Electricity and the Liberal Hansard History, Chapter 8

How to turn a contingent liability into a $3.9 billion revenue gain!
This is chapter 8 in a series by Parker Gallant:  Chapter 1;  Chapter 2:  Chapter 3Chapter 4Chapter 5, Chapter 6,

On June 22, 2004 the Legislature was in session and the electricity sector again commanded a fair amount of attention. Some of the day’s discussions were self-congratulatory while others expressed concern that the direction the Liberals were taking the sector would cause rate increases. On the latter point Mr John O’Toole (Durham) posed this question to the Premier:

Premier you must be familiar with your budget speech on page 23, there’s a little chart that says, “Includes one-time revenue gain of $3.9 billion related to the projected elimination of the liability for non-utility generator power purchase agreements in 2004-05.”, “Minister, I’d like you to explain this to the House. Where does the revenue of $3.9 billion come from, or is it simply an additional burden on the taxpayers? What I’m understanding it to be, if I look at the question clearly, is that you increased the electricity rates — we understand that — in April, and I understand now that you’re going to increase the electricity rates for the second time — another broken promise. Is this what I can read from this obscure comment on page 23 here?”

Mr. O’Toole was referring to the “NUG” contracts many of which were due to expire in the next few years. The Liberals appeared to have taken a contingent liability of the Province and turned it into a $3.9 billion revenue gain in their budget. The response from Dwight Duncan Minister of Energy, was:

No, we’re not raising the price again.” “The non-utility generator contracts are electricity contracts. Liability for them will rest with ratepayers. This is consistent with our policy to have consumers pay the true cost of electricity. Our goal in doing this is to free up the money for health and education. These are the priorities that Premier McGuinty and Minister Sorbara put into the budget. We have to clean up the mess you left in health care, the mess you left in education and the mess, frankly, that you left at Ontario Hydro. It’s not easy but we’re doing it, and we’re going to make sure the legacy you left is wiped out and fixed once and for all.”

The “one-time revenue gain of $3.9 billion” appears to have been a sleight of hand, creating no new revenue, it simply removed the “contingent” liability from the province’s balance sheet. NUG contracted parties (originally by Ontario Hydro) became the responsibilityof the Province after the breakup of Ontario Hydro and the Liberals sought to transfer that responsibility to ratepayers via OEFC. No new revenue appeared. As proof of that we point to a directiveissued by Brad Duguid, Minister of Energy dated November 23, 2010. The directive contains explicit instructions to the OPA to renew contracts with 31 NUG generators. On pricing the directive was ambivalent except to note; 
The New Contracts should endeavour to ensure that a greater share of the payments to the NUG Facilities is recovered through the Hourly Ontario Electricity Price, and to minimize the portion of revenues to be recovered through the Global Adjustment.” 
Trying to locate the archived files for the GA on the OPA website is impossible but a visit to the IESO site shows more information however, it doesn’t break out the NUG contract costs (to the GA) until 2008. In that year the NUG contract amount passed on to ratepayers was approximately $470 million and by the end of 2011 the NUG costs charged to the ratepayers, via the GA, had grown to $1.1 billion.

The response from Minister Duncan drew another question from MPP O’Toole:

Some of what you’re saying, that this liability rests with the ratepayers, that’s just what the point was. It’s really another rate increase. The people of Ontario should be prepared for a second whack on this issue.” MPP O’Toole went on; “I would like to say that your commitment to closing the five coal-fired plants is a laudable objective. I completely support it.” and noted: ‘However, it’s another Liberal promise, so you must be a bit concerned when not one expert in the industry believes you.” and closed with this question;Would you resign if you fail to shut down any one of the five coal-fired plants? Will you put your resignation and your promise on the table here today, or is it just another broken promise?”

Minister Dwight Duncan’s response was:

No, I won’t resign on that, number one. But what I will do, and we’ll be outlining this: I don’t know what experts you’re listening to, but the people of Ontario expect us to move on that commitment and to help clean up air quality. Let’s talk about what the Ontario Medical Association has said in terms of lives lost as a result of smog and air pollutants. Unlike you, we’re not going to give up. We’ve set an ambitious target and we’re going to move heaven and earth to achieve it. Let me tell you something else about that government. That is the government that said it would lower prices, and when they put their policy in place, prices skyrocketed in an unprecedented fashion, to the point where the government of the day had to then put a cap on price that was paid for by the taxpayers of this province to the tune of $1.8 billion. We’re moving quickly to clean up the mess that government left in the energy sector, and we’ve set ambitious targets on coal. We will move heaven and earth to achieve them.”

