMA costs via either staff reductions or salary cuts, or sell off assets!
Dividends paid in 2016 on the 5,623,000 common shares were $577 million representing 80% of net income attributable to common shares with just over $400 million going to the provincial treasury leaving about $150 million2. in retained earnings for future investments in infrastructure repairs and refurbishment and the building and/or improvement to the transmission grid(s) and LDC infrastructure.
Something’s got to give, or future increases to Hydro One’s ratepayers will be even worse than the past!
- Regulatory assets “represent certain amounts receivable from future customers and costs that have been deferred for accounting purposes because it is probable that they will be recovered in future rates.”
- Capital spending in 2016 was reported as $1.6 billion.
Since the Premier of Ontario has admitted her government has made a “mistake” and she is now concerned about rising electricity bills in Ontario, there is a lot of attention being paid to these bills.
I have been invited to speak at two Town Hall events coming up in the next few weeks.
• Saturday, Dec. 3: 10 a.m. to noon at the Kinburn Community Centre, 3045 Kinburn Side Rd., Kinburn.
• Saturday, Dec. 3: 2 to 4 p.m. at the Intercultural Dialogue Institute, 335 Michael Cowpland Dr. unit 112, Kanata.
Here is a news story about last week’s event.
October 26, 2016
The events of the past few months have been difficult for new Minister of Energy Glenn Thibeault as he continues to try to defend his predecessors’ decisions. He has tried to justify: increased energy poverty, the fastest growing electricity rates in North America, the slow demise of energy intensive enterprises (manufacturing, mining, refining, pulp and paper production, etc.), gas plant cancellations and the privatization of Hydro One, to name a few.
Not to be ignored are the many challenges lodged by rural ratepayers against contract awards allowing construction of industrial-scale wind power projects in their communities. Thousands of those ratepayers have challenged the contracts and spent millions of personal after-tax dollars sitting in front of Environmental Review Tribunals, valiantly doing their best to protect the environment and wildlife from the highly invasive power projects. Only a very small percentage of the challenges have proven successful.
Just days ago another ruling was issued and once again it was in favour of an industrial wind developer. This time however, it came from a tribunal sanctioned under the North American Free Trade Agreement (NAFTA), and it was against the Government of Canada because of actions by the Ontario government.
The challenge by Windstream Energy LLC resulted in an award of $25 million and an additional $3 million in legal fees against the decision by the provincial governing party to place a moratorium on a contract granted to Windstream for an offshore 300-MW wind development.
The ruling by the tribunal “found that the Government of Ontario treated Windstream Energy LLC’s (Windstream) investments in Canada unfairly and inequitably” and also ruled “on the whole did relatively little to address the scientific uncertainty” surrounding offshore wind that it relied upon as the main publicly cited reason for the moratorium.
If one were to discuss the contracts awarded by the Ontario Power Authority or IESO with the people who have challenged wind power projects at Environmental Review Tribunals I suspect the words: unfairly and inequitably would be frequently heard. Many rural Ontarians living in proximity to operating turbine installations and suffering the effects of audible and inaudible (infrasound) noise would raise the issue of the lack of research on the effects of the noise on humans.
“Relatively little” has been done to address the scientific uncertainty surrounding onshore wind turbines, as well.
October 2, 2016
Part 3 in a series
The first in this three-part series dealt with laudatory comments bestowed by Premier Wynne on Finance Minister Charles Sousa, but now I will simply look at one unachievable demand.
This article has nothing to do with the energy sector but I had to comment on a section of the Mandate Letter the Premier issued to the Finance Minister — it is completely out of touch with reality.
In the section under the subheading, “Delivering on the Balanced Budget Plan” there is one instruction that will require many magic tricks from Minister Sousa: “Lowering the net debt-to-GDP ratio to its pre-recession level of 27 per cent.”NB
The Province provides information disclosing our GDP growth along with our climbing debt levels and recently the Premier took an occasion to brag how Ontario reputedly “posted higher real GDP growth in the first quarter of 2016 than Canada, the U.S. and all other G7 countries. The province’s real GDP grew by 0.8 per cent in the quarter, or a 3.0 per cent annualized rate.” The braggadocio, however, needs to be examined in relation to the Premier’s direction to Minister Sousa.
The Ontario Finance Authority (OFINA) posted the Province’s debt information indicating that, as of March 31, 2016, publicly held debt was $313.4 billion. OFINA also included a chart showing Ontario’s debt-to-GDP ratio was 39.5%.
