Hydro One and “demonstrable consumer value”

Sorting out fact from fiction among Hydro One claims

The current media attention focusing on Hydro One and its executives is reminiscent of the not so distant past when Andre Marin was Ontario’s Ombudsman. In May 2015 an article in the Globe and Mail noted as a result of his report: “Hydro One issued faulty bills to more than 100,000 customers, lied to the government and regulators in a bid to cover up the problem, then spent $88.3-million in public funds to repair the damage.”

Hydro One installed Mayo Schmidt as CEO in 2015. Recent media reports have focused on why Mr. Schmidt was given a big raise ($1.7 million) to $6.2 million and how his termination (without cause) would cost $10.7 million. The current government signaled they were unaware of either the pay increases for the executives or the increased termination amount and the raises the Board of Directors gave themselves.

These issues were two of the items Hydro One’s Board of Directors had on the agenda for the Annual General Meeting (AGM) that required shareholder approval. As Andrew Willis of the Globe and Mail reported: “Shareholders voted 92 per cent in favour of Hydro One Ltd.’s executive compensation plan, which has faced intense scrutiny during the lead up to Ontario’s election campaign.” It appears that, of the shareholders who actually voted, only 8 per cent were against the increases.   But if the province had participated in the voting (they abstained) and used their 47 per cent shareholding, the motion could have been defeated with 55 per cent voting against it.

One wonders why they chose not to participate.

Christie Blatchford of the National Post was present at Hydro One’s AGM and took part in a short scrum after the AGM ended, with other reporters. The Chairman of the Board, David Denison, along with CEO. Mayo Schmidt represented Hydro One.  Blatchford’s article notes questioning from one aggressive reporter! Asked if he’d take a pay cut or resign, Schmidt said, “It isn’t about pay cuts.” The hellion reporter snapped, “Of course it is.” He then reminded the motley press that the company is committed to “building this high-performing champion,” that Hydro One has reduced costs by 31 per cent, and “turned the power back on for the desperate people.”

Now the only allusion Schmidt made to where those reduced costs came from at the AGM was reported by Andrew Willis who noted “management said the main drivers of earnings growth will come from consolidating local distribution companies in Ontario and cutting costs — the company got rid of 1,000 vehicles over the past year.”

While Schmidt (according to media coverage) was subdued and apolitical during the AGM, a couple of days later he lashed out as reported in the Globe and Mail’s Report on Business in an article by Tim Kiladze. Mr. Kiladze reported that “Schmidt is warning that threats from politicians in Ontario’s election campaign are weighing on the business and will have consequences.” Later in the article reporter Kiladze noted: “Speaking to Hydro One’s latest quarterly earnings, he noted that profit was up by 33 per cent from the year prior, and that Hydro One has added 400 jobs while delivering $114 million in cost savings since its IPO. “Those are remarkable statistics for a company that’s in transition,” Schmidt is reported to have said.

Despite Mr. Schmidt’s claim of improving profits and generating cost savings, the market has moved Hydro’s One’s stock price in the opposite direction. It reached a new low of $18.93 and closed the week at $19.10.   It appears investors are not impressed with either the quarterly earnings jump or the reported “cost savings.”

Examining the first Quarter report tells some of the story.

As CEO Schmidt noted, profit was up by 33 per cent or $55 million above the first quarter of 2017. It appears almost all of the increase was related to rate approvals for the transmission part of the business which increased $54 million due to rate increases approved by the regulator — the Ontario Energy Board (OEB). Electricity transmitted in the quarter was up by only one tenth of one per cent!

Go further into the quarterly report to Note 10, the possible reason for investor concern is significant and relates to the OEB’s Decision and Order in respect to the “transition from the payments in lieu of tax regime under the Electricity Act (Ontario) to tax payments under the federal and provincial tax regime”.