Declining to “resign” was either a smart move (because he was being circumspect) or an admission that the Minister was not up to snuff on his portfolio and didn’t want to be held accountable for his twice uttered remarks that set “ambitious targets”, “to move heaven and earth”. In any event, some 8 years later some of those coal-fired plants still provide the province with the peaking power that it needs on muggy summer days when the wind isn’t blowing. The “lives lost as a result of smog and air pollutants” (still wafting into Ontario thanks to westerly breezes from US states like Michigan and Ohio) presumably still cause lives to be lost. It would appear that Minister Duncan has indeed delivered “just another broken promise” which most Ontarians now seemingly accept as part of the ruling Liberal Party.

The laudatory remarks on this particular day came from Minister Duncan prodded by a fellow Liberal who first castigated the opposition. The following is a sample of that exchange and the hypocrisy and hyperbole that comes with patting yourself on the back;

Mr Peter Fonseca (Mississauga East):My question is for the Minister of Energy. Some of the greatest challenges our government faces are those in the electricity sector. Years of mismanagement and inaction by the previous two governments have made the need for change and decisive action even more urgent. On April 15, you outlined some of the government’s plans for change in this sector. Minister, with the legislation that you have introduced in this House, how is our government ensuring this sector is put back on solid footing after years of Tory neglect?”

One must wonder if MPP Fonseca had foreseen the (since cancelled) erection of a gas fired generation plant in the provincial riding he then held (as per the “regulations”) would he have provided Minister Duncan with such a nice lead in question. Minister Duncan, set up in such a fashion; jumped on the presumably pre-rehearsed question with vigour as the following would suggest:

Hon Dwight Duncan:What we know for certain is that if we had continued on the same path, we would not be able to power the growth in our economy that’s coming forward. Our electricity sector would have ceased to be the great enabler that it’s been throughout most of Ontario’s history. We are putting Ontario back on a solid footing by taking a balanced approach. First of all, we lifted the cap. Second, we’ve now introduced legislation that will redefine the sector, and it provides for public ownership, provides for a new Ontario Power Authority and provides for a new Ontario conservation bureau. These initiatives, wrapped up with the Premier’s commitment on conservation, wrapped up with the Premier’s commitment to close the coal-fired plants in this province, represent a dramatic shift that will provide price stability and reliability of electricity and help the sector become the great strength it was once before. That vision is laid out by the Premier and is incorporated in our first bill, and we believe that at the end of four years prices will be stable, supply will be stable and the people of Ontario will be far better served by their electricity sector.”

and to another question from MPP Fonseca went on:

With the bill before the House today, we are looking beyond the next four, eight and 12 years to ensure a reliable, sustainable and diverse supply of power at stable, competitive prices for generations to come. We’re taking action, because the McGuinty government recognizes that the health of this sector is vital to ensuring Ontario’s economic prosperity.”

The foregoing is what most would consider sweeping statements delivered from a politician with conviction who would deliver on his promises. Unfortunately what we have is the antithesis of what Dwight Duncan said he would deliver. We have a shrinking economy, an electricity sector that has ceased to attract investment (outside of wind and solar subsidized investments), unstable supplies of electricity and a sector that has driven many Ontarians into energy poverty. It is obvious, in hindsight that the Honourable Dwight Duncan didn’t recognize the implications of his undertakings and how it would affect “the health of this sector” to ensure Ontario’s economic prosperity”

Some plan! “Beyond the next four, eight and 12 years” have pretty well passed and Ontario’s economic prosperity looks to remain firmly in the group of “have-not” provinces and just how this “sleight of hand” will “free up the money for health and education” ministries is a complete mystery.

Some legacy!

