My latest, published in today’s Financial Post, here.
When the province of Ontario in October announced its Fair Hydro Plan, which lowered electricity rates to current ratepayers by 25 per cent — by passing on costs to future ratepayers — the Association of Major Power Consumers of Ontario (AMPCO) had a problem. The group, representing companies in the province that consume significant energy in their production, took issue with a claim in the province’s revised Long-Term Energy Plan (LTEP) that stated: “Currently, the electricity price for industrial electricity consumers in Ontario is lower than the average price in the Great Lakes region as reported by the U.S. Energy Information Administration.”
Objected AMPCO at the time: “That statement sends the message that Ontario industrial prices are already competitive with surrounding jurisdictions. That is simply not the case.”
AMPCO had lobbied long and hard for special treatment under Ontario’s rising power rates. It got that several years ago when the provincial energy minister directed the Ontario Power Authority to develop and deliver a program that would bring relief to large industrial companies. The program — which required that the large industrial “Class A” ratepayers drive down peak demand — commenced in 2011 and has grown since then as more and more industrial clients were allowed to qualify with lower and lower consumption limits. Joining the Class A ratepayers can result in substantial savings, achieved on the backs of the rest of Ontario’s ratepayers who are the “Class B” group, made up of households and smaller businesses. …
Anyone in Ontario who receives an electricity bill has seen the line 8% Provincial Rebate which appears just above “Total of your electricity charges” and refers to the provincial portion of HST charges.
There are millions of households in Ontario, however, that are not entitled to that rebate. In fact, 3.3 million households* depend on natural gas, oil or propane for heating or cooking are exempt.
Those households are not even told how much the “cap and trade” tax is. The latter is only available should you visit your supplier’s website where they may, or may not, offer you the opportunity to calculate what that tax is. If you do the calculations you discover the cap and trade tax represents about 8.8% of your bill so that, together with the 13% HST (including the 8% provincial portion), total taxes on your heating bill are 21.8%!
What that means: if your annual heating bill is $1,000 you pay $218 in tax but if you heat with electricity for the same annual cost, you only pay 5% or $50.
If the 8% rebate granted to electricity ratepayers was aimed at reducing energy poverty, why weren’t households heating with natural gas, oil or propane accorded the same treatment?
Getting off fossil fuels might help combat climate change, but switching to electric heat the cost would suddenly zoom to well over $2,000! A sure-fire way to reduce emissions while increasing energy poverty.
On December 12, 2017 Ontario’s energy minister responded to a question in the legislature from the leader of the third party about the Fair Hydro Act. He said:
“Again, some of them don’t have a choice between natural gas or electricity, so they’re using electricity. We’re working on that with the Minister of Infrastructure, rolling out a plan to get natural gas to these communities as well.”
More gas means more taxes, doesn’t it?
But I am confused about the direction the government wants us to take. Is climate change now on the back burner as they push to contain the deficit by getting us to pay more taxes by consuming more fossil fuels?
Shortly after Glenn Thibeault was appointed Ontario Energy Minister, he was at an Ottawa press conference. When asked about electricity service “disconnections” he feigned ignorance saying, “I continue to drink from the firehose” suggesting he couldn’t answer the question due to the complexity of the portfolio.
One and a half years later, it now appears he knows more than the folks at the Ontario Energy Board (OEB).
Minister Thibeault recently announced he is “launching a review” of the OEB via a panel headed up by Richard Dicerni, a former acting CEO of Ontario Power Generation (appointed to that position by Dwight Duncan when he served as Minister of Energy under Premier McGuinty).
The press release announcing the panel review noted, “The OEB is responsible for establishing energy rates and prices that are reasonable, setting rules for energy companies operating in Ontario, and making the energy system easier to navigate and understand for consumers.”
It also mentioned “The panel will have a broad mandate including reviewing how the OEB can continue to protect consumers amidst a rapidly changing sector, support innovation and new technologies, and how the OEB should be structured and resourced to deliver on its changing role. The panel will seek feedback from the public starting in spring 2018, examine best practices from other jurisdictions and report back to government by the end of 2018.”
