Hydro One gives the finger to Ontario Auditor General

Hydro One execs implemented only 17% of the Auditor General’s recommendations. She noticed…

The Ontario Auditor General released the 2017 Annual Report and included were the “Follow-up Reports on 2015 Annual Report Value-for-Money Audits (Summary)”.  Two of those (1.06 and 3.04) related to Hydro One audits with both titled “Management of Electricity Transmission and Distribution Assets”.

The two reports note the “Building Ontario Up Act, 2015 (ACT)”* removed the AG’s ability to conduct “value-for-money audits”.  The Act partially privatized Hydro One apparently to allow funds raised from the sale to be spent on “infrastructure”; however, several reports by economists and the AG’s office have either implied or suggested it was done in order to allow the Ontario government to claim they balanced the books.

Standing Committee Follow-up

Leaving that aside, it is worth noting the Standing Committee’s follow-up report (3.04) indicates they made 10 recommendations to Hydro One, none of which were shown to be implemented by them.   The follow-up report noted “Without receiving further details from Hydro One to verify and support the information in its update, our Office was only able to assess and report on the status of some, but not all, of our recommendations (see Section 1.06) and was not able to assess and report on the status of any of the Committee’s recommendations.” 

The report went on to say: “We conducted assurance work between April 1, 2017 and July 26, 2017. To meet new Canadian auditing standards, we requested Hydro One’s CEO and/or Vice President to sign a management rep­resentation letter, dated September 1, 2017, at the completion of our work. The purpose of the letter was to obtain written representation from Hydro One that it had provided us with a complete update of the status of the recommendations made in the original audit two years ago.

On August 29, 2017, Hydro One responded that it declined to sign this letter or any similar document. Hydro One indicate that since it ceased to be an agency of the Crown fol­lowing passage of the Building Ontario Up Act, 2015, it was not required to participate in this follow-up, and it was not appropriate for it to sign the letter.”

Auditor General Follow-up

The AG’s 2015 Hydro One, “value-for-money report” had 17 Recommendations and 36 specific recommended actions attached to those recommendations. As was the case with the recommendations made by the Standing Committee, Hydro One basically told the AG to get stuffed, although the follow-up report (1.06) did note: “As an act of good faith and courtesy, Hydro One nevertheless sent us a document on April 26, 2017, presenting actions it had taken to respond to our recommenda­tions (following our formal request in late Janu­ary 2017 for it to report back to us). However, as explained in more detail in the following section, it declined to provide us with any more details beside this document.” 

Few recommendations implemented

With the limited information provided and other evidence obtained from the Hydro One documents filed with the Ontario Energy Board (OEB) for several rate increase requests (still under review by the OEB), the AG was able to confirm four out of the 36 recommended actions were fully implemented and two were in process for implementation. They were also able to confirm that four actions “will not be implemented”! As a result, only 17% of the AG’s recommended actions can be classified as accepted and executed by Hydro One.

It appears Hydro One’s executive are treating Bonnie Lysyk, the Ontario Auditor General, in a similar fashion as the previous Minister of Energy, Bob Chiarelli did when he dismissed her “smart meter” report by suggesting she didn’t understand the electricity system. (“The electricity system is very complex, it’s very difficult to understand,” Chiarelli said.)

Coincidentally, one of the issues in the report that elicited the foregoing response from Minister Chiarelli is one the AG raised in respect to Hydro One as “Recommendation # 14” aimed at reducing their lengthy power outages (compared to all other Ontario based local distribution companies [LDC]) which stated: “To lower its repair costs and improve customer service relating to power outages through more accurate and timely dispatches of its repair crews, Hydro One should develop a plan and timetable for using its existing smart meter capability to pinpoint the loca­tion of customers with power outages.” That recommendation has now been classified as “No longer Applicable” and no apparent resolution is sought when viewing the notes in Hydro One’s 2016 annual report.

Their response to Recommendation # 14 may have been cloaked in anger as the AG in the 2015 report noted the 1.2 million “smart meters” acquired by Hydro One cost “$660 million yet it did not implement the related software and capabilities to improve its response times to power outages. Hydro One used smart meters predominantly for billing purposes, but not for the purpose of remotely identifying the location of power outages in the distribution system before a customer calls to report the outage. The $660 million expenditure indicates an average cost of $550.00 per “smart meter” and, as many Hydro One ratepayers learned, despite their average cost being twice that of other LDC they often generated billing errors and about 150,000 of them still require manual readings!

Transparency? Doesn’t apply to us

One has to think that because Hydro One’s executives know they are a quasi private/public monopoly, they don’t have to follow the regulations and demonstrate the transparency required of fullly publicly owned entities, and they can simply ignore the AG’s and the Standing Committee’s recommendations and requests. Their monopolized clients are all of the generators, municipal and privately owned LDC and 1.3 million ratepayers who have no choice as to who will enable them to keep their lights on!

Hydro One’s apparent arrogance should be worrying to all ratepayers no matter if they are Hydro One clients or not.

We can only hope the Ontario Energy Board will finally use their regulatory authority when faced with approving any rate increase requests now before them from Hydro One!

Parker Gallant,

December 7, 2017

 

* In the 12 years from 2004 through to 2015 Hydro One paid $3.375 billion in dividends to the Province of Ontario.

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