Parker Gallant, January 29,2012

Money trumps Integrity

Attacking Liberals seems to be de rigueur as both Parliament Hill and Queens Park Liberals were reputedly recently attacked. The attackers were a couple of the little guys who were then accused of abusing 3rd party advertising regulations. In Ottawa it was the National Citizens Coalition going after Interim Leader, Bob Rae and in Toronto it was Wind Concerns Ontario accused of spending breaches for their anti-Liberal campaign during recent Ontario elections. Lorrie Goldstein in the Toronto Sun carried the news about the NCC breach and the Toronto Star carried the story about Wind Concerns Ontario.
As Lorrie Goldstein noted in his article, the reputed Parliament Hill breach, related to 3rd party spending, and is paltry compared to the Ontario rules. The Act governing spending in Ontario makes the National regulations look like chump change, with various groups aligned with the Liberals, spending millions on attack ads both before and during the election campaign. Indeed the spending on attack ads is only one side of the coin. On the other side are “party donations” and in Ontario standards are much more liberal allowing companies and unions to contribute up to a maximum of $9,300 per year. Ontario allows multiple contributions by corporate subsidiaries and union locals.

A review of the Ontario “Annual Returns” filed by the various parties for the December 31, 2010 year end displays the results of their fund raising activities. Reviewing the returns for the Ontario Liberal Party and the Progressive Conservative Party of Ontario is an interesting exercise. Donations for 2010 were very similar with the Liberals receiving $4,054,413 and the Conservatives $4,275,248. Delve deeper however and the source of those donations are quite different. As one example two large US headquartered Unions (United Associations and the United Brotherhood) made 22 contributions (individual locals) to feed the Liberal bank account to the tune of over $187,000. Total up the contributions by; unions, associations (those representing professionals), teachers federations, trade councils (representing professionals) , etc. for both of the parties and one notes a huge difference. The Liberal Party received in excess of 175 donations of $530,000 from those groups whereas donations to the Conservative Party by 31 of this group was only $123,000.

The donations page also highlights the Liberal Party received almost $90,000 from about 25 renewable energy companies versus $1,065 from 2 companies for the Conservatives. The Sussex Strategy Group contributed $8,005 to the Liberal Party but only $1,635 to the Conservatives. No doubt the latter donation disappeared for 2011 as it was the Conservatives who broke the story about the “confusion” report that Sussex produced for the Liberal Party to defend the Green Energy Act. The Ontario English Catholic Teachers Association also signalled their intentions by donating $10,195 to the Liberals but a measly $130 to the Conservatives.

One must surmise the intention of the groups highlighted above was to ensure the Liberals had enough in their bank account to wage an effective battle against the other parties.
Andrew Coyne’s article in the National Post January 20th suggested that a maximum limit be set for political contributions and only individuals (no companies, no unions, etc.) should be allowed to contribute. After reviewing only the 2010 filings for just two Ontario based political parties it seems to be the right thing to do.

Parker Gallant,
January 23, 2012

Electricity and the Liberal Hansard History, Chapter 7

This is chapter 7 in a series by Parker Gallant:  Chapter 1;  Chapter 2:  Chapter 3Chapter 4Chapter 5, Chapter 6Chapter 8

The saga continues and for this chapter we visit Hansard on June 15, 2004, the day the Liberals introduced the Electricity Restructuring Act which created the Ontario Power Authority.

First out of the box was Energy Minister Dwight Duncan as he spoke about all the wonderful things that this Act would bring the people in Ontario. Here is part of his address relating to the creation of the Ontario Power Authority:

Dwight Duncan: “The power authority would assess adequacy and reliability of electricity resources and forecast future demand. It would also prepare an integrated system plan for generation, transmission and conservation, to be reviewed by the Ontario Energy Board. In addition to its planning functions, the power authority would have the power to procure new supply and demand management initiatives, either by competition or by contract. When necessary, it would use a competitive and transparent procurement process which would foster innovative and creative approaches to meeting our supply needs.”

This “power authority” that Duncan spoke of that day in the Legislature became the Ontario Power Authority (OPA) It did produce an “integrated system plan” or as it was called the IPSP which did find its way to the Ontario Energy Board only to be thrown in the waste bin by George Smitherman, when he was appointed the Minister of Energy & Infrastructure and brought in the Green Energy Act (GEA). The OPA under the direction of Jan Carr did create competition and contracts were executed after a transparent bidding process but the GEA killed that competitive process when the FIT and MicroFIT programs were established.

The Minister, Dwight Duncan, went on to say the following:

“Under the proposed legislation, the wholesale electricity market would continue to operate but there would be several changes in the oversight mechanisms. The Independent Electricity Market Operator, or IMO, would be renamed the Independent Electricity System Operator, or IESO. It would continue to operate the wholesale market and be responsible for the operation and reliability of the power system.”