The following comes from that note: “On November 9, 2017, the OEB issued a Decision and Order that calculated the portion of the tax savings that should be shared with ratepayers. The OEB’s calculation 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 calculation for sharing in Hydro One Networks’ 2018-2022 distribution rates, for which a decision is currently outstanding, it would result in an additional impairment of up to approximately $370 million related to Hydro One Networks’ distribution deferred income tax regulatory asset.”

The conclusion from the OEB’s decision is that they were simply doing their job and honouring their first listed mission statement which reads: “Strengthening the focus on demonstrable consumer value during a period of sector evolution.”

The decision is being challenged by Hydro One’s executives and (presumably) their Board of Directors who are upset the $885 million may not wind up in shareholders pockets. As a result, in October 2017 the Company filed a Motion to Review and Vary (Motion) the Decision and filed an appeal with the Divisional Court of Ontario (Appeal). On December 19, 2017, the OEB granted a hearing of the merits of the Motion which was held on February 12, 2018.

In both cases, the Company’s position is that the OEB made errors of fact and law in its determination of allocation of the tax savings between the shareholders and ratepayers. To put the $885 million in context; it exceeds the annual after-tax profit of Hydro One for a full year!  The results of the OEB hearing will determine whether Hydro One proceed with the appeal to the Divisional Court of Ontario.

Perhaps Hydro One’s Board of Directors and senior executives don’t comprehend they operate a monopoly that is regulated for the express purpose of ensuring their focus is “on demonstrable consumer value during a period of sector evolution.”

As ratepayers, we should hope the OEB continues to place an emphasis on “demonstrable consumer value.” Ordinary ratepayers do not enjoy the benefits Hydro One’s executive have awarded themselves.

Parker Gallant

May 22, 2018

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Ontario’s complicated (and expensive) struggle with energy poverty

In a recent article on CBC Sudbury, Wendy Watson, Director of Communications for Greater Sudbury Utilities, was quoted as saying there are 590 customers in Sudbury who could face possible disconnection this spring, compared with just 60 when the ban against power disconnections started in November.

The Energy Minister responded saying, he hoped people having trouble paying their power bills will talk to their hydro utility and look at the numerous programs the government offers to help low-income citizens.

Coincidentally, a recent article in the Financial Post carried dire news: “The proportion of Ontarians living in low-income rose a scandalous 26 per cent from 2003 to 2016. No other province even comes close to performing that badly.” The article also noted “the latest Statistics Canada data show that in 2016, the percentage of Ontarians living in low-income exceeded the national average for the fifth straight year.”

Also in the CBC Sudbury article is an interesting comment from Ferio Pugilese, EVP Customer Care for Hydro One. CBC reported he said the company has worked hard to configure payment plans for customers over the last three years and find ways for them to pay “that fit their lifestyle.” Pugliese also told the CBC that disconnections and the amount owing from outstanding bills to Hydro One are down 60 per cent in the last year.

What Mr. Pugilese says sounds impressive — unless you look at a 29 page report the OEB (Ontario Energy Board) produced for the 2016 year (referenced in an earlier article about “energy poverty”).   The article didn’t specifically highlight Hydro One’s data but, needless to say, it stood out as the “winner” in most categories including: disconnections (up 407% from 2013 to 2016), number of customers in arrears at year-end (8.5% of all their customers or one household out of each 12 on a street), total dollar amounts of arrears (51.7% of all residential ratepayers but only 24.7% of all residential customers), number of arrears payment agreements (55.9% of all arrears payment agreements), total monies owing under arrears payment agreements (75.1% of all) etc., etc.

So, based on the horrendous results reported by Hydro One for 2016 in respect to customers arrears, the question is, how could they have possibly reduced their disconnections and the amounts owing by 60%?

Well, the answer is, Hydro One should send a big thank you to all taxpayers and future ratepayers as many of those arrears were picked up by via the Fair Hydro Plan and by several changes in the allocation of ratepayer costs to taxpayers.

Here are some that significantly benefited Hydro One!