OEB under government’s thumb
The OEB was stripped of its authority by Premier Wynne and Minister Thibeault when they decreed, under the Fair Hydro Act, that electricity rates for residential ratepayers would be reduced by 25%. That decree followed 18 directives and letters of instruction to the OEB by a variety of Ontario’s Energy Ministers since 2003. Five of those directives/letters were issued by the current Minister.
So, the question today is, what is the panel likely to find and what are they likely to recommend?
More to the point, what won’t they find out?
Ontario ratepayers expecting the panel to find the OEB was responsible for the rate increases we have experienced will be disappointed. If ratepayers expect the panel to recommend the OEB be given back their regulatory authority as one would hope, that won’t happen either, or at least not before the 2018 election is over. The panel, as noted above, has been instructed to report by the end of 2018 or about six months after the upcoming election in June 2018.
As an observer of the electricity portfolio, I think the objective of establishing this panel is it to give the Ontario government talking points to deflect mismanagement. Minister Thibeault’s quote in the press release carried this message: “Utilities and regulators need to respond by renewing their focus on efficiency, reliability, affordability and looking at new cutting-edge ways of keeping electricity consumers as their top priority.”
Never mind that the “focus” of utilities and regulators over the past decade has been to execute policies dictated by their masters—the various Energy Ministers who have arbitrarily decreed their views via directives, specific acts and regulatory changes on how the electricity sector should function.
Down a very long road
When Liberal candidates are questioned about the energy file by media and voters leading up to the election day in June next year, they will surely say we need to wait for the panel conclusions later in the year, and that the government expects the OEB to help us move to an equitable and “fair” price for electricity in the province. They will claim they have told the utilities and the regulators they need to focus on the electricity consumer and that they expect “fairness” will be the outcome!
The panel could become a very useful deflection tool ward off criticism and escape allegations of the harm caused to ratepayers and the Ontario economy.
It is clear the Minister of Energy has learned a lot since his appointment.
On December 12, 2017, Yvan Baker, Liberal MPP for Etobicoke Centre introduced Bill 190, An Act to amend the Consumer Protection Act, 2002. After the first reading he provided a short statement:
“Mr. Yvan Baker: Speaker, we all know how terrible it feels when you expect to pay one price for something and end up paying a price that’s much higher than that. Consumers feel confused, misinformed and sometimes misled. This bill, known as the What You See is What You Pay Act, amends the Consumer Protection Act by adding a new section that requires all suppliers of goods or services to ensure that any information provided to a consumer regarding the price of a good or service includes the all-inclusive price. The all-inclusive price is a total of all amounts that a consumer will have to pay for the good or service, including tax and other charges or fees.
This will ensure that consumers don’t have to worry about hidden taxes or fees and that they can make more informed choices. It will ensure that what you see is what you pay.”
So, a question: what will happen to our electricity bills in the future?
According to Hydro One they will have “A fresh new look to serve you better”. Hydro One appears to be in the process of spending $15 million dollars to make that happen, as explained on page 2032 of one of the dozens of documents filed with the OEB seeking several rate increases. Those will cost $141 more per average ratepayer over the next four years.
Energy Minister Glenn Thibeault spoke to the billing issue in the Legislature December 12 stating: “We have an LDC working group with the Electricity Distributors Association, which represents all local utilities across the province. They’re working with us, as part of the long-term energy plan, to create a bill redesign. They understand what needs to be done and how we need to ensure that we make it as clear as possible, for people to understand how our electricity system works and how our electricity bills work as well.”
A quick look at the sample “fresh” bill posted by Hydro One doesn’t show much difference from those currently used, although it promises we ratepayers will “Understand more about the electricity use, delivery and regulatory charges that make up your statement.”
I suspect there is much we won’t be told. The Yvan Baker bill will presumably bury the breakdown of what is in the key three lines “Electricity used,” “Delivery” and “Regulatory Changes” so we shouldn’t expect to be enlightened.
Here are several samples of what we won’t see as a breakdown on our bills:
Cap and Trade costs—they are not allowed to appear on either our electricity or natural gas bills
Fuel costs for water both running through turbines and being spilled when IESO instructs OPG to do the latter. Costs/fees paid to the province annually are in excess of $350 million.
