Ontario Energy Board news release: cherry-picked facts and conflicting information

Glaring omissions from the OEB about the “Fair Hydro Plan”

Hydro One’s “low-density” customers pay more —way more

 The June 22, 2017 news release from the Ontario Energy Board tells Ontario ratepayers about the wonders of the “Fair Hydro Plan” and how much rates would have increased without it.

But other related information on the OEB website discloses cherry-picked data and, on examination, reveals shortcomings. One small example is a chart comparing Ontario residential rates with other cities in Canada and the U.S. San Francisco is at the top; Hydro One low-density in fourth place; and Toronto Hydro is in sixth place. The lowest five cities on the chart are all Canadian cities including Montreal; comparing their cost of electricity shows Hydro One’s (low density) costs are 232% higher!

The average monthly cost for U.S. cities are converted into Canadian dollars at $1.3046, pushing them up the scale to create the impression that Ontario’s electricity rates are competitive. What isn’t disclosed is average household income and what percentage of the income is consumed by electricity bill(s) on a comparative basis.  In San Francisco, 1.3% of household income (US$104,879) goes to pay for the comparable “average” electricity bill, whereas in Toronto (household income $75,270) it consumes over 2% of household income.  Household incomes in rural Ontario are lower (20% or more) than large urban centres such as Toronto, etc., as Statscan noted in an extensive report.  Hydro One’s billings in some cases, for their serviced areas, represents 5 to 10% of pre-tax household income.

The news release said if the Fair Hydro Plan hadn’t kicked in, rates per household were scheduled to increase 3.2% May 1st or about $33 annually for the “average” residential ratepayer.  That would have increased total costs of power (COP) by almost $200 million over 12 months for just residential ratepayers, and another $3/400 million (estimated) for the rest of the Class A and Class B ratepayers.  That money will now be part of the 30 year refinancing flowing from the “Fair Hydro Plan.”  Many of those “refinanced” assets will have reached their best before date so ratepayers will be paying for assets with little or no value requiring replacement.

Instead of the rate increase that would have occurred, the average household will see a monthly reduction of almost $22 ($263 a year) commencing July 1, 2017. The foregoing monthly decrease reflects the reduction in time-of-use (TOU) rates taking effect on that date based on the OEB’s standards of usage calculations.  The decrease includes prior announcements moving the OESP (Ontario Electricity Support Program) and the RRRP (Rural or Remote Rate Protection) allocation to the provincial treasury, instead of on the backs of ratepayers.  This was contained in the directive given to the OEB by Energy Minister Glenn Thibeault April 10, 2017.  The latter (OESP + RRRP) are estimated (by the writer) to have cost ratepayers about $5/600 million in 2016, and will increase as the OESP and the RRRP have both been expanded.  Those costs will become the responsibility of Ontario’s taxpayers.  Taxpayers will also bear the burden of the foregone revenue previously generated from the 8% provincial portion of the HST on electricity bills, removed as of January 1, 2017 the same time as “cap and trade” charges began.

More conflicting information in the OEB news release was the sentence: “With the new RPP prices that will start to apply on July 1, the total bill for the proxy customer described under the Fair Hydro Act, 2017 will be about $121. That is about $41 or 25% lower than it would have been without the following mitigation*”  That suggests the “proxy customer” was paying $162 per month, yet the “chart” referenced in the second paragraph contains what is shown as a “Median Ontario Utility (OEB regulated)” with a monthly bill (as of November 2016) of $130.46.  The OEB does not clarify what a “proxy customer” is and the “Fair Hydro Act 2017” contains no reference to a “proxy customer”!

With all this conflicting information from the OEB, it is hard to understand how they are fulfilling item number three in their “Mission” statement which reads: “Making the consumer’s own usage, and the broader energy issues, easier to understand”.

If the OEB was attempting to add clarity to the messages from Premier Wynne and the Minister of Energy, Glenn Thibeault about the Fair Hydro Plan, they have failed!

