How Ontario’s “little” electricity customers help out the big ones (with billions)

Class B Ontario ratepayers support Class A ratepayers–$6.2 billion and growing

It was almost six months ago when the Ontario Energy Board’s (OEB) Marker Surveillance Panel (MSP) released a review of the Industrial Conservation Initiative (ICI). The review looked at the impact it had on pricing since its launch in September 2011.

The ICI came into being after extensive lobbying for a reduction in electricity pricing by the Association of Major Power Consumers of Ontario (AMPCO) when Brad Duguid held the position of Minister of Energy.

The ICI model simply requires the “A” Class user to pick five “peak demand” hours over a year in order to gain a sizable discount to the price they pay.

An article written by yours truly, appeared shortly after the review’s release and pointed out the cost to Class B ratepayers, namely, residential and small/medium sized businesses. The article noted the failure by the OEB to act on its role which is: “The OEB supports and guides the continuing evolution of the Ontario energy sector by promoting outcomes and innovation that deliver value for all Ontario energy consumers.” The article noted it took the OEB seven (7) years to realize “the ICI as presently structured is a complicated and non-transparent means of recovering costs, with limited efficiency benefits.”

One should wonder if the recognition was a reflection of a change in government or, a realization the “value” didn’t apply to “all” of Ontario’s ratepayers the OEB is supposed to consider in its innocuous decisions!
The support of Class B to Class A ratepayers as of the end of 2017 “has shifted nearly $5 billion in electricity costs from larger consumers to smaller ones. In 2017, the ICI shifted $1.2 billion in electricity costs to households and small businesses—nearly four times greater than the amount in 2011.”

Almost six months have transpired since issuance of the MSP review and nothing has changed. Another year has gone by (the review reflected cost transfers to the end of 2017) and 2018 duplicated the shift of 2017 so add another $1.2 billion and push the total transfer to $6.2 billion since mid-September 2011.

What that represents is an average subsidy to Class A ratepayers of over $1,200 for each of the approximately 5.1 million Class B ratepayers over the 7 ½ years since the ICI came into existence.

The Market Surveillance Panel made several observations on how the ICI could be made more efficient and/or enhanced to make it fairer. The Panel’s first two observations would help to reduce the burden on Class B ratepayers so perhaps its time the OEB and/or the Ministry enable those changes which are:
*Costs that are not related to the fixed capacity costs of needed generation are removed from the Global Adjustment and recovered by other means.
*Only the cost of peaking generation is recovered based on consumption during peak demand hours; the cost of non-peaking generation should be allocated such that all consumers that benefit from that capacity pay for that capacity.”

Almost a year ago, many in Ontario voted for the Ontario Progressive Conservative Party, handing them a majority government. One of the chief reasons the Liberals were defeated was their mishandling of the energy file. Based on the foregoing, most voters anticipated the new Ford-led government would have tackled the file with all the might one would expect with the election promise that “help is on the way” followed by the declaration of Premier Ford in his victory speech stating; “My friends, help is here.”

The opportunities to demonstrate the “help” are there for all to see such as those recommended by the MSP.

The government could also use regulations to enforce noise controls (audible and inaudible) on industrial wind turbines, they should insist the UNIFOR wind turbine in Saugeen Shores be removed, they could cancel the 100 MW Nation Rise project to save future ratepayers hundreds of millions, and they could insist the OEB reflect its “vision” which claims it is responsible for: “promoting outcomes and innovation that deliver value for all Ontario energy consumers.”

Ontario’s Class B ratepayers are waiting for “help” to arrive and see the OEB deliver actual value!

Oh, and a thank you from the Class A ratepayers would be nice too!

PARKER GALLANT

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Cutting Ontario’s electricity bills: promise made, promise (partly) kept

How the Ford government is cutting electricity costs, and some suggestions on how they might do better

A month or so before the 2018 Ontario election, the Ontario PC Party made a promise to reduce electricity bills for Ontario’s residential ratepayers by 12% or specifically: “Putting $173 back in the taxpayer pocket”.  The amount needed to achieve the $173 per ratepayer would amount to approximately $807 million annually, based on the 4,665,055 residential ratepayers Ontario had at the end of 2017, according to the OEB’s (Ontario Energy Board) “2017 Yearbook of Electricity Distributors”.

PC leader Doug Ford promised if elected, they would give ratepayers the dividends the government receives from the partially privatized Hydro One. For 2018, that would amount to $245 million as 47.4% (the province’s current ownership) of total dividends ($518 million) awarded to common shareholders by Hydro One.  The dividends of $245 million annually would translate to about $53 per residential ratepayer.

