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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Wind waste should worry Ontario ratepayers

Ontario’s electricity ratepayers paid more than $500 million in 2017 for nothing

With only one month left in the current year, the bad news on the electricity sector keeps getting worse.

Well before the official sources such as IESO report on how much power industrial wind turbines generated and how much was curtailed (constrained, or paid for but not added to the power grid), my friend Scott Luft has published his estimates for both the former and the latter for the month of November.

As he reports (conservatively), curtailed wind in November was over 422,000 megawatt hours (MWh)  that could have supplied 562,000 average Ontario households with free power for the month.

Instead, no one got free power; the cost of the 422,000 MWh of undelivered wind power to Ontario ratepayers was $120/MWh.  That $50.7-million cost for the month was simply added to the costs of the electricity bills ratepayers will be obliged to pay, while some of it will deferred to the future as part of the Fair Hydro Plan.

Somebody’s enjoying cheap power — not you  

No doubt the wasted wind power presented itself when it wasn’t needed; if it had been accepted into the grid, that extra power could have caused blackouts or brownouts, so it was curtailed.  At the same time, much of the grid-accepted wind was exported to our neighbours in New York, Michigan and elsewhere, at discount prices!  Curtailed wind for November 2017 compared to 2016 was almost 55% higher.

How bad is it? Let’s review the first 11 months of the current year, compared to 2016.

So far in 2017, curtailed wind is about 786,000 MWh higher (+33.8%) at just over 3.1million MWh.  The cost of all the curtailed wind so far in 2017 is approximately $373.6 million, or $94.3 million more than 2016 costs.

And wind wasn’t the only source of power generation constrained. When Ontario Power Group reported their third Quarter (September 30, 2017) results they said this:

“Baseload generation supply surplus in Ontario continued to be prevalent in 2017, resulting in forgone hydroelectric generation for OPG of 1.1 TWh*: and 4.5 TWh in the three and nine month periods ended September 30, 2017, respectively, compared to 0.5 TWh and 3.9 TWh during the corresponding periods in 2016.”  

Translation: ratepayers will pick up the approximately $165 million cost of that waste via their electricity bills.

Not only are we curtailing wind and spilling hydro, but we also steamed off nuclear power generated by Bruce Nuclear at the same time we pay for idling gas plants to back up intermittent wind and solar power generation.

Intermittent wind and solar cost us

The cost of “greening” Ontario with unreliable and intermittent wind and solar keeps climbing, no matter what their proponents or politicians say.  As ratepayers and taxpayers we should reflect on why 25% of the waste of the noted 7.6 TWh of undelivered power and its cost of $539 million (so far this year) is being deferred via the Fair Hydro Plan.  And at the same time, we should recognize that we have experienced the worst possible planning in the Energy Ministry in the history of the province.

The energy sector in Ontario needs real planning by experts that will provide real value for money and save ratepayers from paying more than $500 million a year … for nothing!

~

*  1 (one) terawatt is equivalent to 1 billion kWh

Boldface type on hydro bills doesn’t make statements true

 

The baby’s not smiling… he can see the future

If you just received your monthly electricity bill from Hydro One (presumably all local distribution companies will have the same message), you will be drawn to the boldface type declaring:  “Ontario’s Fair Hydro Plan saved you $XX.XX on your bill. This amount includes the 8% Provincial Rebate.”

The next paragraph elaborates on that message by telling you “Ontario’s Fair Hydro Plan substantially lowers electricity bills for typical residential consumers.  This includes the eight percent rebate introduced in January 2017 and builds on previous initiatives to deliver broad-based relief on all electricity bills.” (“Previous initiatives”? Huh?)

Also included with your bill is a leaflet (English on one side and French on the other) expanding on the wonders of the Fair Hydro Plan with a picture of a happy smiling family (mom and dad but not the one-year-old in mom’s lap) viewing a laptop computer. Right above the picture is a white on black square with the words “Ontario’s Fair Hydro Plan Bringing electricity bills down”.