Parker Gallant

* “Mitigation” includes the OESP, RRRP, removal of the 8% provincial portion of the HST and the “refinancing of a portion of the costs of the Global Adjustment”

Letter to Energy Minister Thibeault on rate increase application

 To: The Honourable Glenn Thibeault, Minister of Energy, Ontario

EB-2017-0049  Hydro One Rate Increase application

My views/thoughts and “What the OEB needs to consider”

  1. The OEB must consider the fact Hydro One has publicly declared1(a) their intent to pay 70% to 80% of their net income after taxes as dividends to shareholders.  No other publicly owned LDC pays out at that level.   Toronto Hydro has recently informed the City of Toronto they will reduce their dividend.(b)  It should be a point of the review by the OEB to limit the payout dividend rate by Hydro One to no more than the average of all of the other LDC dividend payout rates as the higher payout rate increases borrowing needs and resulting interest payments thereby increasing the need for the raising of distribution rates!
  2. The OEB is currently in the process of endeavouring to have the distribution rates become more of a “fixed” cost moving away from variable rates currently embedded within the rate application system. Hydro One’s application ventures away from that path even though they cite the move to fixed rates on their website!(a)  The OEB needs to re-establish their regulatory purpose.
  3. A review of the Yearbook of Distributors(a) filings on the OEB website comparing Hydro One’s filings for 2014 with 2015 (2016 filings not posted yet) indicates OMA costs fell by $103 million from 2014 to 2015 while depreciation increased by $14 million. One would suspect the reported drop in OMA costs would have caused a drop in Hydro One’s distribution costs but no reduction was forthcoming.  One must assume the increased depreciation was due to the OEB approving the completion of capital spending moving previously approved spending within a variance account to current rate recovery status.  Presumably due to the drop in OMA costs; Hydro One reported an after-tax profit in their distribution business of $257.3 million an increase of $68,1 million in fiscal 2015.
  4. We would note either Hydro One has been effective at getting ratepayers to conserve OR their out of line distribution rates have driven ratepaying households into “energy poverty”. The foregoing is evident in comparing the year ended December 31, 2015 with the comparable year ended December 31, 2016.  Distribution volumes fell 8.6% whereas Transmission volumes increased 1.7% signaling distribution rates are out of line with other LDC!  A further 1.1% reduction in distributed electricity is evident in reviewing the 1st Quarter of 2017 as compared to the 1st Quarter of 2016! NB:
  5. We would note that asset classifications of: “Goodwill” and “Intangible Assets” now cumulatively represent $676 million having increased from $400 million in 2012.  Those assets now represent 6.7% of Hydro One’s equity base and in line with the OEB’s annual setting of the ROE allowed by the LDC has the effect of inflation of Hydro One’s rate increases.  It is time to discount the $676 million when considering the current application.  Hydro One has inflated the goodwill (in particular) by enticing local councils to sell their LDC to Hydro One at prices that exceed normal acquisition activities in the private market.  That in turn impacts not only the ratepayers of the acquired LDC but also (via the inclusion of the goodwill) impact all other Hydro One ratepayers.
  6. Of note in respect to the OEB’s responsibility is the January 14, 2016 “Review of the Cost of Capital for Ontario’s Regulated Utilities”(a) wherein we find the following under the heading “Electricity Distributors” and labeled # 4) under “The differences between the OEB approved and the actual results can be attributed to the following:”: is the following: “4) The utility’s ability to manage its costs leading to under or over spending, and demand pressures! Ontario’s ratepayers should rightly expect the OEB to not only “attribute” differences between “approved and the actual results” for the foregoing reason but to also bear that in mind on a comparative basis with all LDC ensuring that “over spending” is not granted the freedom given to Hydro One in the past and in the future!  Costs for the same relative activities should be similar for all LDC!

 Parker Gallant

NB:  What that suggests is having the highest distribution rates during a time when the grid has a large surplus of electricity has two negative effects on ratepayers.  The first is that reducing consumption will have a detrimental impact on the HOEP driving it down further particularly during the shoulder seasons when demand is low and secondly the reduced revenue to Hydro One will cause them to apply for rate increases associated with the revenue drop thereby increasing distribution rates.  It is a downward spiral for ratepayers!  We would also point out that while Hydro One experienced an 8.6% drop in consumption the IESO report that consumption from 2015 to 2016 remained flat at 137 TWh.