The “wholesale electricity market” that Duncan spoke about has continued to be operated by IESO but what we have seen is that because of all those FIT generation contracts the wholesale market has shrunk and the hourly Ontario electricity price (HOEP) which averaged $49.40 per MW in June 2004 has fallen to an average of $31.50 for 2011 (a 38% drop) yet ratepayers now pay over 100% more for their electricity per kWh. Additionally the available “unregulated” electricity has been severely impacted as that electricity has been usurped by contracted intermittent renewable generation depleting the revenue stream for Ontario Power Generation (OPG) by over $1.8 billion in only the last 4 years (2007-2011). This has extended the period of time that the “stranded debt” will remain on the ratepayers electricity bills.

More from Minister Duncan in his presentation to the Legislature that day:

“Under the proposed legislation, consumers who do not wish to participate in the regulated rate plan would have other options, such as purchasing their electricity from energy retailers.”

By eliminating competition while shrinking the available supply of energy traded in the wholesale market the role of the “energy retailers” was reduced to one of simply guessing what the future price of electricity was going to be and adding a large margin. Retailers were left with almost no ability to hedge their future electricity purchases because they had no ability to hedge the Global Adjustment (GA) but their contracts allowed them to pass this on to their customers. In 2005 the GA was a credit of $7.48 per MWh (megawatt hour) and in 2011 was a charge of $40.10 per MWh (4.01 cents per kWh). So the option available to ratepayers to purchase their electricity from retailers became simply an option to pay higher prices than they would through their local, municipally owned, local distribution companies. Summing up his speech Mr. Ducan said:

“The proposed legislation is a start. By ensuring a reliable, sustainable and diverse supply of power at stable, competitive prices, and creating a conservation culture, we are delivering the real, positive change that Ontarians need and deserve.”

The ratepayers, big and small, in Ontario have seen the “change” that Duncan spoke about that day but it has been far from positive with 300,000 manufacturing jobs gone, electricity prices 100% higher and forecast to climb another 46% (per the Ministry of Energy forecast) by 2015.

Later in the Legislature the observations by Mr John O’Toole (Durham) spoke ominously of the future when he said:

“Minister, The consumers of Ontario should be put on notice today by you and this government that you have no intention of keeping any promises. This is yet another broken promise, because you are raising electricity prices.
Minister, you should know that your false commitment to shut down the five coal plants, which are laudable objectives, was hasty and reckless. You simply can’t remove 7,500 megawatts of generating capacity out of the system with no plan. How long is it going to take you to replace that lost generation capacity? The people of Ontario should be concerned, because at the end of the day, you, the consumer of Ontario — that’s you and I — are going to pay the price.”

It would appear that MPP O’Toole saw the future and didn’t like what he was seeing and perhaps didn’t even realize how much truth he spoke.

Later on during this legislative session the following exchange (abbreviated) between Howard Hampton and Dwight Duncan caught my interest:

“Mr Hampton: Public power does not rule out energy efficiency; in fact, it accommodates it. It does not rule out alternative energy; in fact, it accommodates it. I just want to point out to you: After California got in trouble with the privatization and deregulation move, what did they do? They created the California Power Authority, but it hasn’t brought power rates down. California is going to continue to pay those very high rates for many years.

So I ask the minister again, how do you think you can make this any more affordable than it was under the Conservatives when people’s hydro bills skyrocketed? How do you plan to make hydro privatization look different now?

Hon Mr Duncan: Unlike California, we’re regulating price and we’re using our hydroelectric and nuclear assets to do that. I would say to the member opposite, the Ontario Clean Air Alliance has endorsed our plan, the Consumers Council of Canada has endorsed our plan, and Constellation NewEnergy has endorsed our plan. We have had letters of support from the Dominion Bond Rating Service Ltd. What do you have against them?

I’d also say to the member opposite, somebody who opposes our plan was Tom Adams. He was a full supporter of the previous government’s plan.

As one can see from the foregoing exchange, the Minister of Energy received endorsements of his plan from a foreign energy company, a rating agency and the Ontario Clean Air Alliance (OCAA). We can probably assume that the energy company was “in it for the money” and the OCAA were endorsing their view that Ontario should shut down “coal generation” because it was reputedly costing Ontario’s health care system billions of dollars and DBRS were simply expressing the view that competition was a good move. It would have been more satisfying if some “expert opinions” like those of “Tom Adams” had been accepted rather then rejected, however Dunan apparently preferred to rely on those with vested interests to support his legislature. Today we are paying the price for the Minister’s apparent lack of foresight and if the OCAA get their way in the future our nuclear plants will also be shuttered.

