Province's power problems shocking: analyst

Auditor General Bonnie Lysyk’s Annual Report last week highlighted several areas where the Ontario government is falling short.

Some of the most eye-popping findings dealt with problems with the province's power generation system, where Lysyk found ratepayers are literally paying the price for misguided policies.

Tom Adams, an independent energy and environmental adviser who has served on the Ontario Independent Electricity Market Operator board of directors and the Ontario Centre for Excellence for Energy board of management, said in an interview the mismanagement the AG uncovered is staggering.

'Lines to nowhere'

While the problems run deep, Adams said one paradox ratepayers are trapped in is particularly troublesome: the $37 billion we were charged over the last several years for items not related to the cost of generating electricity.

For example, when Ontario produces too much energy. In 2013, for example, our excess capacity was equal to the entire power demands of Manitoba. To deal with the excess, Hydro One pays other utilities to take it off their hands.

"That's where you're paying for all the export losses, the costs we have to pay to other utilities — mostly in Michigan and New York — to take delivery of excess power from Ontario,” Adams said. “These transmission lines to nowhere.”

He's particularly unimpressed by the reaction of Energy Minister Bob Chiarelli, who has said those exports are profitable.

"In situations where we have to pay American utilities to take our excess power off our hands, if we did not pay them, the ratepayer would be worse off,” he said. “But don't go around telling people this is profitable. We're losing our shirts on exports."

So, Adams says, on one hand we are paying other utilities to take our excess power, but on the other we are issuing new contracts for solar and wind programs that will generate more power. Worse, the province has tied ratepayers into long-term contracts, paying producers far above market rates to generate power we don't need.

“The guaranteed prices for generators of wind-powered electricity were double the U.S. average price in 2014,” Lysyk wrote in her report. “The guaranteed prices for generators of solar power were 3½ times higher than the U.S. average price.”

“The market price for electricity is rarely high enough to satisfy the contract terms,” Adams said. "When she talks about the $37 billion of excess costs, she's looking at what's driving that global adjustment and why that global adjustment is above market prices, and adding up the numbers."

Cost of conservation

Compounding that problem, the province also has a pricey program to encourage conservation. While that sounds like a good way to save on your energy bill, in practice it has two very negative effects, Adams said. When you drive down consumption — when you sell less power than you used to — that means rates have to increase to make up for lost revenue.

Added on to that is the more than $1 billion the province has spent encouraging consumers to use less power.

"That's a very important finding,” Adams said. “The government has been pitching this kind of talking point for years. Anytime anyone would complain about their power bill, the solution is you're not conserving enough. But we have a program to help you conserve, that will lower your usage and that will lower your bill.

"The auditor was too polite to say this, but the benefits of the conservation program — when you switch out the lights — the benefits of that flow mostly to utilities in Michigan and New York. They get paid even more to take our power when we conserve. (So) conservation is driving up rates."

It's madness for the province to continue issuing contracts under the controversial FIT program to generate more power, when Ontario's oversupply of energy is growing, and costly to deal with, he said.

"Back in 2003, Ontario used 153 terawatt hours, now we're using 140 terawatt hours,” he said. “Next year, it will probably be 138."

The overcharging will continue to cost taxpayers into the future, Adams said. The cost of the FIT and other clean energy contracts already signed or set to be approved, mean ratepayers will keep overpaying for the next decade or two. More immediately, big rate increases are coming Jan. 1, May 1 and Nov. 1 next year.

"Lysyk also projects forward to 2032 — there's over $100 billion left to pay," he said. "In 2016, electricity prices in Ontario are going to take off. You're going to look at your power bill of December 2015 in a year from now and say those were the good old days."

'Shameful' findings

In an interview Friday, Sudbury MPP Glenn Thibeault said the auditor general does good work despite challenges of the office.

No matter what steps the government takes, Thibeault said power is going to get a lot more expensive in the coming months and years.

“Rates are going to go up, no matter what, right? That's the way things are,” he said. “We, as a government, are trying to find ways to mitigate that. And some of the recommendations that have come forward from the auditor general, the government is going to look at to try and implement.”

But in an interview Wednesday, NDP Leader Andrea Horwath said the “shameful” findings in Lysyk's report are yet another sign of a Liberal government gone off the rails.

"They've made an absolute mess of the hydro file," Horwath said. "And things are just going to get worse with the private sector selloff."

One aspect of Hydro One's IPO that may have gone unnoticed, she said, is the fact the auditor general will no longer have authority to audit the utility.

"The government removed the auditor's ability to look into Hydro One when they passed the legislation to privatize," Horwath said. “So the is literally the very last time that the auditor general will do a review of Hydro One.

"No more salary disclosure, freedom of information — nothing at all. It's quite worrisome. (The government) can't admit that this thing is a mess."