 

 

1.(a) https://www.theglobeandmail.com/globe-investor/investment-ideas/research-reports/hydro-one-will-be-a-dividend-stock-worth-considering/article26829880/

(b) https://ca.news.yahoo.com/toronto-hydro-cuts-citys-dividend-172637812.html

2.(a) http://www.hydroone.com/Norfolk/Pages/MovingtoFixedDistributionRates.aspx

3.(a) https://www.oeb.ca/utility-performance-and-monitoring/natural-gas-and-electricity-utility-yearbooks

6.(a)https://www.oeb.ca/oeb/_Documents/EB-2009-0084/OEB_Staff_Report_CostofCapital_Review_20160114.pdf

Wind power lobby myth buster is busted

The opening sentence in a recent post on the Canadian Wind Energy Association’s (CanWEA) website states:  “Various pundits assert that the major reason for higher electricity bills in Ontario is the addition of renewable energy to the province’s electricity mix. This is a myth.”

The post was created by Brandy Giannetta, Ontario Regional Director of CanWEA. Ms. Giannetta holds a Master of Arts and Public Policy degree and was recently appointed to the Independent Electricity System Operator’s (IESO) Strategic Advisory Committee (SAC).  The Committee, says IESO, “gives senior stakeholder and community representatives the opportunity to provide policy-level advice and recommendations directly to the IESO Board of Directors and Executive on matters relating to the IESO’s mandate and other matters that may be of concern to stakeholders and the general public.”

I have trouble believing a representative of wind industry trade association CanWEA will represent the concerns of the general public.

Ms. Giannetta’s post on CanWEA’s website on April 24, 2017 underlines my worries.

Her article points to two articles that purportedly support the “myth” she is “busting,” but both require closer examination.   She cites Waterloo professor Natin Nathwani’s, (PhD in chemical engineering and a 2016 “Sunshine list” salary of $184,550) article of March 6, 2017, posted on the TVO website, which supports Premier Wynne’s dubious claims of “a massive investment, on the order of $50 billion, for the renewal of Ontario’s aging electricity infrastructure.”  Professor Nathwani offers no breakdown of the investment which suggests he simply took Premier Wynne’s assertion from her “Fair Hydro Plan” statement as a fact!  It would be easy to tear apart Professor Nathwani’s math calculations — for example, “The total electricity bill for Ontario consumers has increased at 3.2 per cent per year on average” — but anyone reading that blatant claim knows his math is flawed!

The second “study” cited is by Keith Brooks, Program Director at Environmental Defence (Masters degree in Environmental Studies from York) in which he claims “the average Ontario household pays about $11 per month for wind power, and $9 for solar power.”  Collectively it amounts to an annual cost of $240 for the “average Ontario household”.  Mr. Brooks and Ms. Giannetta apparently believe that, by providing a figure representing a small monthly amount, we will all buy into CanWEA’s spin that wind and solar are competitive with other generation sources.

In fact, Ms. Giannetta chose to ignore other more factual information that is readily available on other websites, including the Ontario Energy Board’s (OEB) semi-annual Regulated Price Plan, Price Report.  The following is a chart from the Price Report (May 1, 2017 to April 30, 2018) the OEB uses in setting TOU prices on a go-forward basis for the ensuing six months.  Note the chart provides a breakdown by percentage of generation supply and of the Global Adjustment (GA) and a per kWh cost of the specific generation:

Table 2: Total Electricity Supply Cost

  % of Total Supply % of Total GA Total unit cost (cents/kWh)
Nuclear 60% 40 6.9
Hydro 24% 12 5.8
Gas 6% 15 20.5
Wind 8% 18 17.3
Solar 2% 14 48.0
Bio Energy 0% 0 13.1

Source: Navigant NB: Hydro excludes NUGs and OPG non-prescribed generation. Gas includes Lennox, NUGs and OPG bioenergy facilities. Percentage (%) of Total GA excludes CDM costs.