Later in the debate Duncan had this to say:

“Our party is moving to protect consumers with a blended, regulated price that protects consumers large and small, will provide security to the sector and will encourage new generation in Ontario, something that never happened under his government or the previous government. This policy will work.”

The stability, competitive prices, security of the sector and protection of “consumers large and small” forecast by Duncan back on that day in June 2004 were a figment of his imagination and a legacy that will impact Ontario for decades. The “policy” he alluded to has been an abject failure!

Parker Gallant, January 22, 2012

Electricity and the Liberal Hansard History, Chapter 6

This is chapter 6 in a series by Parker Gallant:  Chapter 1;  Chapter 2:  Chapter 3Chapter 4; Chapter 5Chapter 7Chapter 8

My ongoing review of the Liberals pronouncements in the Legislature in 2004 and the results of those proclamations (with particular emphasis on the electricity sector in Ontario) continues, however, this chapter will wander off in a slightly different direction, for a brief period. In my review of Hansardfor May 5, 2004 the dissertations of Mike Colle, MPP for Eglinton-Lawrence caught my attention and were particularly noteworthy. Here is what Liberal MPP Colle had to say;

The provincial debt has been increased. If you include the hydro debt, it’s almost $140 billion of debt that they have on the books. Never mind the deficit; $140 billion. Do you know what it costs us to carry that deficit? It costs you, the taxpayers of Ontario, over $10 billion a year in interest payments on their debt. Next to health care and education, the third-largest bill we have in the province of Ontario is paying interest on the provincial debt. That’s what they left us with. They tell us, “You’re not holding up to your commitments.”

If one fast forwards to September 30, 2011 the debt that Liberal MPP Colle spoke about has increased to $251.9 billion, (an increase of 80% in the last 8 years) per the Ontario Finance Authority report. That debt doesn’t include the numerous contracts executed under the FIT and MicroFIT programs which will commit the ratepayers of Ontario to the payment of an additional $80/$100 billion over the terms of the contracts signed by the Ontario Power Authority (OPA) with $20 billion of that just for Samsung. It is worth noting that the average annual increase in debt ($14 billion per year since the Liberals gained power) exceeds the deficit of $5.5 billion in the preceding year (2003) by a factor of almost three (3)! Interest on the debt is still the 3rdlargest budget item in Ontario and will be much greater in the event interest rates rise or Ontario suffers a rating decline. Both of these are likely events within the next year.

This day’s records from Hansard also has other self adulation comments from the Liberals and this exchange between Liberal MPP Mr Mario G. Racco(Thornhill) and Dwight Duncan is telling:

My question is to the Minister of Energy. Friday, April 23, was Conservation Day in Ontario, and I had the pleasure of visiting a company in my Thornhill riding that produces energy-conserving devices such as smart meters. These smart meters allow energy consumers to easily and accurately monitor and control consumption under the tiered rate structure.I understand that our government is trying to build a culture of conservation in our province so that Ontarians spend less on energy and rely less on polluting energy sources such as coal while preventing the potential of more dangerous power blackouts, as we did experience under the Tory government. Minister, what is your ministry doing to encourage the use of energy-conserving devices such as smart meters by homeowners and businesses?

The response from Hon Dwight Duncan Minister of Energy, to this question was enlightening:

On April 19 of this year, Premier McGuinty announced the most broad-ranging and sweeping energy conservation program in the history of Ontario. At that time, we announced our intention to put smart meters into every Ontario home by 2010, with an interim target of 800,000 meters in place by 2007.We’ve also given the Ontario Energy Board clear direction and authority to establish rates with more flexible pricing to allow Ontarians to save money if they consume electricity in off-peak hours (emphasis). We’ll be working with the Ontario Energy Board to develop and implement requirements for the installation of smart meters in homes and smaller businesses. Large consumers already have interval meters, a type of smart meter. We’ll allow local distribution companies to begin investing approximately a quarter of a billion dollars, the largest investment in conservation in the history of the province.This government is moving fast and solidly to build and improve a conservation culture in the province of Ontario.”

