Ontario’s three Classes of electricity ratepayers

The title above is intentionally misleading.

Ontario has only two classes of ratepayers which are: large industrial users referred to as, Class A and the rest as simply Class B!

Class A’s do have sub-categories related to their peak demands and in order to obtain lower rates, they must pick the “high five” hours of the year when Ontario’s demand reaches its highest level(s).  Picking those hours and reducing their demand (by firing up a diesel generator) allows them to achieve significant savings. Reference to IESO’s report for 2019 detailing Class A consumption and the cost of the GA allocated, indicates the average cost of the GA (Global Adjustment) was 5.89 cents/kwh. That GA cost plus the average HOEP of 1.83 cents/kWh for 2019 produced an average cost of electricity for Class A ratepayers of 7.72 cents/kWh.  The substantial all-in lower cost of electricity for Class A ratepayers is due to the allocation (subsidy) of the GA costs being charged to Class B ratepayers.

The Ontario Liberal Party during its time in power piled up electricity costs by signing contracts well above market rates for intermittent and unreliable power from wind and solar which needed back-up power from gas plants.  The combination of the three sources of power drove rates up resulting in large industrial customers making the point: Ontario’s cost of electricity made them uncompetitive.  The result was the Liberals simply reallocated costs to residential and small/medium sized companies.

The all-in Class B rate (GA plus HOEP) for 2019 was 12.63 cents/kWh.

Recently, not all Class B ratepayers had to pay the foregoing average rate, as “residential ratepayers” * now receive a taxpayer subsidy, appearing on our electricity bills as the “Ontario Electricity Rebate”.   A “rebate” of 25% off of the electricity line on our bills was initially referenced as the “Fair Hydro Plan” and enacted by the Wynne led government mere months prior to the last provincial election.  The Liberal government, under Wynne, noted voters were extremely upset with electricity rates climbing by over 100% in just several years. They felt it would affect the outcome of the election without the rebate.  Despite the rebate Ontario’s Liberal Party felt the wrath of the electorate and lost party status.  The Ford government moved the rebate to taxpayers and added other allocations such as:  conservation spending ($400 million annually), low income support programs ($200 million annually), Northern Ontario tax credit ($120 million annually) etc. to the taxpayer pot.  As a result (based on the writer’s calculation) taxpayers are now picking up almost 40% of the GA allocated costs for residential ratepayers under the “Electricity Cost Relief Program” recently estimated to cost $5.5 billion.

Second class, Class B ratepayers

The small and medium sized businesses** in Ontario are still bearing the full brunt of the increased electricity costs as they get no relief.  They are treated as second class citizens of Class B which are already regarded as second class citizens by our electricity operator. A significant factor affecting them is related to Ontario’s time-of use rates with the highest costs (20.8 cents/kWh during On-Peak hours) applied to when most small/medium sized businesses are operating and consuming electricity.

A recent occurrence allowed me to review an electricity bill for a company with just under 100 employees.  Their electricity costs were 18.9 cents/kWh.  A comparable company operating in the USA would pay (average of all US states) 10.8 cents/kWh according to the US Energy Information Administration.  The net difference of 8.1 cents/kWh would have saved the company almost $200,000 annually which may have resulted in the hiring of additional staff.  Those employees would have produced additional taxes for the Provincial and Federal coffers.

Bear in mind this is only one of the hundreds of thousands of small/medium sized businesses in Ontario.  Imagine what would have happened if we had not contracted at those above market rates for the intermittent and expensive power generated by those many foreign wind and solar generators that rushed to Ontario to take our hard-earned dollars.

The time has come to treat Ontario’s largest employers with the respect they deserve by axing the Global Adjustment and the time-of-use pricing mechanism!

We should surmise those small/medium sized companies are not in favour of subsidizing large industrial complexes or those greenhouse operators producing marijuana!  Let’s level the playing field!

*Full disclosure! I calculated my average electricity line cost from my recent bill (adjusted for the “Electricity Cost Relief Program”) and it worked out to 9.11 cents/kWh

**The CFIB in a 2016 report stated Ontario had 1.4 million small/medium sized businesses.

Knighthood within the Eco-royalty

The latest issue of the magazine, Corporate Knights is, as always, about clean capitalism and the latest issue does not deviate from that theme.  No matter which article you read it’s all about “climate change” and reducing emissions.  The magazine is published quarterly and distributed by the Globe and Mail and Washington Post.  Advertising dollars seem to come from those companies endorsed via their “rankings”. This issue contains a “Global 100 Progress Report” and many on that list have placed ads.