Based on information in the OEB chart, it is relatively easy to calculate the individual generation supply costs* to the Global Adjustment or GA. The IESO provide the specific detail on the GA and for 2016 it totals $12.333 billion.  As noted, the chart indicates wind is forecast to represent 18% of the GA so the cost of wind should be around $2.220 billion, solar (14%) around $1.6 billion and gas (15%) $1.850 billion.

The OEB forecast is that wind and solar, (granted “base-load” status via their contacts) will cost ratepayers $3.820 billion over the next 12 months representing 32% of total GA costs, but will only deliver 10% of the power generation — often when it’s not needed!

To ensure wind and solar generation is backed up, gas plants (classified as “peaking plants”) stand at the ready and are estimated to impact the GA by $1.850 billion (15%) for a forecast 6 % of generation.

Collectively, wind solar and gas generation over the next 12 months are forecast to provide a meager 16% of total generation but will represent a cost of $5.670 billion of the Global Adjustment or 47% of total GA costs.

Most would agree $5.7 billion in annual costs is more than a “myth” and could have gone a long way in providing social, health, education and transit services for the people in Ontario, rather than creating wealth for wind and solar developers!

….

*In the prior year’s forecast wind was estimated to generate 8% of supply, solar 2% and gas 9% and represent 44% of the GA costs. Also note the IESO GA reports are on a calendar year (Jan. 1st to Dec. 31st) basis.

Where did the $50 billion go, Premier Wynne?

He said, she said: we say, where did the money GO? [Photo: Toronto Star]
Last September 13, Minister of Energy Glenn Thibeault issued a press release announcing the  Ontario Liberal government would reduce electricity bills for five million families, farms and small businesses.  The relief granted was equivalent to the 8% provincial portion of the HST. The press release also claimed Ontario had “invested more than $35 billion” in new and refurbished generation.

Fast forward to March 2, 2017 and that $35 billion jumped to $50 billion in a press conference the Premier jointly held with Minister Thibeault. An increase of $15 billion in six months!

The press conference was to inform us the 8% relief announced by Minister Thibeault would be added to, with a further 17% reduction. A Toronto Star op-ed Premier Wynne wrote March 7, 2017 reaffirmed the $50 billion investment claim made the previous week, and further claimed: “By delivering the biggest rate cut in Ontario’s history and holding rate increases to inflation for at least four years, this plan provides an overdue solution.”

That made history alright, but not the way she meant. What the Premier forgot to say was that her government had brought us the biggest rate increases in Ontario’s history.  In March 2011 the Ontario Energy Board (OEB) website shows the average electricity rate was 6.84 cents per kilowatt hour (kWh) and on May 1, 2016 it had increased to 11.1cents/kWh.  In just over five years, the price of the commodity — electricity — increased 62%, a multiple of the inflation rate during that five years, which added about $400 to the average consumer bill.

Electricity price goes down, your bills go UP

From 2010 to 2015 Ontario demand fell by 5 TWh (terawatt hours) to 137 TWh.* That is enough to provide electricity to 550,000 “average” Ontario households for a year, yet the price for residential consumers increased 62%.   The increase was not driven by the trading value via the hourly Ontario electricity price (HOEP) market.  In fact, the market treated Ontario generated electricity badly as it fell from an average of 3.79 cents/kWh in 2010 to 1.66 cents/kWh in value for 2016 —  a 56.2% drop.

As to how they were achieving this “relief,” Wynne and Thibeault told us they were pushing the payback period for the 20-year contracts (wind and solar) out another 10 years. Those generation sources are the principal cause of the increase in electricity prices.  (For further proof of that, read  Scott Luft’s recent analysis on the costs of “other” generation in 2016 which confirms its effect on our rising electricity rates.)

Where did the money go?

What the Wynne/Thibeault announcement means is, ratepayers will pay for the intermittent and unreliable power for their 20-year contracted term(s), and continue to pay for the same contracts which, by that time use equipment that will be heading for, or already in the scrap yard.

It is time for Minister Thibeault to disclose what is behind his claim of $35 billion invested and for Premier Wynne to disclose the details of the $50 billion she says went to “necessary renovations” to rebuild “the system.”

Time to come clean.

* Ontario consumption remained at 137 TWh in 2016.

