Smart meters, smart grids, conservation campaigns: how well does IESO watch your money?

More on Ontario’s IESO…

August 1, 2018

Yesterday, I examined IESO’s responsibility in respect to the “financial settlement” associated with the various public and private electricity generation sources in the province, and their ability to execute those, considering all the variables connected with the GA (Global Adjustment) and the HOEP (hourly Ontario energy price).

I contemplated not only their ability to handle that responsibility, but also to deal effectively with the FHP (Fair Hydro Plan) and the HST rebate the prior Ontario government created.

Soon, the IESO will be further burdened with the financial aspects of the additional 12% reduction in residential electricity bills that the newly elected Premier Ford government has promised. IESO denies responsibility for any audit-associated issues and simply pays money to the LDC (local distribution companies), based on the data associated with the billing submitted.

The question today is this: is it possible possibility the IESO can be “gamed” as they already were by one of the gas generators for $100 million, as reported in December 2017?

IESO deals directly with all grid connected (TX) generators, plus approximately 70 LDCs in Ontario.  Those 70 LDCs in turn deal with well over 26,000 generators under the various MicroFIT programs, carrying a variety of contracted payment amounts. So, “gaming” IESO under their unaudited procedures should not be seen to be difficult.

Additionally, those LDCs are responsible for implementing campaigns associated with the numerous conservation programs, which annually dole out more than $400 million.  For example, Hydro One uses their five-year allotment of $338 million to basically do whatever they wish with the money, as long as they report back to IESO that they have reduced consumption via conservation programs. Toronto Hydro’s allocation is even higher than Hydro One’s at $396 million.   Strong “gaming” possibilities.

Now if you bother to look at past predictions of both data development and spending on that development, you would find aspirations speaking to “smart meters” and a “smart grid” as a means to take data and configure it in such a way to allow all of us to experience utopia! Presumably that “utopia” would make life easy for IESO to handle the financial aspects of managing day to day activities associated with generating power and bringing it to our households or businesses along with the many variables included in the Global Adjustment!

The facts, since the advent of both smart meters and smart grids however, dispel those notions of a forward-looking “cars will fly” utopia. As the Auditor General reported, the “smart meters” cost Ontario $2 billion which, as it turned out was twice as much as planned. The “smart grid” was advocated by a 10-member Smart Grid Forum in February 2009 with objectives loosely defined as “It is necessary change; change from a one-way ‘dumb’ grid to an interactive, intelligent smart grid.”   The Forum reached a consensus in respect to the costs of this “smart grid”: “The preliminary cost estimate by the Forum is that incremental capital spending over the initial five years would be $1.6 billion.”

Well, those five years have come and gone. To the best of my knowledge, there is no report indicating how far we are along in developing the “smart grid” or how much of the $1.6 billion has been spent, but what we do see on each and every electricity bill we get is a charge for its development.

So, “smart” meters, “smart” grids and all that data and the fact the IESO was “gamed.” It is still looking like a one-way “dump” on ratepayers.

Tomorrow, in Part 3 in this series, I look at what the Fair Hydro Plan has accomplished in the first year of its existence.

PARKER GALLANT

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Ontario’s IESO: electricity customers should be concerned

The province’s power agency has been found to use incorrect accounting methods and actively obstruct oversight… that’s a worry, considering their other goals

March 26, 2018

The Independent Electricity System Operator or IESO, which is responsible for managing Ontario’s electricity system, has again been called out on its abilities. Unlike prior occasions, this time the criticism is related to the manner in which the IESO engages in “irregular and improper accounting” discovered in a special audit and reported by the Ontario Auditor General.

From the report by the Globe and Mail: “Bonnie Lysyk, the Auditor-General, informed the province’s public accounts committee last week of problems uncovered during the audit, which began late last year and is now nearly complete. Her concerns included incorrect accounting, deceptive and obstructive behaviour by the IESO’s board and management, and poor financial controls.”

The dispute is related to the Fair Hydro Plan and the accounting treatment that surrounds it. Ms. Lysyk noted the accounting structure was designed to avoid including the costs on the province’s books thereby allowing the government to “falsely claim” it had a balanced budget. The claim was disputed by the Minister of Energy who said the practices are not new and are used in other jurisdictions and “endorsed” by major auditing firms.