The baby is right not to smile: the information on the bill and insert contain only selective facts.*

What’s missing: 

Missing on the bill and the brochure was an explanation on why our cost of electricity climbed well over 100% due to the Green Energy and Green Economy Act which handed out long-term, above market contracts for intermittent and unreliable wind and solar generation.

Missing was information about the cost of moving two gas plants to save Liberal seats in Oakville and Mississauga.

Missing was any information about why we pay gas plant generators hundreds of millions of dollars to sit idle to back up intermittent and unreliable wind and solar generation.

Missing was any mention about the Global Adjustment Mechanism (GA) forcing Ontario to export surplus generation to NY and Michigan for pennies on the dollar causing ratepayers to pick up hundreds of millions of missing dollars to cover the cost of surplus generation.

Missing was any mention of the hundreds of millions of dollars the curtailment of wind generation, steaming-off of nuclear or spilling of hydro costs ratepayers.

Missing is any mention of the costs of hundreds of millions of dollars to annually pay for discounts for LED lights, an energy-efficient furnace or a new energy-efficient refrigerator, etc., etc.

Missing was any mention of the hundreds of thousands of families placed in “energy poverty” who have had to choose to either buy food or pay their hydro bills.

Missing is any claim to the harm caused to humans and nature by the thousands of unreliable, intermittent wind turbines erected or any mention about how their installation is now affecting water aquifers in certain parts of the province.

Fairness is in the eye of the beholder and the current claim that the government is “Bringing electricity bills down” should be expanded to state what most Ontarians know: “Bringing electricity bills down” today, will cause them to rocket upwards in the near future due to our complete mismanagement of the energy portfolio.

(C) Parker Gallant

November 18, 2017

 

* Selective facts are “true” facts that only tell us part of the story.

 

 

 

 

 

Hydro One: the news is bad, bad and even worse

Hydro One’s litany of bad news

Shortly after Hydro One’s CEO Mayo Schmidt announced in July that Hydro One would acquire Avista Corporation of Spokane, Washington, it’s been a litany of bad news for him and the shareholders.

Bad News # 1.

The worst bad news was a recent one by the OEB in respect to the allocation of a large part of Hydro One’s rate increase request, associated with deferred income tax relative to their transmission business.   The note in their recently released 3rd Quarter report states: “On November 9, 2017, the OEB issued a Decision and Order that modified the portion of the tax savings that should be shared with ratepayers. This proposed methodology would result in an impairment of Hydro One Networks’ transmission deferred income tax regulatory asset of up to approximately $515 million. If the OEB were to apply the same methodology for sharing in Hydro One Networks’ 2018-2022 distribution rates, for which a decision is currently outstanding, it would result in an impairment of Hydro One Networks’ distribution deferred income tax regulatory asset of up to approximately $370 million.”

Hydro One was not pleased and as a result are appealing the ruling by the OEB to the Ontario Court of Appeals. They hope the decision will result in a 100% benefit for the shareholders and nothing for the ratepayers instead of the 29% allocated by the OEB.

Bad News # 2. and # 3.

Another bit of recent bad news was related to the ruling of the Alaskan regulators who  rejected the acquisition of Alaska Electric Light and Power Company (an Avista subsidiary) by Hydro One.  Interestingly enough, the rejection came even though Hydro One have guaranteed the regulators (via the Avista Corporation’s application to allow the takeover) a 10-year rate reduction which is estimated to reduce Avista’s revenue by US$31 million.

Bad News # 4.

Almost six months ago, Hydro One submitted a rate application to the OEB that, if fully granted, would increase average residential distribution rates by $141 annually. This was right in the midst of all the chatter about the Fair Hydro Plan the Ontario government was promoting.  When confronted with questions related to that application, the Premier declared to the Elliot Lake Standard: “It’s the Ontario Energy Board (OEB) that sets the rates. The Ontario Energy Board sometimes accepts increases and sometimes they don’t.”  Most ratepayers know that setting rate increases has become the purview of the Minister of Energy and the Premier who decreed rates would be reduced by 25% via the Fair Hydro Act so the claim was disingenuous.  Nevertheless, perhaps the OEB took a signal from the Premier’s message?  What they did was schedule a series of open-house meetings at nine locations in the province.  One should suspect those attending the meetings were not there to support the rate increases!  The OEB is still weighing the Hydro One submission and what they heard at the community events.