Hydro One: can it deliver on its dividend promise?

The headline on the Hydro One February 10 press release was:  “Hydro One Reports Positive Fourth Quarter Revenue and Operating Cost Trends.” Annual “revenues, net of purchased power” came in at $3,125 million, an increase of $37 million (.4%) over 2015, while Net Income rose from $714 million to $746 million, and “adjusted” earnings per share increased to $1.21/share up from $1.16/share.

If you believe the reporting by Hydro One, you are led to believe a small increase in revenue translated to an almost identical increase in after-tax income.

A closer look is necessary to determine how that happened. As it turns out, transmission revenue was up $48 million and distribution revenue was down $11 million, accounting for the revenue increase. Regulatory assets1. climbed $130 million while operations, maintenance and administration (OMA) apparently fell by $66 million. It is not clear how many millions of OMA expenses were placed into “regulatory assets,” but we should assume a portion of salaries, pensions and benefits were.

As a result, it is impossible to determine whether Hydro One has become more or less efficient, despite this claim in the press release: “Our fourth quarter results demonstrate favourable revenue growth and operating cost control.” We can quickly see “favourable revenue growth” was small potatoes!

There are ways of using information in that press release and annual report to allow for calculations. One area that affects ratepayers is “delivery” costs which is reflected in Hydro One’s “distribution” business line. The annual report indicates the amount of electricity distributed to their 1.3 million residential and business customers fell 8.6% from 28,763 gigawatts (GWh) to 26,289 GWh while distribution revenue fell by $11 million from $1,499 million to $1,488 million. Using simple division one is able to calculate the cost of distribution per megawatt (MWh) increased from $52.05/MWh to $56.60/MWh for an increase of 8.7% or $4.55/MWh.

Everyone pays

Not all of that increase was paid for by Hydro One customers, however, as Hydro One receives revenue from all of Ontario’s ratepayers via the OESP (Ontario Electricity Support Program) which presumably resulted in the year over year drop (at a minimum) of $26 million in Hydro One’s “Allowance for doubtful accounts” from $61 million to $35 million. As well, all Ontario ratepayers pick up the costs of the RRRPP (rural and remote rate protection plan) which was $125.4 million for Hydro One in 2016 and will increase in 2017 to $243.4 million. Adjusting the distribution revenue to reflect contributions to Hydro One by all Ontario ratepayers would reduce their distribution costs to about $54/MWh (5.4 cents/kWh) and bring it almost in line with the claim by Hydro One their distribution/delivery costs represent about 37% of their customer’s electricity bills before HST. If one does the calculation on the OEB’s website however the actual cost of the “delivery” line for a “medium density” Hydro One ratepayer is 43%!

Another asset that showed a big jump on Hydro One’s balance sheet in 2016 was “goodwill” which more than doubled to $327 million, despite their having recovered $60 million in goodwill from the provincial acquisition of Hydro One Brampton before Hydro One went public. This also occurred just before the arranged merger of Hydro One Brampton with PowerStream, Horizon and Enersource. Hydro One has been snapping up some of the small local distribution companies (LDC) such as Norfolk Power, Woodstock Hydro, Haldimand for the past few years and recently applied to the OEB for acquisition of Orillia Power. Hydro One also just completed acquisition of Great Lakes Transmission improving the monopolistic control they hold in this business line to over 98%.   The LDC acquisitions were made well above book value and many of them had their delivery rates frozen for five years.

With Hydro One’s success at being the second most expensive hydro distributor we should expect the ratepayers in the locales of the acquired LDC will see their future delivery rates jump significantly.

On the liability side of Hydro One’s ledger, 2016 saw the acquisition of about $1.7 billion of increased and mainly long-term debt yet, their negative working capital position only improved $716 million. The additional debt raised during the year caused their Debt/Equity ratio to rise from 1.45:1 at the end of 2015 to 1.52:1 at the end of 2016 and brought with it increased interest costs. A rising D:E ratio often precedes a credit rating drop!