The litany of band-aids                                                                                                                 

First look at an October 19, 2016 press release which states “The Ontario Rebate for Electricity Consumers Act, 2016 will reduce electricity costs by 8 per cent on the amount before tax, an average savings of about $130 annually or $11 each month, for about five million residential consumers, farms and small businesses.” On the “about five million” ratepayers, that $130 annual reduction represented about $650 million in foregone tax revenue and for Hydro One, it was a reduction of around $140 million they didn’t have to bill ratepayers for.

Now the second big benefit for Hydro One is found in another note in that press release: “Eligible rural electricity ratepayers will receive additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month.”

The ratepayers referenced were those under the RRRP (rural or remote rate protection program) which the Energy Minister in his May 11, 2017 press release (announcing the Fair Hydro Act) noted: “Enhance the Rural or Remote Rate Protection (RRRP) program to provide distribution charge relief to about 800,000 customers and shift costs from ratepayers to provincial revenues. This would include customers served by local distribution companies (LDCs) with the highest rates.” That translates to a cost of $670 million and for Hydro One, with over 300,000 of those customers, it represents taxpayer funding of $160 million annually.

The third benefit for Hydro One was the substantial (50%) increase in the OESP (Ontario Electricity Support Program) which will also be funded by taxpayers. When the plan was first launched, the estimate for annual costs was approximately $200 million, so the increase would drive that to $300 million. With Hydro One servicing 25% of Ontario’s five million ratepayers, they would again receive a minimum of $75 million from taxpayers.

Collectively, the above three benefits will result in taxpayer support for Hydro One of $375 million.

Reviewing Hydro One’s 2017 annual report discloses that 54% of “distribution revenue” came from residential ratepayers, which would amount to $2.36 billion. And, the cost of power (CoP) would represent $1.25 billion, meaning Hydro One’s net revenue from those customers was $1.11 billion. If one excludes the foregone sale tax of $140 million, it means Hydro One will annually receive subsidies from taxpayers of $235 million — that’s 19% of their net distribution revenue!

Due to the Green Energy Act, Ontario’s electricity ratepayers have subsidized renewable energy generation for years (principally wind and solar) and now, with the Fair Hydro Act, the government enlisted taxpayers to subsidize the local distribution companies, with Hydro One being the biggest beneficiary.

Knowing the intricacies as described, it is easy to understand why Hydro One’s EVP Mr. Pugilese can make the claim that disconnections and outstanding bills are down 60 per cent. Hydro One is being handed $235 million of taxpayer money, which must have gone a long way to reduce both the disconnections and amounts in arrears.

Parker Gallant

 

*At year-end 2016 Hydro One claimed they had disconnected 14,114 customers and at year end had 96,397 customer accounts in arrears that represented $69.7 million.

In writing these posts, I am an independent observer and commentator on Ontario’s energy sector.

Who is the real hypocrite in electricity sector?

Hydro One and a little distributor in Niagara On The Lake have different ways of doing business … and serving customers

Niagara On The Lake Hydro president Tim Curtis: honest effort for customers

February 20, 2018

It is interesting to compare a relatively small Ontario-based local electricity distribution company (LDC) against a much larger one such as Hydro One. If you do, you get some idea of what’s behind rate-paying electricity customers concerns.

Niagara-on-the-Lake Hydro (NOTL) had the gall recently to brazenly ask, Are we hypocrites?  They asked that question because they installed 70 kW of solar panels on the roof of their building and it will, at 15% generation capacity, produce revenue of about $21,400 annually.  Their news release made this bold statement:

“A reasonable question to ask is whether the Board of NOTL Energy can be considered hypocrites for accepting a FIT contract while they publicly called for the cancellation of the FIT and MicroFIT programs? 

“The short answer is, yes, we are hypocrites.”