Costs for curtailed wind generation of over $400 million annually.
Costs for spilled hydro of 4.5 TWh (terawatt hours) at a cost of about $200 million annually.
Costs for various conservation programs estimated at $400 million annually.
Costs for line losses of 5/6 TWh annually representing a cost of at least $500 million.
Costs for steaming off Bruce Nuclear—annual costs unknown but believed to be $50/100 million annually.
Costs for “gaming” the system by gas plant and coal plant operators estimated to be in excess of $350 million by the Auditor General of Ontario over a period of several years.
Costs absorbed for exporting surplus generation annually in excess of $1 billion.
Costs associated with the Class A to Class B transfer estimated to be around $1 billion annually.
Interest costs (unknown) on borrowed funds related to the Fair Hydro Act’s 25% reduction.
Do the quick math on the above you will note the annual costs of what we won’t see itemized on our bill comes to $4 billion. Most of it represents no value to residential or small business ratepayers. The only value accrues to the Class A ratepayers and all the costs will be paid by residential and small business ratepayers.
A rough estimate of the costs of the above to the average residential ratepayer who consumes 9 MWh (megawatt hour) annually is approximately $27.00 per/MWh (2.7 cents/kWh) and represents $243.00 annually ($27,00 X 9 MWh) for no benefit!
For Ontario ratepayers “What You See is What You Pay” has been a fact of life under the current government. Hydro One’s $15-million spend to give us a bill without a proper breakdown will do nothing to “to ensure that we make it as clear as possible” despite Minister Thibeault’s claim!
Transparency will continue to elude the Energy Ministry and ratepayers will still feel misinformed.
The Ontario Federation of Agriculture has published support for the new Long Term Energy Plan — but did they even read the numbers? Government spending seems to run counter to OFA goals
About a year ago, Energy Minister Glenn Thibeault told a community meeting in Sault Ste. Marie, “Since 2003, Ontario has invested more than $35 billion in over 16,000 megawatts (MW) of new and refurbished clean generation, including nuclear, natural gas and renewables – this represents about 40 per cent of our current supply and is the main reason why hydro bills will continue to rise in the future.”
That was followed on March 2, 2017 by Premier Wynne who put out a statement on Ontario’s Fair Hydro Plan and how much had been spent: “In the past few years we’ve invested more than $50 billion in electricity infrastructure”.
Now, to the release of Minister Thibeault’s 2017 Long-Term Energy Plan (LTEP) “Delivering Fairness and Choice” which says this: “Nearly $70 billion has been invested in the electricity system since 2003. These investments have several benefits, including providing a clean, reliable electricity system.”
In just one year, Ontario’s Premier and Minister of Energy changed the claims made about spending on the electricity sector to the point where they suggest we have spent an additional $35 billion dollars in just one year!
In response to the LTEP, the Ontario Federation of Agriculture or OFA put out a very short paper that simply seems to buy into the government claims: “$70 billion was invested in our electricity system over the past 15 years, much of these investments were for the shift to non-emitting generation sources.”
You might think Ontario’s farmers, who are very dependent on energy, would be far from happy with electricity prices. In fact, on their Issues page on their website, they say “OFA believes Ontario farms need competitively priced energy, including access to natural gas and reasonably priced electricity, to be able to compete and to contribute to the growth of our rural economy.”
They are no doubt concerned about the Fair Hydro Act and what will happen when the bill for its $40-billion cost falls due and electricity rates shoot up again. But you wouldn’t know that from reading their LTEP review: it suggests refinancing the Global Adjustment to defer costs was a good thing!
Perhaps Don McCabe, former President of the OFA, still plays a role in determining the OFA’s position on the electricity sector? As people may recall, McCabe was one of several “environmentalists” who were members of the GEAA (Green Energy Act Alliance) who claim responsibility for bringing us the Green Energy and Green Economy Act. Back in 2011 the Ontario Sustainable Energy Association (OSEA) awarded Don McCabe a trophy for that role! (The OFA continues to maintain membership in OSEA but the current representative is Ian Nokes.)