Dividend promise impossible, unless …

All this points to a company whose future is dependent on the OEB granting their every wish to increase delivery/distribution rates. If not, the promise to dividend out 70/80% of their annual net profits becomes impossible unless they either: forgo proper maintenance of the infrastructure, or reduce OMA costs via either staff reductions or salary cuts, or sell off assets!

Dividends paid in 2016 on the 5,623,000 common shares were $577 million representing 80% of net income attributable to common shares with just over $400 million going to the provincial treasury leaving about $150 million2. in retained earnings for future investments in infrastructure repairs and refurbishment and the building and/or improvement to the transmission grid(s) and LDC infrastructure.

Something’s got to give, or future increases to Hydro One’s ratepayers will be even worse than the past!

 

  1. Regulatory assets “represent certain amounts receivable from future customers and costs that have been deferred for accounting purposes because it is probable that they will be recovered in future rates.”
  2. Capital spending in 2016 was reported as $1.6 billion.  

Energy ministry dodges questions on hydro bill relief

The government has promised to get the electricity bills down…but at what cost? Where is the money coming from? The answer is simple: taxpayers and ratepayers are picking up the costs.

Ontario Energy Minister Thibeault: not forthcoming with the facts on electricity bill "relief"
Ontario Energy Minister Thibeault: not forthcoming with the facts on electricity bill “relief”

Last fall, Energy Minister Glenn Thibeault announced that the 8% provincial portion of the HST would be rebated to “residential, small business and farms as of January 1, 2017”.

The Energy Minister’s press release went further stating the government would be “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”.

That was somewhat ambiguous in several areas so I looked for clarification from the Ministry.

After several phone calls and e-mails with messages left for the Ministry’s media spokespeople, and even a phone call to the Minister’s office, I received no response other than to confirm (via e-mail): I had “reached out to us [the ministry media contact] in regard to one of our September press releases”.

So, with no actual clarification, here’s what I get from the press releases, a mail insert from Hydro One, and a search on the Ontario Energy Board’s “bill calculator”.*

What is the real hydro bill relief? 

Energy Minister Thibeault’s September 13th press release suggested an average savings of $130 per year for the rebate, and also announced “eligible” rural ratepayers would see “additional relief” amounting to $540 a year.  My query to the Ministry asked, what were the requirements for “eligible” rural ratepayers, and how many were there?  I also asked what the estimated overall cost of the 8% rebate would be for the province, and where the money was coming from to cover the lost revenue.   Those questions remain unanswered by the government, so here are my estimates in respect to the anticipated costs of the 8% relief.

►Out of one pocket into the other

The Ontario Energy Board’s 2015 Yearbook of Electricity Distributors indicates Ontario had 4,564,835 Residential Customers and 434,999 General Service (50kW) Customers, 54,295 General Service (50-4999kW) Customer and 124 Large User (5000kW+).   The “General Service” customers consist of farms and the small and medium sized businesses.

Gross revenue for the year including delivery costs was reported as $17,526 million, so rebating 8% would represent approximately $1.4 billion.

About $600 million would be earmarked for “Residential” Customers. Based on the specific information received from Hydro One, whose media team were responsive to my questions, the only group listed but not on the “rebate” list is the 124 Large Users who would consume (estimated) 5.2 terawatts (TWh) of the 124.6 TWh reported as “supplied” in the OEB report. Again, based on an estimate, the value of that 5.2 TWh would be approximately $735 million of gross revenues (including delivery) and reduce the rebate of the provincial portion of the HST by only $60 million to $1.340 billion.  It is assumed the difference of $740 million would represent the rebate to the small businesses and farms.

The full $1.340 billion cost will be picked up by the Ontario taxpayers!

►Out of ratepayer’s pockets into ratepayer’s pockets

That same press release also said, “Providing eligible rural ratepayers with additional relief … by an average of $540 a year”.  The Hydro One application filed with the OEB notes the total additional amount required under the RRRP (Rural or Remote Electricity Rate Protection Program) is $116.4 million (rounded) for 334,500 (rounded) Hydro One “low-density” customers. That works out to $29.19 per customer each month and annually to $350.28, not the additional $540.00 Minister Thibeault claimed in the press release.  Even if you add the 8% PST rebate to the rural ratepayer relief it comes to $500.40  in total so is below the $540 claimed by Minister Thibeault.