Now, contrast NOTL’s honesty with Hydro One and their efforts to convince U.S. electricity regulators they are deserving of acquiring Avista. It’s a strange path Hydro One is taking. Hydro One CEO Mayo Schmidt recently traveled to Juneau, Alaska to plea for approval in respect to Avista’s ownership of Alaska Electric Light & Power Company.  Their appeal included a 444-page submission to the Regulatory Commission of Alaska, one of several required to convince regulators in four western states that the takeover of Avista would not negatively affect customers.

So it wasn’t a private island in the Caribbean Schmidt traveled to, but hopefully Ontario ratepayers won’t be picking up the tab for Schmidt et al in their efforts to win approval for Hydro One’s Avista takeover.

But we are paying: Hydro One’s December 31, 2017 Financial Statement was released February 13, 2018 and had an unusual “after tax” income claim of $36 million on page 34 referenced as: “Costs related to acquisition of Avista Corporation”.   Accounting rules allow Hydro One to claim expenditures related to Schmidt’s travel costs along with consultant and legal fees plus prep time for submissions made to the regulators in the states where Avista operates. As a result, Hydro One reported “Adjusted Net Income” of $694 million versus $721 million in 2016. Putting aside the $36 million, net income was actually down $63 million, or 8.7%.

Also, as a result of the dividend increase announced in May 2017 (quarterly at 22 cents per share), the payout of the 4th Quarter net income of $155 million (net of the above Avista expenditures of $36 million) resulted in a payout ratio of 89% (in excess of the maximum of 80% announced) of quarterly income — that doesn’t leave much for the oft-touted reinvestment in infrastructure.

Also evident in the Financial Statement is the fact the Ontario Provincial Government received $150 million less by way of dividend payments in 2017 compared to 2016. That $150 million could have covered interest payments on over $4 billion of the provincial debt!

An interesting feature in Hydro One’s annual report is the first 15 pages are devoted to telling the reader how wonderful the company is and how much progress has been achieved. For example is the claim of customer satisfaction climbing to 71%. It is probably fair to assume this “climb” occurred after the launch of the “Fair Hydro Plan” which kicked up to 31% of “electricity costs” down the road, but promised electricity customers a 25% chop off their bills right now.   As a de facto monopoly, perhaps 71% customer satisfaction is somehow good? Forgotten in the bragging process is the fact Hydro One are spending $15 million to give their customers prettier bills containing less information. The $15 million spend is included in one of several outstanding rate application increases filed with the Ontario Energy Board.

So brave little Niagara On the Lake Hydro will increase spending and increase revenues (slightly) meaning less pressure on increased delivery rates, but Hydro One spends on frills that will increase pressure on their clients’ delivery rates.

I will let the reader decide which of the two local distribution companies is the true hypocrite.

 

Hydro One’s new electricity bills: so pretty, so empty

The Ontario government was recently questioned about advertising in electricity bills and got this response from the Energy Minister: “Hydro One has a pilot project under way in which they’re doing a new bill redesign, helping customers right across the province who are Hydro One customers understand their bills and some of the complexity of the bills. Knowing that they’re getting a 25% reduction on their bills is important.”

The Minister’s added, “It is important that all rate-payers in the province know what is on their bills”. 

The “pilot project” referred to by the Minister was the $15-million spend by Hydro One to design their new bill. This has recently received a lot of media attention with an emphasis on how Hydro One used “behavioural science”* in its design. The government has previously said it uses behavioural science research to “improve services and outcomes.” (See it here)

I’ve already noted the planned spending of $15 million by Hydro One last December in an article: “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.”

The media reported that so far, Hydro One has spent $9 million reinventing their bill and are fully intent on spending the balance of $6 million. So the question is, do the changes add value, make our bills more easily understandable and tell us where all the money is being spent?

If you are curious as to what the new bills look like, Hydro One posted a sample bill (two pages) on their website. Compare your old bill to the new one — developed with the assistance of “behavioural science” — you will immediately notice it is much more colourful!   But finding new or meaningful information is virtually impossible unless you think the box on the right hand side of page one telling you how much Ontario’s Fair Hydro Plan saved you is important, even though it is already shown and highlighted on existing bills.