As an OFA executive, Mr. McCabe should step up and help the Premier and Minister to present a dollar amount to the public that is consistent, and doesn’t suggest spending jumped $35 billion in one year.
On the other hand, he and the other members of the GEAA could be blamed for increasing electricity bills plus the removal of the rights of rural communities to say yes or no to industrial wind turbines, and for the negative impacts on neighbours of any farmers who signed leases with wind power developers
Perhaps Mr. McCabe is content to keep a low profile as the spending claims keep growing!
The Wynne government’s (apparent) 25% reduction in electricity rates for Class B ratepayers (ordinary folks, not huge corporations and businesses) under the Fair Hydro Act might have resulted in increased power consumption … but it doesn’t appear to have had that effect. Should reduced demand for power continue in Ontario, the big discount will simply drive up the debt to be accumulated over the next ten years of the deferral (refinancing existing assets) under the act.
The Independent Electricity System Operator or IESO just released their Monthly Market Report for August 2017. Compared to the August 2016 report, overall consumption was down from 13,113,357 MWh to 11,350,008 MWh or 1,763,349 MWh (-13.4%). That’s enough to power about 200,000 average households for a year.
When one looks at the breakout between Class A and Class B ratepayers, however, IESO reports consumption by Class A ratepayers increased from 2.373 TWh (terawatt hours) in 2016 to 3.230 TWh in 2017 — 36.1% (.857 TWh). Class B ratepayers consumed 22.9% less (2.515 TWh) reducing consumption from 10.962 TWh to 8.447 TWh.*
The lower consumption by Class B ratepayers was partially influenced by a slightly milder August in 2017; however, IESO notes in the recently released 18-Month Outlook “Weather-corrected demand was a similar 11.5 TWh and represents an all-time low for the month.”
Now looking at the Class A consumption, the combined rate (Global Adjustment + HOEP [hourly Ontario energy price]) dropped from $75.05/MWh to $70.53/MWh (-6%) from 2016 to 2017, and that ratepayer class appears to have taken advantage of the drop. Some of the increase was no doubt due to an expansion of Class A ratepayers following a change in who qualifies under the Industrial Conservation Initiative program. That allowed companies with lower consumption to join the Class A group. Energy Minister, Glenn Thibeault dropped the Class A attributes from peak consumption of 3 MWh to 1 MWh and then finally to 500 kWh* in an effort to mollify the numerous medium-sized companies and associations who lobbied hard to get a lower electricity price.
Costs are up for regular folks, down for business
The weighted average (GA+HOEP) cost for “B” class ratepayers is up $15.47/MWh year over year, but down for class A by $4.52/MWh. Costs (GA +HOEP) in August for B class ratepayers was $118.37/MWh and those costs for A class ratepayers were $70.53/MWh. The additional costs of $47.84/MWh that B class ratepayers are responsible for was 67.8% higher than A class costs in August. Under the Fair Hydro Act, 17%** of the B class costs will be deferred and IESO tracks those under a “Variance Account”. The latter increased in August by $210.8 million to reach $605.5 million for just the first two months. The monthly variance is being refinanced cumulatively and will come back to haunt ratepayers and whoever is the government, in 10 years
According to my friend Scott Luft, wind power generation in August from grid- and distribution-connected industrial wind turbines (IWTs) produced 597,537 MWh. Another 78,265 MWh were curtailed, or paid for but not added to the grid.
All-in, the cost of IWTs in August was approximately $90 million and represented 79.7 % of our export of surplus power of 847,416 MWh to our neighbours in New York, Michigan and elsewhere.
While we don’t know specifically the source of the power included in the grid, if all the wind generation was exported, we were paid about $17/MWh or around $10 million, meaning a loss of $80 million. Without wind power generation, the August “Variance Account” addition could have been lower by that $80 million.
The future: more costs
So, despite “B” Class ratepayers experiencing the “benefits” of the Fair Hydro Plan, instead they reduced their consumption by 22.9%.
Maybe they are concerned about what will happen in 10 years’ time, when they will be billed for that Variance Account the Financial Accountability Office said would be a minimum of $45 billion and could balloon to as much as $93 billion.