The $116.4 million cost of the “additional relief” via the RRRP will be a part of the “regulatory” line on all ratepayers’ bills, increasing that cost.  All ratepayers share in the payment of the RRRP which with this increase now totals approximately $280 million.

►Northern spin

Thibeault’s quote at the end of the press release said “Many rural and northern customers would receive significant rate relief”.  Yet there is nothing additional proposed in this press release for “northern customers.”  The rate relief for them appears to be the same as the rest of the province, except for those who are “low-density” Hydro One customers.

►Total spin

The spin of the press release is captured in the first sentence: “Ontario is taking action to reduce electricity costs and intends to introduce legislation that, if passed, would rebate the provincial portion of the HST from the electricity bills”.

Very nice sentiment, except we know that funding to “reduce electricity costs” is from taxpayers who will pick up the costs of the 8% rebate and ratepayers who will pick up the costs of the “eligible rural ratepayers” reduction.

Almost $1.5 billion shifted to make government look good

The almost $1.5 billion was not obtained from a reduction in spending or by instructing the OEB to reduce the return on capital of the power generators or the local distribution companies—it’s coming from the pockets of taxpayers and ratepayers. The “action” being taken does nothing to defer future rate increases by canceling wind and solar contracts or by taxing them — it simply passes the costs to those who have been affected by the steady and unrelenting rise in the cost of electricity.  To claim, as the press release does, that “consumers will be positively impacted” is pure spin!

Had the Wynne government been brave they would have reduced the TOU rates on the first 750 kWh of consumption by a significant amount. As it is those residential ratepayers who have been most impacted by the price climbs will not reap the monetary benefits of residential ratepayers who use more energy — 8% of a $150 monthly bill is $11 versus $24 for a $300 monthly bill.

This cost shift of almost $1.5 billion looks amazingly like another “mistake” by Premier Wynne.

 ————————

* The OEB “Bill calculator” fails to note any reduction in the “delivery” line for Hydro One’s “low-density” ratepayers but does highlight the 8% reduction in the HST.

 

Question for Minister Thibeault: how does buying power we don’t need save us $70 million?

OPEN LETTER to Minister of Energy Glenn Thibeault 

December 16, 2016

Dear Minister Thibeault:

As a concerned citizen of our wonderful province I do my best to stay up on current events.   In that regard I recently noted Ontario Premier Wynne and Quebec Premier Couillard attended the official signing of “the historic electricity trade agreement between Hydro-Québec and the Independent Electricity System Operator of Ontario (IESO).”

It appears you also attended the signing and had a quote recorded on the press release: “By importing 2 terawatt hours of clean electricity, enough to power the City of Kitchener for a year, Ontario will reduce carbon emissions and system costs by $70 million.”

I read that and wondered how importing 2 TWh of electricity from Hydro-Québec would save “system” costs by $70 million? It just didn’t ring true based on the math I was taught and have used throughout my lifetime. I pondered your comment for a while and then I wondered if statements of that standard are simply inherited with the portfolio.

Thinking back I recalled several which left me and many others scratching their heads. What if I give you a simple test by asking if you know which energy minister uttered the following. The answers can be found on page 2 but don’t peek until you have at least guessed.

Here they are in no particular order. From Energy ministers:

  1. “Conservation is the cleanest and least costly energy resource, and offers consumers a means to reduce their electricity bills.”
  2. “I think most in the industry would expect that the rates will likely go down, but we’re confident we’ll do that in a way that maintains confidence in the investment climate in Ontario”
  3. The same energy minister in 2. above also said: “When you put in the new meter you find out the previous meter wasn’t billing and working properly. So the new meter is bringing bills up to date and is more accurate.”
  4. We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years.”
  5. “if you change your behaviour, if you use less carbon emitting products you are actually going to see your bill reduced”

Now, reverting to your December 15, 2016 quote I hope you were aware that in 2015 Ontario exported 22.6 TWh of electricity to our neighbours because it was surplus to our needs!  According to the IESO (a signatory to the above agreement) and an earlier release from your ministry we have a “robust supply” of electricity that will last us for a decade.  I checked out current IESO data and determined that, up to the end of October 31, 2016, Ontario has exported 18.33 TWh of surplus electricity.  The average “sale price” of those 18.33 TWh was $16.04 million per TWh but it cost ratepayers $112.26 million per TWh according to IESO.