What’s not there? Plenty: the new bills don’t disclose your “service type” which has a significant bearing on what you pay for “delivery” costs, nor do they tell you your average daily consumption over the previous five months.  They don’t disclose the cost of subsidization of Class A ratepayers, how much it cost for curtailed wind or spilled hydro, or how much it cost to sell our surplus energy to our neighbours in New York, Michigan and Quebec, etc.  New understanding of the bills’ “complexity” as suggested by the government is sadly lacking.

Essentially what the new electricity bills demonstrate is “bad behaviour” on the part of Hydro One and the government by spending $15 million for colourful bills!

Parker Gallant

January 17, 2018

 

* “behavioural science” is defined by Merriam Webster as “A science that deals with human action and seeks to generalize about human behaviour in society”

 

New info: energy poverty still deep in Ontario

It apparently took the Ontario Energy Board (OEB) a long time to put together the report on the low-income energy assistance program (LEAP) as the 2016 report was not posted until January 11, 2018.

(It was late:  OEB reporting regulations state “A distributor shall provide in the form and manner required by the Board, annually, by April 30, the following information related to the provision of LEAP emergency financial assistance in the preceding calendar year.”)

Actually, I looked for the reports for both the LEAP program and the OESP (Ontario Electricity Support Program) back in mid-December 2017, and still have not received a response.  Busy times at the OEB? Or is the release of the OESP report being delayed for some reason?

The LEAP report is just what we have come to expect. The leader by a wide margin in terms of the program, was Hydro One, which represented 52.4% of all recipients, despite only having about 25% of all residential ratepayers as clients. The dollar values from Hydro One also represented 57.4% of total available funds and 60.7% of total grants disbursed.   Hydro One’s budget was only $1,845,000 (41% of the CEO’s annual remuneration), but it had to be supplemented via donations of $2,250,000 from numerous corporate donors and social agencies.

Thirty-nine (39) LDC depleted their funds in 2016 and 12 more had less than the average grant amount available at year-end. Almost half of the LDC had run out of funds by the time summer arrived in June 2016.

Funds disbursed under the LEAP and Winter Warmth programs compared to 2015 increased in 2016 by $1,318,700 to $7,776,600 (up 20%) despite the fact the OESP (Ontario Electricity Support Program) started January 1, 2016 and offered significant relief to hundreds of thousands of low-income Ontarians. The OESP was estimated by the OEB to cost other ratepayers as much as $200 million annually.

It certainly appears “energy poverty” continues to increase in the province despite the recent claim by the Minister of Economic Development and Growth that “Ontario has now created more than 800,000 net new jobs since the depths of the recession.”

The assumption must be, those 800,000 jobs are all at the low end of the pay scale — otherwise there would have been no need to kick $25 billion (plus the interest [$15 billion]on the borrowed funds) of ratepayer bills down the road for future generation to pay.

Parker Gallant

 

 

Abracadabra! Now you see it, now you don’t on Hydro bills

No, wait: you’re never going to see it

[Getty images]
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:

  1. Cap and Trade costs—they are not allowed to appear on either our electricity or natural gas bills
  2. 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.
  3. Costs for curtailed wind generation of over $400 million annually.
  4. Costs for spilled hydro of 4.5 TWh (terawatt hours) at a cost of about $200 million annually.
  5. Costs for various conservation programs estimated at $400 million annually.
  6. Costs for line losses of 5/6 TWh annually representing a cost of at least $500 million.
  7. Costs for steaming off Bruce Nuclear—annual costs unknown but believed to be $50/100 million annually.
  8. 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.
  9. Costs absorbed for exporting surplus generation annually in excess of $1 billion.
  10. Costs associated with the Class A to Class B transfer estimated to be around $1 billion annually.
  11. 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.

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.