* The difference of 165,000 MWh between the Market Report and the breakout is presumably due to line losses billed to each ratepayer class and the 22.9% drop is no doubt related to the expanded ICI
** 8% of the 25% reduction was due to the canceling of the 8% provincial portion of the HST.
The IESO (Independent Electricity System Operator) released their July 2017 Monthly Market Report several days ago, including Class B ratepayer consumption levels along with the cost of electricity by MWh (megawatt hour) and kWh (kilowatt hour).
Compared to the July 2016 report, it shows Ontario’s ratepayers used 910,000 MWh less (down 7.2%) in 2017 than 2016 (enough to power 100,000 average residential homes for one year) yet the cost* of the electricity generated jumped, from $106.47/MWh (10.6 cents/kWh) to $126.41/MWh (12.6 cents/kWh) or 18.7%!
To put this in context, Ontario’s Class B ratepayers reduced their consumption from 10.495 TWh (terawatt hours) in 2016 to 8.858 TWh (down 15.6%), while Class A ratepayers increased their consumption from 2.284 TWh to 3.062 TWh (up 34.1%). The cost of power consumed by both Class A and Class B ratepayers increased substantially year over year.
The impact on Class B ratepayers is being tempered by the debt being accumulated under the Fair Hydro Act that will eventually result in a new and higher debt retirement charge. Some of the additional costs can be attributed to losses on our export of surplus power increasing its cost from $88 million in 2016 to $105 million in 2017. Wind curtailed (21.3% of potential generation in 2017) costs also increased from $13.2 million to $14.4 million in 2017.
What it means: despite a reduction in consumption of 15.6 %, total costs increased!
Looking at the IESO’s “Global Adjustment Components and Costs” for July 2017, you see that dividing the published Class B costs of the GA for July of $913.4 million by the consumption figure of 8.858 TWh results in a GA cost of $103.11/MWh (10.3 cents/kWh). That cost is $9.71/MWh less than the GA Monthly Market Report of $112.80. The difference of $86 million** in additional costs was allocated to Class B ratepayers for the month of July.
When I saw that apparent difference, I inquired why. What I got back was this:
“Regarding the discrepancy you’ve identified on the Global Adjustment Components and Costs web page, the reason for the difference is because of adjustments between Preliminary Settlement Statements and Final Settlement Statements for previous months. Page 28 of Market Manual 5.5 explains this. The rate as posted in the monthly market report, is not the Class B GA amount divided by TWh. Rather, it is set to cover all payments made through GA including those held in the variance account.”
The “variance account” referenced in the response from the IESO spokesperson is cleared every six months when the Ontario Energy Board (OEB) set future rates and would have been cleared when they reset the new rates under the Fair Hydro Act that applied to Class B ratepayers as of May 1, 2017. As a result of the reply, I undertook similar calculations for other months as a test and all of them wound up within pennies … not the almost $10/MWh difference for July 2017.
What I get from all this is, transparency may not be all it is claimed to be when a mistake is made, or alternately $86 million for one month being billed to ratepayers is considered a rounding error! What is obvious is that “conservation” costs Class B ratepayers a lot of money.
September 3, 2017
* GA (Global Adjustment) + HOEP (Hourly Ontario Energy Price).
August 5 2017 was an interesting day: the wind was blowing and the sun was shining, in part of Ontario, anyway.
Unfortunately for Ontario ratepayers that weather will cost them a lot of money.
Why? The cost stems from the fact Ontario’s demand for electricity on that day was only 317,000 megawatts (MWh),* according to the IESO Daily Market Summary, probably due to conservation efforts and mild temperatures. Low demand doesn’t save money: in fact, it will cost Ontario ratepayers millions of dollars due to bad management of the electricity sector by the current government.
I was curious about this windy, sunny day, which led me to contact Scott Luft, a master at using IESO data to give us a real picture of market demand and its costs. Scott occasionally produces “Daily Ontario Supply Estimates” which provide a picture of both our demand and generated sources, what it cost, how much was exported, how much was curtailed/spilled (wasted), etc., and even how much of the costs were picked up by Class B ratepayers versus Class A.