The cost of the Fair Hydro Plan just to the end of February is in excess of $1.6 billion and is carried on the books of an OPG “trust” subsidiary — that means the debt incurred will not show on the Province’s books as debt.

Recovery of the monies will, however, become a future burden for Ontario’s electricity ratepayers, who will have to ante up the funds to repay it and the interest it accumulates. The Financial Accountability Office suggests it would be a minimum of $40 billion and perhaps as much as $90 billion depending on if the province manages to balance its budget.

Ms. Lysyk noted, according to the Globe story, “When a board or management in any other province recognizes that an AG’s office has issues with their accounting, they would have handled it differently,” the committee was also told, “They basically treated, I think, my audit team like we were subservient to KPMG. In terms of the law in Ontario, that would be the reverse.”

The AG ordered the IESO special audit when IESO’s auditors would not respond to queries about potential accounting changes and, when their financial statements were published, they used some radically different accounting practices. Those practices were used immediately for the Fair Hydro Plan.  IESO’S Chief Financial Officer, Kimberly Marshall did not consult or notify the AG prior to adopting those practices!  As a result, and because of the refusal by management and the board to sign key documents, the AG’s office was unable to provide an audit opinion.

Many followers of the electricity sector have expressed issues with IESO’s inability to provide correct or timely information related to the generation and consumption of electricity so it should come as no surprise the Auditor General is faced with the same dilemma on financial accounting issues.

IESO also has responsibility for managing data required to pay generators for their power and using data from smart meters.

It should be disconcerting to all ratepayers, big and small, to realize IESO are also spending hundreds of million to bring us a smart grid.   A concern is that IESO may be working with MaRS Data Catalyst (liberally supported by the current government) who note, “We are working with industry, regulators, consumers and government to get that data into the hands of innovators in a secure, private and usable way to drive energy conservation and spur economic growth.

All ratepayers should be concerned as IESO may once again decide to use  different standards when it comes to protecting ratepayers’ privacy, as they have done with IESO’s financial information.

Hydro One’s shopping list: new Smart Meters”!

Ka-ching! And, Hydro One is considering asking you to pay for electricity up-front …

Electricity: soon to be a luxury in Ontario? More families choose between heat, or eat

It was just a couple of years ago when then Ontario Ombudsman Andre Marin issued his damning report about Hydro One’s billing errors. As quoted by the Globe and Mail, “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.”

The Office of the Ombudsman cannot now report on Hydro One due to partial privatization, so ratepayers obtaining their electricity from them should be prepared for this monopoly to do whatever it wants.

Prior to the release of the Ombudsman’s report the OEB said this:  “On March 26, 2015, the OEB issued a Decision and Order to amend Hydro One’s distribution license to include an exemption from the requirement to apply TOU pricing to approximately 170,000 Regulated Price Plan customers that are outside the smart meter telecommunications infrastructure. The exemption expires December 31, 2019.”

Those 170,000 RRP customers represented about 14% of Hydro One’s customer base. In December of 2015 the Ontario Auditor General in her annual report noted: “Hydro One installed 1.2 million smart meters on its distribution system at a cost of $660 million”. The math on that indicates a probable cost per meter of $550 each, including the 170,000 meters that aren’t working as they should. Now, Hydro One is back in front of the OEB seeking rate increases that will impact their ratepayers for the next five years. They are submitting thousands of pages of documents to justify their needs to increase distribution rates by 1.56cents/kWh for their rate-paying clients.

Looking at one of the Hydro One application documents, you find the following (untenable) claim related to smart meters: “There is a significant increase in projected spending in 2022, which reflects the anticipated commencement of smart meter replacement, as the current population of smart meters approach end of service life.”

This should alarm Hydro One customers—should we once again be concerned about billing problems? Will the replacements once again fall short of being able to communicate data?

Ontario’s record with smart meters is not stellar. A report issued in August 2016 by The Brattle Group report notes: “Besides Italy, Ontario is the only region in the world to roll-out smart meters to all its residential customers and to deploy TOU rates for generation charges to all customers who stay with regulated supply.” The old mechanical meters were much cheaper and longer lasting as an article from 2010 states: “Itron, which formerly produced mechanical meters and now makes smart meters, said that older instruments generally have a lifespan of about 30 years before they start to slow down.”