Using the foregoing data it is easy to discern at that point in time, Ontario’s Gross Domestic Product (GDP) was approximately $794 billion. Extrapolating the foregoing information and using it to calculate how challenged Minister Sousa will be to reduce that ratio to the pre-recession level is also an easy task. If the books were balanced as of March 31, 2016 and the debt level remained at $313.4 billion for the future, the GDP required to meet Premier Wynne’s 27% target would need to grow by $367 billion. That’s a 46% increase from its current level.
In the current global economy the Premier’s challenge is impossible to achieve in a reasonable timeframe.
Looking at a Royal Bank of Canada September 2016 report it becomes obvious Minister Sousa is destined to fail miserably in achieving the Premier’s target. The RBC report indicates Ontario’s GDP is forecast to grow at a rate of 2.7% in 2016 and 2.4% in 2017. This anticipated growth is a far cry from the 46% increase the Premier expects her Finance Minister to achieve.
The foregoing should remind everyone of George Smitherman’s 2009 forecast that the Green Energy and Green Economy Act would only increase electricity prices by 1% per annum. The Premier failed to see the electricity crisis arrive until her party lost a by-election and she was booed at a plowing match when she mentioned hydro rates in her speech.
It appears the ability to forecast the future is a major flaw in the current government in Ontario so we should expect this mandated one to Minister Sousa by the Premier is simply another unrealistic one.
Premier Wynne and Minister Sousa should prepare themselves for additional booing that may soon come from credit rating agencies.
NB: Ontario’s debt-to-GDP ratio has never been as high as it currently is. The Bob Rae NDP government of the early 1990s had to deal with high inflation and a recession that cut the GDP by 3.2%
Spilling, constraining, steaming off–Ontario’s surplus power situation is costing millions
August 14, 2016
Ontario Power Generation (OPG) just released their second quarter results and if you read the news release quickly you might think everything is wonderful — but it’s not.
OMA (operations, maintenance and administration) costs were up $59 million (9.1%) for the quarter compared to 2015, net income was down to $132 million from $189 million in the comparable quarter, and OPG are now the proud owners of Hydro One shares as this excerpt from the quarterly report indicates.
“In April 2016, OPG acquired nine million common shares of Hydro One at $23.65 per share as part of a secondary share offering by the Province through a syndicate of underwriters. The acquisition was made for investment purposes to mitigate the risk of future price volatility related to OPG’s future share delivery obligations to eligible employees under the collective agreements with the PWU and The Society renewed in 2015.”
The Hydro One share acquisition was of course one of the “net-zero” wage settlements touted by the Ontario Liberal government, and this one made specifically by former Energy Minister Bob Chiarelli when the announcement of a settlement with the employees at OPG was made.
Paid to waste power–and you pay them to do it
OPG also disclosed in the news release that they were again forced to spill hydro power which is normally sold into the grid for about 4.4 cents per kilowatt hour (kWh). The amount they spilled in the quarter was 1.7 terawatts (TWh) and 3.4 TWh for the first six months, compared to 1.5 TWh in the comparable 2015 six month period. If that information makes you feel bad for OPG, don’t — they are paid the same for spilling hydro as for delivering it to the grid. A change in regulations by the government created the “pay for spilling” situation. The 3.4 TWh spilled could have supplied about 750,000 “average” households meaning, we wouldn’t have needed other much more expensive power such as intermittent and unreliable wind and solar.
The cost to ratepayers for the spillage of the hydro is about $150 million and will wind up in our electricity bills under the Global Adjustment charge.
While OPG were busy spilling hydro, we were also curtailing wind in the first six months of this year; my friend Scott Luft (http://coldair.luftonline.net/) keeps a record of those curtailments. Curtailments for the first six months on his chart were estimated at 1.245 TWh, and have already surpassed IESO reported curtailments for the whole of 2015 of .733 TWh. The latter cost ratepayers about $88 million at the reputed $120 per megawatt (MWh) wind generators are paid for curtailment. Curtailment costs for 2016 so far are about $150 million.
There were other wastes of generation and ratepayers money in the first six months of 2016 too as Bruce Power was frequently asked to “steam off” nuclear generation at two of their units, but no disclosure is yet available to tell us how much. In 2015 it amounted to .897 TWh which cost ratepayers about $60 million; it is probably more in 2016 as demand is down.
So ratepayers for just the first six months of 2016 will pick up the costs for OPG buying Hydro One shares, spilling hydro, curtailing wind, and steaming off nuclear without one kWh delivered to the “average” household despite the ratepayers responsibility for costs of about $600 million. We also picked up costs to promote conservation which was probably north of $200 million for the six months.
Ontario’s electricity customers should be “steamed” about the increasing waste we continue to pay for.
© Parker Gallant