Scott also estimates curtailed wind, spilled hydro, etc., using a conservative approach; they are generally confirmed months later by IESO.
Scott’s daily estimate for August 5, 2017 confirmed my suspicions! Emissions-free nuclear and hydro generators alone supplied the 340,000 MWh of power Ontario needed easily, even exceeding Ontario demand by 23,000 MWh. The cost of that generation was $21.1 million. After allowing for the value of the surplus 23,000 MWh as exports at the average hourly Ontario energy price (HOEP) of $4.94/MWh the cost per MWh comes to $66.34/MWh or 6.6 cents/kWh.**
Double the cost — and you’re paying it
Part of Scott’s daily estimate includes additional costs in the form of all the other generation sources, plus curtailed wind and solar, spilled hydro, biofuel and idling costs of gas plants. When those are added to the $21.1 million of nuclear and hydro, the price billed to ratepayers for the day jumps to $37.8 million — $119.24/MWh or 11.9 cents/kWh. The Class A to Class B subsidy results in the cost per kWh for the “B” Class (that’s you and me) jumping to $131.10/MWh or 13.1 cents/kWh.
The other generation sources on Scott’s August 5 daily estimates include transmission (TX) and distributor (DX) connected generation, along with curtailed/idled, etc. costs with gas at 9,123 MWh (cost $4.1 million), wind at 49,088 MWh (cost $6.3 million), solar at 13,002 MWh (cost $6.1 million), biofuel at 701 MWh (cost $368,000) and imports of 8,563 MWh (cost $52,000).
The costs to you are mounting
Are you with me so far? What this means is, those other generation sources (including curtailed wind, etc.) of 85,000 MWh cost $16.7 million — $196.47/MWh or 19.5 cents/kWh) and are billed to … you, Ontario’s ratepayers.
Approximately $8.1 million of the day’s costs will be allocated to the Fair Hydro Plan and wind up on future electricity bills. If August 5 was a typical day, the amount kicked down the road for the next four years by the Premier Wynne-led government will amount to $3 billion annually (plus interest). (The $8.1 million estimate for this day comes from the use of what is referred to as the “Global Adjustment Modifier” set by the OEB at $32.90/MWh from July 1, 2017 to April 30, 2018 and will be reset at the later date. The $8.1 million was obtained by simply multiplying Class B consumption — 246,000 MWh — by the $32.90 “Modifier”.)
Mismanagement of the energy portfolio by the Wynne-led government on August 5 generated a cost for Class B ratepayers that was excessive. It will continue, and lead to an explosion of households living in “energy poverty”*** when the Fair Hydro Plan comes to an end in four years.
The Minister of Energy needs to recognize the problems caused by intermittent and unreliable renewable energy! Once he understands the latter he should immediately cancel any wind and solar contracted projects that have not commenced construction, along with any in the early planning stages.
Kicking the can down the road via the Fair Hydro Act is anything but fair. Paying twice for non-emitting clean energy simply amplifies the bad management this portfolio has received from our government.
August 11, 2017
* Some of the above MWh references are rounded to the nearest thousand.
** The 6.6 cent rate, coincidentally, is close to our new off-peak rate of 6.5 cents/kWh (previously 8.7 cents/kWh) which came into effect July 1, 2017. The lower rate is a result of the “Fair Hydro Plan” instituted by the Premier Wynne that kicked 25% of the costs down the road for four years. The Off-Peak rate back on May 1, 2007 was 3.2 cents/kWh so even after the recent reduction it is still up over 103% in the last 10 years.
*** Energy poverty is generally defined as utilizing 10% or more of a household’s disposal income to pay for their electricity and heating needs.
From all appearances, Ontario Energy Minister Glenn Thibeault sincerely believes Premier Wynne’s plan to reduce our hydro bills is the right one and the opposition parties have got it all wrong.