Another disturbing issue is found on page 2038 in yet another of the documents submitted for the rate increase discloses Hydro One’s plans when it comes to ratepayers who are slow to pay their bills:

“One method of enabling customer control of their electricity consumptions, while in arrears condition, and minimizing Hydro One Network’s financial risk, is through the use of pre-paid meters. Pre-paid meters are a type of energy meter that requires users to pay for energy before using it. This is done via a smartcard, token or key that can be ‘topped up’ at a corner shop, via a smartphone application or online. For customers who are high collection risk, the financial risk will be minimized by rolling out this type of meter. With a pre-paid meter, electricity is paid up-front. Once the pre-paid amount is used up, power is cut-off until the customer is able to load the meter with more credits.”

 If the OEB backs off on their muscle flexing and grants Hydro One’s wishes, ratepayers should expect they will have to prepay their anticipated electricity usage or have their power cut off.

Sad times for Ontario as power becomes a luxury, and many more households face the “heat or eat” dilemma!

 

Hydro One’s scorecard: not a winner

Lose, lose, lose … and more losses to come

Hydro One 2016 Scorecard highlights shortfalls

 

 On several occasions, I’ve expounded on the decision by then Energy Minister Dwight Duncan in July 2004 to direct the Ontario Energy Board (OEB) to instruct all LDC (local distribution companies) to install “smart meters”*   The Premier’s October 2005 throne speech included the comment:  “Consumers can look forward to getting smart meters that will help them save money by telling them when they can pay less.” 

I believe most ratepayers know how McGuinty’s claim worked out: over the past 12 years, our electricity bills have shot up and the Hydro One billing problems were top of mind in the media for many Hydro One in the province, thanks to Andre Marin when he was Ombudsman and thanks to  Ontario’s Auditor General. Those billing problems were caused by the inability of Hydro One to read many smart meters; and, installation costs were double ($2 billion) the budgeted costs, as noted by in the AG in her December 2014 report.

While Hydro One customers have been assuaged with claims the problems with smart meters have been fixed, if one examines their 2016 Scorecard submitted to the OEB it is obvious they are still dealing with issues.  Under the heading “Billing Issues” is this: “The Company’s continued improvement is mainly attributable to ongoing business process optimization, investing in the smart meter network to expand and replace various network support tools, and a continued focus on addressing smart meters that do not meet the necessary quality levels.”

Oh dear.

Further on, under the heading “Asset Management” is this remark in respect to why Hydro One exceeded its planned investment: “Hydro One is replacing meters because its service provider is phasing out network cellular technology by April 2018. The new meters align with the service provider’s new technology and prevent loss of data communication between Hydro One and its customers.”   

Garbage day

Hydro One obviously doesn’t want to encounter the negativity of future billing problems so, now, the expensive meters they installed just a few years ago are being tossed in the waste bin. The cost of the replacements has caused them to ask for further rate increases.

Despite the spending on “smart meters” past and present, Hydro One’s “Customer Satisfaction Survey Results” keep trending down despite their claim of higher billing accuracy according to the Scorecard.

Hydro One also shows a lack of leadership in the “Scorecard’s” System Reliability in both the “Average Number of Hours that Power to a Customer is Interrupted” and the “Average Number of Times that Power to a Customer is Interrupted.”

Scoring high in one area, at least

Yet another very disconcerting leadership role in evidence in the Scorecard is under “Financial Ratios” where Hydro One shows their “Leverage: Total Debt (includes short-term and long-term debt) to Equity Ratio” at 1.46 to 1. That means it ranks as the sixth highest leveraged LDC.   With their plans to purchase Avista their debt will increase substantially ($4 billion), raising this ratio further, and impacting Ontario’s ratepayers in respect to possible credit rating downgrades and the resulting increased borrowing costs.

So far, we see no discernible benefits to Hydro One’s ratepayers — only more costs.

 

Sidebar: Amazingly, Hydro One claims on the Scorecard they scored brilliantly in hooking up MicroFit contracted parties where the excessive cost of what the parties are paid are picked up by all of the other ratepayers of Ontario.

* For more background view this article: Hydro One’s failure to communicate rewarded with rate increase