Bad News # 5.

Yet another piece of recent bad news came from Spokane, Washington when Avista announced their 3rd Quarter earnings were down 63% from US$12.2million to US$4.5million of the comparable 2016 Quarter. (Could someone please tell me why Hydro One is buying Avista Corp. and paying [US $5.3 million] 45 times current earnings, suggesting there are synergies that will result in savings and benefits to both sets of ratepayers separated by 3,687 km of driving miles?)

Bad News # 6.

Back in August 2016 the City of Orillia agreed to sell Orillia Power Distribution for $26.3 million (30 times 2015 earnings) and Hydro One dutifully submitted the agreement to the OEB for approval. Shortly after Hydro One announced their planned purchase of Avista, the OEB stated “In an order dated July 27, the board said it had determined “that the hearing of this application will be adjourned until the OEB renders its decision on Hydro One’s distribution rate application.”  Energy board staff found that rates proposed for previously acquired utilities in Hydro One’s distribution rate application

“suggest large distribution rate increases for some customers” in future.”  Hydro One resubmitted the application and the OEB’s response was: “On October 24, 2017, the OEB issued a Procedural Order in response to Hydro One’s Motion to Review and Vary, with key dates for filing additional materials on the Motion, hearing date, and filing of reply submissions.”

 Bad News # 7

On November 10, 2017 Hydro One released their 3rd Quarter results: they were disappointing, with distributed power dropping by 395 GWh (gigawatt hours) or 6% compared to the same quarter in 2016. That reflected itself in a revenue drop of 3.7% or $14 million (net of cost of power) despite additional revenue coming from OEB approved rate increases.  The overall drop in consumption in the province also reflected itself in a significant drop in average peak demand (down 9.3%) which would have resulted in a revenue drop if not for the OEB’s approval of transmission rate increases, pushing revenue up by $27 million.

The end result was a $15 million (-6.3%) drop in net income despite the year over year rate increases for both the distribution and transmission businesses. Interestingly Hydro One blamed “milder weather” as the cause of the consumption and peak demand drops whereas Environment Canada reported “From June 20 to July 31, Toronto hit 30 degrees just seven times, compared with 24 days in 2016” but perhaps “milder weather” insofar as Hydro One is concerned references cooler weather or simply reduced consumption due to the cost burden on ratepayers?

 Perhaps the stream of bad news that Hydro One is currently suffering from will allow the company’s executives time to reflect on the decade of bad news Ontario’s ratepayers have experienced as a result of their inability to keep our rates from climbing at a multiple of the cost of living.

Parker Gallant,

November 14, 2017

 

Aftermath of new rules on political advertising

Almost a year ago, the Ontario government presented and passed legislation related to campaign finance reform.   The Globe and Mail noted in an article on December 1, 2016: “The Election Finances Act – prompted by a Globe and Mail investigation into pay-to-play fundraising – passed its final vote in the legislature Thursday morning with all three parties in support.”

As most people know, the reform associated with political campaign financing was demanded when it was widely publicized the Premier “and members of her cabinet were offering intimate face-time to corporate leaders and lobbyists seeking government contracts and favourable policy decisions in exchange for donations of up to $10,000 to the Ontario Liberal Party.”   Funds raised by political parties are used to promote their promises to voters and to outline their plans if elected.  The party most affected by this reform was Ontario’s Liberal Party, meaning, less funds to promote themselves.

The foregoing event occurred only months after the OLP had gutted the ability of Ontario’s Auditor General to say “yes” or “no” to public money being used for campaign-style ads under the Government Advertising Act, an act brought to the Legislature by former Premier Dalton McGuinty. Since amendment of that act, Ontario’s voters have seen many ads that the Auditor General indicated she would have quashed.