Shortly after Premier Wynne and her loyal servant Glenn Thibeault announced the Liberals’ “Fair Hydro Plan” Andrea Horwath, leader of the NDP, announced their plan. Thibeault had this to say about the NDP’s plans to repurchase Hydro One shares: “Buying back $4 billion in Hydro One shares is costly, he added, and ‘will not take one cent off electricity bills. What it will do is send billions to the stock market instead of making much needed infrastructure investments in communities across Ontario.’ ”
When PC MPP Vic Fedeli suggested diverting our surplus power to local businesses so they can create jobs, instead of exporting it to U.S. states at staggeringly low prices*Thibeault lashed out, saying that was “back-of-the-napkin” thinking. Thibeault did admit Ontario “doesn’t have sufficient electricity demand at home to use up the electricity we export to other markets.”
This begs the question: why does the Energy Minister not cancel contracts recently awarded (LRP 1) and permanently cancel plans (LRP 2) to add more renewables that will be surplus due to insufficient demand and plant closures. In respect to the latter, demand will continue to be insufficient as the recent announcements about the closing of the Proctor and Gamble plant (500 employees) in Brockville and the Siemens plant in Tillsonburg (340 employees), just to name two, will further reduce demand.
The Siemens announcement undermines the Green Energy Act which the Liberals originally touted as destined to create 50,000 jobs, but fell miserably short of that goal. In fact it cost Ontario jobs as suggested by former Ontario Auditor General McCarter in his 2011 report.
Thibeault might also stop directing IESO to spend $400 million annually on conservation programs which further reduces demand, but at a cost that is added to ratepayer bills and negatively affects export sale prices.*
Now, when Minister Thibeault or Premier Wynne speak about the Liberal Plan, they revert to the main “Fair Hydro Plan” talking point which is “This is the largest rate cut in Ontario history”. What Minister Thibeault always fails to note is Ontario’s ratepayers have experienced the largest rate increases in history thanks to the GEA’s passage in 2009! He also fails to acknowledge the future costs due to the Fair Hydro Plan which will push rates up well past those before the “largest rate cut in Ontario history”. That cost (subject to balanced budgets) according to the Financial Accountability Office will be $45 billion versus a benefit of $24 billion. That $45 billion will easily drive up electricity rates and represents in excess of two years of current total electricity costs.
Amortized over 10 years we should expect annual rate increases well in excess of 10%. At that time, all ratepayers will be exposed to the Ontario Liberal government’s incredibility bad planning!
* For the first six months of 2017 IESO report the sales price for surplus exports was $14.93 a megawatt hour (MWh) or 1.49 cents a kWh which is close to 10% of what it costs to produce. Ontario’s ratepayers pay for the losses via their monthly bills
A Globe and Mailarticle of November 11, 2002 reported that Dalton McGuinty, leader of the Ontario Liberal Party (OLP), then in Opposition, was upset because Premier Ernie Eves had promised legislation to cap electricity prices.
Liberal Leader Dalton McGuinty said the true cost of the Conservative government’s hydro bungling will add billions of dollars to the debt.
“Now that families and businesses have been scared to death, now that new investment in supply has been scared off, now that everyone knows hydro has been completely mismanaged, Ernie Eves is going back to square one,” Mr. McGuinty said in a news release on Monday.
“The government should have had its act together before the market opened. And the bill for its failure to do that hasn’t been cancelled — it’s just been put off.”
Mr. McGuinty said the Ontario Liberals have been calling for action for months, but the Eves government has not acted until now to freeze electricity prices and increase supply.
The Liberal Leader said his real concern is what Ontarians will have to pay over the long term.
Fast forward to September 14, 2005 when Dalton McGuinty was Ontario’s Premier. In a keynote speech to the Ontario Energy Association, he bragged about what the OLP had accomplished and their plans for the future. Let’s examine the promises made in that speech.
McGuinty: “We won’t gamble away Ontario’s future prosperity because of what the next poll might or might not say...”
A noble thought, but discarded by the OLP. When seeking re-election in 2011 McGuinty cancelled the Mississauga and Oakville gas plants and plans to contract for offshore wind developments. Polling in ridings affected by the foregoing showed several Liberal seats in jeopardy. More recently, shortly after a poll indicated Premier Wynne’s approval rating was at 20 %, she announced hydro rates would be cut by 25 %. Policy by polls…
McGuinty: … Or because of what new technology might or might not be developed.