In simple math terms we were billed $2,057.7 million for the 18.33 TWh and sold it for $294 million — meaning it cost ratepayers $1,763.7 million or about $360.00 per ratepayer …  and we still have two months left in the year to account for.

Importing two (2) more TWh will simply add to our surplus generation meaning we will either have to export it at a big loss or; curtail wind, spill hydro or steam-off Bruce Nuclear. What we are looking at here is similar to “Dutch Disease” but in reverse.

I hope you understand the math better than your predecessor(s) and you are able to provide me, and many others with a plausible explanation as to exactly how importing 2 more TWh from Hydro Quebec will save $70 million in system costs?   Were you aware that in the past five years (2011-2015) Ontario has imported 18.9 TWh (per IESO) from Quebec or an average of 3.78 TWh annually.  That begs the question—what is so special about the additional 2 TWh we will be importing in the future?

OK, now is the time to let you know which Minister of Energy was behind the quotes on the first page.

  1. The first one was a Minister Bob Chiarelli quote from his “Conservation first” Long-Term Energy Plan in 2013.
  2. This was a Minister Brad Duguid quote from Reuters November 24, 2010 when he was telling them the rates for “green power” were going to go down.
  3. This one was a Brad Duguid quote from the Toronto Star November 16, 2010 when he was attempting to explain why electricity rates went up again.
  4. This particular quote was from George Smitherman when he sat in the Energy Minister’s chair and was ushering in the Green Energy and Green Economy Act.   He said this to the committee hearings members about the GEA.
  5. I assume you guessed this one as it was you on December 9, 2016 as you were interviewed on Global TV and asked a question about how the “cap and trade” bill would affect heating bills. From my perspective your response was perhaps rushed or you were badly prepped by your staff in the ministry. The reason I would suggest the foregoing is if you look back in time you will note your predecessors all look pretty dumb!   When you review events that unfolded after their quotes they have been proven to be very wrong. History will undoubtedly prove you to be wrong like your predecessors.

Another issue for you is the query about why gas bills won’t disclose the “cap and trade” levy when it takes effect.   When questioned as to why the information would not appear on gas bills you stated that the OEB acts “independently” and your ministry doesn’t give them directions!Just to remind you, one of the first things you did when you took over the energy portfolio was to issue a directive (June 27, 2016) to the Ontario Energy Board which contained the following (emphasis mine): “I write in my capacity as the Minister of Energy in order to exercise the statutory power I have under section 35 of the Ontario Energy Board Act, 1998 (the “Act”) to require the Ontario Energy Board (the “Board”) to examine and report back to the Ministry of Energy (the “Ministry”) with advice on the questions outlined below.”

In looking over the letters and directives in the OEB files, it appears letters of directions and directives (“orders in council”) are commonplace and reflect the full power of the “minister” and the governing “caucus” over the OEB.

You have the power to instruct the OEB to tell natural gas distributors to disclose the amount the “cap and trade” act will add to their bills.

In a related issue, your predecessor Bob Chiarelli ensured electricity bills disclosed the amount of savings due to the cancellation of the debt retirement charge or “DRC” while (seemingly) intentionally failing to order disclosure of the cost of removal of the OCEB (Ontario Clean Energy Benefit).If you want your legacy as the Minister of Energy to reflect the bad traits of your predecessors then you can continue doing as you have been doing, but if you believe in transparency you have an opportunity to demonstrate those beliefs by coming clean.I certainly hope you will review your actions of the recent past and show the ratepayers of the province you have the ability and the intestinal fortitude to stand up and recognize the abuse we have suffered for the past decade and show us actions that stop the climb in electricity rates that are a necessity of life in this province.

Yours truly,

Parker Gallant 

A concerned citizen

PS: Looking forward to your response on how the imported TWh will save the system $70 million