Recently, we have seen such messages in our hydro bills. Back in January 2017, the bill we received told us how the Ontario government is reducing electricity costs by rebating the provincial portion of the HST; shortly after, the government announced the Fair Hydro Plan and our bills said “Ontario’s Fair Hydro Plan saved you $XX.XX on your bill”.   (I don’t recall a message when they put the 8% Provincial Portion of the HST on our bills)!

Now, the recent messages will apparently be expanded as the Ministry of Energy has decreed via an upcoming regulatory amendment to “O. Reg. 275/04 (Information on Invoices to Certain Classes of Consumers of Electricity) made under the Ontario Energy Board Act, 1998 (OEBA)”.  These latest changes will be “dynamic” according to the posting on Ontario’s Regulatory Registry as per the following:

“Dynamic Messaging
ENERGY is proposing to amend O. Reg 196/17 by amending the current information to be included on invoices and including a requirement that LDCs provide a customer-specific dynamic calculation of savings associated with the Fair Hydro Plan for each billing period invoiced.”

Perhaps the governing party no longer needs those $10,000 “face-time” donations as long as they can reach voters in other ways to get their messages out.

Whether we believe those messages as we head to an election is up to each of us.

©Parker Gallant,

November 8, 2017

Wind: worst value for Ontario consumers

The wind power lobby continues to claim power from wind is great value and contributes to “affordable” electricity bills. But the facts of October tell a different story.

Ontario turbines near Comber: not helping

Right after Ontario Energy Minister Glenn Thibeault released his version of the LTEP (Long-Term Energy Plan), “Delivering Fairness and Choice,” CanWEA (the Canadian Wind Energy Association) issued a news release with the following statement:  “New wind energy provides the best value for consumers to meet growing demand for affordable non-emitting electricity.”

To back up that claim, CanWEA president Robert Hornung had this to say: Ontario’s harnessing of wind power can help fight climate change while keeping electricity costs low. Without new wind energy, costs to electricity customers and carbon emissions will both continue to rise.”

Brandy Giannetta, CanWEA’s Regional Director for Ontario also had a quote: “CanWEA supports competitive, market-based approaches to providing flexible, clean, and low-cost energy supply, to meet Ontarians’ changing needs.”

The expression “I wish I had a dollar for every time I heard that,” immediately comes to mind but here’s the truth: industrial-scale wind turbines have failed miserably in producing anything resembling “low-cost” energy and is instead one of the reasons consumers’ electricity bills “will continue to rise”!

If Hornung and Giannetta had waited just five days, they could have visited my friend Scott Luft’s spreadsheet and noticed how wind performed in October.   They would have discovered it was pretty dismal: 37.9% of possible grid-connected (Tx) wind power generation was curtailed (paid for but not used).  

The IESO (Independent Electricity System Operator) was concerned that too much wind power generation could cause repercussions such as a blackout or brownout, so 481,243 MWh (megawatt hours) were not accepted throughout the month. However, Ontario’s ratepayers will still pay for those undelivered MWh at a cost of $120 each, meaning the GA (global adjustment) increased by $57.7 million (481,243 MWh X $120. = $ $57,749,160).

Add that $57.7 million to the 787,627 MWh of the Tx  generation accepted into the grid, the total costs rise to $165 million or $208.32/MWh — the equivalent of 20.8 cents/kWh (kilowatt hour).   (That calculation is 787,627 X $135/MWh = $106,329,645 + $57,749,160 = $164,978,805.  Simply divide the latter amount by the Tx accepted generation and you get the $208.32 MWh or the 20.8 cents/kWh.)

It is important to note that the costs calculated and reported here do not include the transmission charge, delivery charge, regulatory charge or the HST.  Additionally, another 158,609 MWh of wind were delivered to local distribution companies (Dx) at a cost of $135/MWh, bringing IWT costs for the month to $185 million — for power we didn’t need.  No doubt during the month we were also steaming off clean nuclear power from Bruce Nuclear and spilling clean hydro power from OPG’s hydro generation units. In both cases the cost of the steamed off nuclear and the spilled hydro will be added to the Global Adjustment pot and find its way to our future bills.