An article in this issue was written by Gideon Forman an analyst with the David Suzuki Foundation. For over 11 years Forman was Executive Director of CAPE (Canadian Association of Physicians for the Environment).  CAPE was and still is a relatively small charity with annual revenue of $386K (June 30, 2019 CRA filing) and received $107K of that from the Federal government. Nevertheless they claim many victories including phasing out coal plants, cosmetics pesticides, etc., etc. The David Suzuki Foundation on the other hand in their CRA filing for 2018 show revenue of $11.7 million and spent $1.8 million of those revenues on fundraising activities.

Forman’s article in Corporate Knights is titled “The man of wind, water and sun” and is a fawning article about Brian Iler, a lawyer who appears to reside on the Toronto Islands. Iler is an environmentalist and the article notes he “has been the creative legal mind behind a host of cutting-edge renewable energy projects, social ventures and co-ops that have challenged received wisdom.” The article goes on to note Iler was “the go-to counsel for Ontario’s cooperative sector,” and he “received a call from an engineer who wanted to erect wind turbines in Toronto. That was the start of the development of the iconic TREC wind turbine* at Exhibition Place now owned by Toronto Hydro. Finding a location for the wind turbine was difficult “until a naturalists’ group proposed Exhibition Place, but the zoning didn’t work.” A city official suggested; “Call it an amusement device” and “That’s what appeared on the building permit.”

Iler in April 2013 wrote an article about industrial wind turbines and in it he claimed “Scientists agree that the noise emitted by wind turbines ‑- the chief source of alleged health effects -‑ is basically indistinguishable from normal background sounds we experience in everyday life, whether we live in an urban or rural area.”

While Iler made the foregoing claim about wind turbines he was very upset about other noises and for several years fought against the Island Airport due to the “intolerable” noise.   An article in The Bulletin Iler penned June 6, 2018 stated: “That airport is a legacy heavy industrial use, completely out of step with the dominant recreational and residential character of our waterfront today.”  Iler was castigated in a letter from the CEO of Ports Toronto who, in his letter to Mr. Iler stated: “You are in fact the founding Chair of an organization dedicated to the airport’s closure, a position I might note that is clearly out of step with the sentiment of the vast majority of Toronto residents.”

The airport closes at 11 PM so one assumes the noise ceases at that time. Perhaps if Mr. Iler spent a few windy nights 500 metres from a 500 foot high wind turbine, he might not think of them as “an amusement device”!

Another part of the article commends Iler stating; “Iler is an expert on innovative funding models. Thanks in part to his efforts, Ontario has become a hotspot for renewable-energy-based community bonds, including SolarShare (a co-op that floats bonds to finance sun-powered arrays throughout Ontario) and ZooShare (a biogas co-operative).  Both of the foregoing have negatively impacted ratepayers and taxpayers in Ontario.

Ilier himself claims he played a major role in convincing the McGuinty led Ontario Liberal government to enact the GEA (Green Energy and Green Economy Act) in his biography (posted on his firms website).  He and other self-appointed luminaries such as Bruce Lourie, Marion Fraser, etc. were members of both OSEA and/or the GEAA (Green Energy Act Alliance) who convinced former Energy Minister and Deputy Premier, George Smitherman, to push the GEA through the provincial legislature.  Ratepayers of the Province have been paying the price of that “Act” since its enactment!

While Corporate Knights and environmentalists of the Gideon Forman ilk want to crown themselves and others such as Brian Iler; it is the ratepayers/taxpayers of Ontario who continue to suffer the consequences!

Perhaps it’s time for those who self-label themselves as knights to recognize they are charlatans.

NB: A contact of the writer disclosed the following suggesting another fact was untrue!

“The OPA called out Exhibition Place for claiming the wind turbine was the source of energy for charging their electric golf cart type vehicles. In fact, both turbine and charging stations were connected to the grid with separate accounts. As I recall, this was likely because the kWh payment for power delivered to the grid was higher than their kWh cost for the charging. Our point was that their claim about the wind turbine charging the golf carts was misleading to the public who might consider something similar.”

NBB: The Exhibition Place turbine was also created for the purpose on indoctrinating our children as this excerpt from a  August 28, 2012 indicates: “The Exhibition Place wind turbine doubles as the linchpin of a large-scale education program. In the 2008/2009 school year TREC reached more than 4,000 grade 5, 7 and 9 students.”

*The Trec Co-op Exhibition Place wind turbine is an abysmal economic failure as noted in an article penned in July 2014.

Hydro One’s 3rd Quarter 2019 results will make shareholders happy and distribution customers unhappy

Hydro one just released their 3rd Quarter results and net income after taxes increased from $194 million to $241 million or 29.4%.  Net income increased by only $14 million or 6.2% after adjusting the 2018 results upwards for the costs associated with the failed Avista acquisition.

Let’s look at those results by Hydro One’s client base of transmission (generators and local distribution companies or LDC) and distribution (ratepayers).

