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.

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