I hope Mr. Hornung and Ms Giannetta will rethink their claims and simply admit wind power generation is high-cost, and frequently displaces low-cost non-emitting nuclear and hydro power.

You can’t hide October’s facts!

 

Ontario’s new energy plan: bragging, promises, and unanswered questions

Ontario’s Long-Term Energy Plan (LTEP) 2017 is labeled “Delivering Fairness and Choice”. It comes on the heels of the Fair Hydro Act, indicating the government has moved beyond their Stretch Goal concept and now, pre-election, favour the term “fair”.

The 2017 LTEP is full of self-congratulation starting with the Minister’s Message describing their concept of fair! Energy Minister Thibeault says:

“Delivering Fairness and Choice makes an important commitment: we will strive to make energy more affordable, and give customers more choices in their energy use, ensuring that Ontarians and their families continue to be at the centre of everything we do.”

He goes on to state, “By eliminating coal-fired generation, we now have an electricity system that is more than 90 per cent free of emissions that cause climate change. The phase-out of coal-fired generation and our investments in clean generation have contributed to dramatically improved air quality in Ontario – smog advisories have dropped from 53 as recently as 2005 to zero in 2016.”

The latter comment makes one wonder why he went back to 2005 instead of going to 2012, but perhaps it was because the claim wouldn’t look nearly as impressive. By that time the Liberals had been in power for over nine years. It is worth noting that in 2012 the coal plants generated only 4.3 TWh of electricity and there were 30 days with smog advisories.

Minister Thibeault continues by describing the wonders of what (they claim) has been accomplished, and broadly describes future plans while elaborating on how government “is using this opportunity to move ahead with innovative ideas for managing the system and reducing costs. Initiatives such as Market Renewal will ensure the province has appropriate sources of electricity at the lowest possible price. This initiative could save Ontarians up to $5.2 billion over a 10-year period.” 

In a quick review of the 156 pages of the report I found several other claims about all the money they previously saved, together with how much the 2017 LTEP will save! Here are some of them spread throughout the plan:

  • Deferring the construction of two new nuclear reactors at the Darlington Nuclear Generating Station, avoiding an estimated $15 billion in new construction costs;
  • Driving down the cost of renewable energy generation through annual reviews of Feed-In Tariff (FIT) pricing, revised procurement totals, and the introduction of competitive procurement for large renewable projects. This reduced the cost of renewable energy generation by at least $3 billion, compared to the forecast in the 2013 Long-Term Energy Plan (2013 LTEP);
  • Suspending the second round of the large renewable procurement process (LRP ll) and the Energy-from-Waste Standard Offer Program. This is expected to save up to $3.8 billion compared to the forecast in the 2013 LTEP;
  • Renegotiating the Green Energy Investment Agreement with Samsung, reducing contract costs by $3.7 billion;
  • Starting the refurbishments at the Bruce Nuclear Generating Station in 2020, instead of 2016, helping to save $1.7 billion compared to the forecast in the 2013 LTEP; and
  • Pending regulatory approvals, continuing to operate the Pickering Nuclear Generating Station up to 2024, for an estimated saving for ratepayers of as much as $600 million.

Do the quick math on the above statements, without the savings of $5.2 billion from the “Market Renewal”, you will quickly note they total $27.8 billion! Reading about the above savings one notes a substantial amount of the savings comes from pushing expenditures into the future which will presumably coincide with repayment of the money deferred under the Fair Hydro Plan. That means our children and grandchildren will face some dreadful electricity costs!

One of Minister Thibeault’s closing sentences tells us, “Our plan will ensure we can all depend on a clean and reliable supply of affordable energy to power our households and businesses for many years to come.”

With those purported savings of $27.8 billion we should ask Minister Thibeault to please explain why rates have gone up so much since the Green Energy and Economy Act was passed by the Legislature in 2009?

We should then ask him, why his newly minted 2017 Plan indicates they will continue to climb in future years at well over anticipated inflation rates?