Transmission Revenue and Income Down                                                                                    What is interesting about their results is it shows transmission revenue decreased by $50 million (down 10.1%) as “peak demand” keeps falling.  Year over year the latter fell by 1,805 GWh (gigawatt hours) or 7.9%.  As a result, net income (before financing and taxes) from the transmission business dropped by $55 million or 19.2% from $287 million to $232 million.

Distribution Revenue and Income Up                                                                                       On the other side of their business Hydro One’s distribution revenue (net of purchased power) was up from $370 million to $403 million for a $33 million (+ 8.9%) gain and the revenue growth translated to a $33 million jump in net income (before financing and taxes).  The latter increased from $120 million to $153 million (+27.5%) year over year.

The jump in distribution income occurred despite the fact Hydro One’s 1.4 million customers reduced their consumption from 6,817 GWh to 6,627 GWh for a decline 190 GWh or 2.8%.  The forgoing means the average delivery cost per kWh increased from 5.43 cents/kWh to 6.08 cents/kWh year over year and amounts to a jump of 12%.   The 12% increase is co-incidentally what we were promised to see as a reduction in our rates by the Ford government.

Summary                                                                                                                                                 While all customers are billed for both delivery and transmission costs, the latter tends to represent a very small charge whereas delivery costs represent (on average) about 30% of your monthly bill.  Hydro One’s delivery costs however, are closer to 40% so it is disappointing to see that portion of the bill for their 1.4 million customers keeps climbing at rates well above inflation.

Getting rid of the $6 million man did nothing to reduce Hydro One’s delivery costs!

Is the IESO finally trying to get it right?

The baby’s not happy… are his parents being scammed?

One of the IESO’s responsibilities is to ensure Ontario ratepayers are billed fairly. That’s been a challenge with more than 100 “directives” from the former Liberal government. First in a series

July 30, 2018

Ontario’s Independent Electricity System Operator (IESO) is responsible for monthly settlement (dollars in and dollars out) with all LDC (local distribution companies), transmission companies (Hydro One) and with thousands of generators of various stripes connected to the TX (transmission gird) and DX (distribution grid).

In order to capture the vagaries of what the monthly settlement encompasses, the IESO have a 164-page market manual entitled, “Settlements Part 5.5 Physical Markets Settlement Statements Issue 69”.  Its effective date was March 7, 2018, the fifteenth update of the manual over the last three years!

I’m confident the 15 recent updates were a result of directives emanating from the desks of former Liberal Ministers of Energy, namely Messrs. Bob Chiarelli and his successor Glenn Thibeault, and include the actions related to the Fair Hydro Act and the rebate of the 8% Provincial portion of the HST.

The directives and the changes they entail indicate the IESO is trying to “get it right” in their responsibility in dealing with the variables. Those variables were created by the Liberal government as it toyed with the energy portfolio over the last 15 years in so many ways via those directives (117 to OPA/IESO alone).  As an example, IESO in 2017 was responsible for settling about $16 billion related to the costs of generating electricity (what the public is charged for the combination of the HOEP (hourly Ontario electricity price) and the GA (Global Adjustment).

Ensuring ratepayers are correctly billed and generators are paid no more than they deserve places a lot of responsibility on IESO to ensure ratepayers are not being scammed!

On the latter point it is worth noting a CBC article from just seven months ago stated:  “Hydro customers shelled out about $100 million in ‘inappropriate’ payments to a natural gas plant that exploited flaws in how Ontario manages its private electricity generators”. The article said “gaming” of the system was discovered by the Ontario Energy Board (OEB) and contained this statement about the IESO: “the investigation found IESO did little checking into the details of Goreway Power Station’s billings.

Data not audited

That is somewhat disconcerting. When I recently asked IESO about the Fair Hydro Plan’s “variance account” for the month of May 2018 being very high ($309.9 million), they answered “Please note that settlement data submitted to the IESO by the LDCs is not audited by the IESO (audit responsibilities reside with the OEB) and is processed as submitted.”

In viewing IESO’s December 31, 2017 financial statements, their independent auditors (KPMG) attempt to capture their responsibilities, listing 30 of them as if they were simply the Ten Commandments. The one directing the activities associated with the money movement related to the FHP (Fair Hydro Plan) says: “engaging in activities related to making payments to and receiving payments as contemplated under the FHP and related settlement activities”.

The disconcerting part of this is that the Fair Hydro Plan alone will (according to the Financial Accountability Office of Ontario) amount to approximately $1,750 million on an annual basis — the 8% HST provincial rebate will add another $1 billion annually.  That certainly leaves the taxpayers and ratepayers of the future exposed to any one of the LDC “gaming” the system, or inadvertently submitting incorrect information.

Can we current and future ratepayers trust that Hydro One and all of the other LDC will submit correct “data” to IESO and that it will be properly audited by the Ontario Energy Board?

Stay tuned!

Second installment to appear tomorrow