On July 13, 2018, the Minister of Energy, Northern Development and Mines announced the cancellation of 758 renewable energy contracts* which he said would save ratepayers $790 million over the life of the contracts. Assuming the bulk of the contracts were for 20-year terms, that would amount to about $40 million annually, costs that would have been borne by all ratepayers, not just “residential” ones.

Over the past several years, residential ratepayers consume about 32% of all grid-delivered electricity, so the savings to that group should be relatively small as 32% of $40 million only translates to annual savings of $13 million (rounded) or less than $3.00 per residential ratepayer. (Bob Chiarelli, when Minister of Energy would have suggested it would amount to “a large Timmies”.)

So, these two actions leave a shortfall of slightly more than $545 million or $117 per residential ratepayer — where will the balance come from?

Will “bold action” pay out the shortfall for ratepayers?

March 21, 2019 arrived and the Ministry of Energy, Northern Development and Mines issued a press release declaring: “Ford Government Taking Bold Action to Fix Hydro Mess.” It was full of promises, but were they enough to deliver the missing $117/per residential ratepayer?

Winding down the Fair Hydro Plan (FHP)

The press release specifically stated the Ministry would “wind down the Fair Hydro Plan” (FHP) and in the process save billions of dollars in borrowing costs.  They would do that by simply moving the borrowing process from the OPG “Trust” directly to the Province.  As noted in the report of the FAO (Financial Accountability Office) of early 2017, borrowing via the “Trust”, would increase interest costs by “about $4 billion in interest expense, because the interest rate on Provincial debt is lower than the interest rate on OPG Trust’s debt.”  The FAO noted the timeline required to both fund and repay the total debt under the FHP was 29 years, so the $4 billion in savings would amount to approximately $138 million annually.  As the FHP was all directed at residential ratepayers, $138 million would reduce future rate increases by $30 per residential ratepayer.

That reduces the missing $117 to $87 per ratepayer.

Reducing Conservation Spending

Another position in the recent press release was related to reducing conservation spending which has added about $450 million annually to ratepayer bills for the past 10 years.  The effect on residential ratepayers will be approximately one-third of that amount.  Those coupons your local distribution company handed out for the purchase of LED bulbs, and the rebates for installing energy efficient furnaces or air conditioners have been cancelled, which will reduce the bill to residential ratepayers by around $150 million annually.  The effect on ratepayers should be a reduction in future rate increases of $32 per residential ratepayer. So that means the $173 reduction is now $55!

Unanswered at this point is where the remaining $85 per residential ratepayer will come from. Perhaps Minister Rickford would like a suggestion or two to find the missing $400 million in annual costs needed to eliminate the missing $55 per residential ratepayer? Here we go.

Quick and easy savings                                                                                                                                                             Wyoming State has implemented a “wind tax” and a suggestion to do likewise in Ontario was put forward by the writer back in March 2018 as just one idea.  If that is seen by the current government as going “against the grain” of a conservative government, I have another suggestion which can be easily found in the regulatory pigeonholes!

Enforce the regulations

Enforcement of regulations dealing with complaints surrounding wind turbines would reduce the generation they provide out of sync with demand or where they are curtailing their generation, but paid for doing so.

Enforcing regulations should be something the government should be onside with!

A recent article noted: “The Ontario government now has records of thousands of complaints dating back to 2006 regarding excessive noise and shadow flicker or strobe effect. The detailed files on these complaints, which contain notes by Provincial Officers with the ministry of the environment, also contain comments on adverse health effects stemming from exposure to the noise emissions.”

Needless to say, those “complaints” have been virtually ignored. If the regulations were enforced wind developers would be told to shut down their turbines thereby saving ratepayers considerable monies and as a wondrous side benefit, would reduce health issues (and costs to the healthcare system) related to the noise and strobe effects.

The Minister of Energy, Northern Development and Mines would quickly find the $260 million missing to help him reach the goal set by Premier Ford to reduce future bills by the $55 per residential ratepayer.

One should hopefully believe (unlike Kathleen Wynne, our previous Premier), Doug Ford was not suggesting the $173 per residential ratepayer he promised will turn out to be a “stretch goal”!

PARKER GALLANT

*One wind power project, the 100-megawatt “Nation Rise” in North Stormont south of Ottawa, escaped the guillotine, despite not being built and in fact, receiving its approval after the election while the defeated Wynne government was in “caretaker mode.” Cancelling this project would save Ontario ratepayers over $400 million for the 20-year contract, less any penalty for cancelling the contract.