The launch of the Green Energy and Green Economy Act (GEA) in 2009 focused on wind and solar generation at above market prices, without a cost/benefit study as pointed out by the Ontario Auditor General in his December 5, 2011 report. Both wind and solar were old technologies promoted by ENGO and wind and solar associations and known to be intermittent and unreliable sources of generation.
McGuinty: That’s why we asked the OPA to report on a long-term plan.
The Ontario Power Authority (OPA) produced a viable plan with limited wind and solar capacity to be contracted for in a competitive environment, but the plan was suspended by Energy and Infrastructure Minister George Smitherman before approval via his directive to the OPA dated September 17, 2008.
McGuinty: That’s why we acted to take the politics out of pricing.
The recent Fair Hydro Act and the gas plant moves dispel the notion that politics has been removed from pricing, as do the FIT and MicroFIT programs that past Minister Smitherman enabled via a directive issued September 24, 2009 to the OPA which included a domestic content requirement. The latter resulted in a challenge before the World Trade Organization which Canada lost and taxpayers picked up the costs.
McGuinty: This spring, the Ontario Energy Board, a truly arms-length public agency will set the price of power for small consumers. The OEB sets the price based on what electricity costs, not on what politicians think it should cost, or wish it would cost.
While those homilies are correct, the prices are set based on input costs which the OEB has no control over. In simple terms, they divide the input costs accumulated (Global Adjustment + Hourly Ontario Electricity Price + transmission) and divide it by kilowatt hours consumed. The impact of above market (highlighted by the Auditor General reports) contracts with wind, solar, and other generators and the plethora of other spending (e.g., conservation $400 million per year, etc.) dictated by the Energy Minister, plus above market salaries and benefits for OPG and Hydro One employees etc., are all part of those costs.
McGuinty: We could require our businesses and families to subsidize the price of electricity through their taxes.
Premier McGuinty did just that when he moved the gas plants and part of the cost was paid by taxpayers. The Liberal government also drove up the price of hydro and put 600,000 household into energy poverty. It fell on charities, supported by Ontario taxpayers, to help those households. Tax dollars from those households also supplied grants to buyers of expensive Tesla automobiles and those grants continue today!
McGuinty: But, having finally put our province on a sound financial footing, we choose to ensure the price of electricity reflects the true cost of electricity.
The “sound financial footing” didn’t last long, and during the Liberals’ reign Ontario’s debt has increased from $132 billion to over $300 billion. Ontario has seen only one budget in the last decade that will seemingly balance and that was the most recent one.
McGuinty: We can’t guarantee price certainty –; that just isn’t realistic, given the nature of the challenges before us.
The Fair Hydro Act just passed by the Wynne government guarantees price certainty for four years for certain classes of ratepayers. This isn’t realistic: refinancing those assets may conflict with their ability to continue to generate electricity for an additional ten years. Amortization of fixed assets is based on the longevity of those assets, but the Wynne government has decreed that they can extend their life so that our children will be stuck with the replacement costs.
McGuinty: But I can assure you that we will do everything we can to ensure safe, clean, affordable electricity is always in full supply in the Province of Ontario.
When the OLP became the government, the average price of a kilowatt hour was 4.3 cents. By 2016 it averaged 11.2 cents — a 160% increase. The 25% reduction touted by Premier Wynne as the largest in Ontario’s history followed. The subsidy to cover that 25% will accumulate within the confines of OPG and at the end of increases held to “the rate of inflation for the next four years,” that subsidy will rise well above that benchmark in the years following that moratorium.
McGuinty: We won’t subsidize prices or cap prices –; that would mean more debt or higher deficits. Both of which would lead ultimately to higher taxes.
By deferring debt to subsidize hydro prices for four years within OPG’s balance sheet (guaranteed by the Province), the plan is to hide (temporarily) the impact from ratepayers while supposedly balancing the budget.
So, what happened to all those lofty promises of “affordable” electricity costs for consumers and business, that is immune to politics?
Was this what all those promises really meant?
“The true cost of the Liberal government’s hydro bungling will addtens ofbillions of dollars to the debt.”