Minister Duncan did deliver on the installation of those “smart meters” which have added costs to all ratepayers bills under the “regulatory” line however the benefits of them are highly suspect. In my opinion all ratepayers in Ontario would find Duncan’s claim that smart meters would “save money if they consume electricity in off-peak hours” to be a lie as rates for “off-peak” have risen from 4.7 cents per kWh (all electricity no matter the time of use) on May 1, 2004 to 5.9 cents per kWh on November 1, 2011 which is a 25.5% increase (3.2% per annum) during a period of time when inflation prices increased at 2% per annum or less. The Duncan pronouncement wouldn’t even prove valid if all consumption was switched to off-peak. On-peak rates have increased since his dissertation on May 5, 2004, by almost 130%. Unless usage fell by 40% or more no one would “save money”!

Addressing the”conservation culture” that Duncan spoke of on that day is another dizzying array of spending to accomplish little as was evident from the Environment Commissioner’s reportannounced December 7, 2011 and the OPA’s report released on December 23, 2011.
The Environment Commissioner’s report had the following to say about electricity conservation: 

“By investing about $1.7 billion in conservation programs from 2006 to 2010, Ontario saved electricity ratepayers $3.8 billion in avoided electricity supply costs.”

The OPA’s report had this to say: 

From 2006 to 2010 Conservation programs have seen an investment of $1.7 billion and have saved ratepayers $3.8 billion in avoided costs.”

From all appearances it would appear that either the OPA agrees with the Environment Commissioner or vice versa. A nice co-incidence perhaps! If you actually examine where the reduced consumption occurred for both the overall ”average” and “peak” usage designations (claimed 1751 MW) you discover that the bulk (1000 MW) of the claimed conservation was due to reduced wholesale demand caused by the 300,000 manufacturing jobs that have disappeared in the province since the 3rdquarter of 2003. The savings of the residual 750 MW cost the ratepayers of the province $1.7 billion dollars which works out to about 26 cents a kWh but our high electricity prices may have cost the loss of many of those good paying manufacturing jobs which also reduced tax revenues and drove up the province’s debt. The ultimate cost of that conservation was considerably more than stated in either of those two reports. The Environment Commissioner did note that the “smart meters” were virtually useless in determining if time-of-use pricing played a roll in the conservation reported. Perhaps he should have said this has cost the ratepayers over $2 billion and no conservation benefits could be detected.

May 4, 2004 was “Opposition Day” and Mr John R. Baird (Nepean-Carleton)brought the following motion before the house: 

“Be it resolved that the Legislative Assembly call upon the government, To recognize that the Premier ruled out raising taxes over the course of the last election — just six short months ago by saying the following: “We will not raise taxes one cent on Ontario families,” 

While the motion was about the health “user fees” that Premier McGuinty insisted were not taxes the response from the Liberals to this motion enlisted some interesting comments including this one from Brad Duguid.

We’re seeing political hacks being paid millions of dollars. We’re seeing billions in overpayments, billions of dollars of over-budgeting for projects in places like Pickering, $40 million spent on the so-called dream team. What did that get us? It got us an energy plan that is absolutely unsustainable right now. Thank goodness we were elected last October to get this problem cleaned up. Thank goodness we have a minister who understands that some tough decisions have to be made on the energy file, and we’re going to proceed proudly to make those changes.”

Looking back many would note that over-budgeting is probably NOT what MPP Duguid actually meant. What it appears he meant was spending exceeded the budgeted amount. This is something that the Ontario Liberals have delivered on in most portfolios and one of the reasons for the province’s current fiscal problems. It is also interesting that Duguid referred to “an energy plan” as we are still waiting for one to emerge from the Liberals despite all the rhetoric since their election in 2003.

This problem” that MPP Duguid referred to has not been cleaned up and in fact has grown worse and was caused principally by that esteemed “minister” he referenced, and by George Smitherman, when he was the Energy Minister and of course by Mr. Duguid himself during his tenure as Energy Minister.

Parker Gallant,
January 10, 2012

Where’s George? Reaching into Ontarians wallets!

The “Where’s George” websitewas initially established to track American currency, however we Ontarians should set one up to follow the activities of our former Minister of Health and Minister of Energy and Infrastructure, George Smitherman.
The former Energy Minister, George Smitherman is still trying to reach into our pockets in spiteof “Following his unplanned retirement from politicsas lamented on his website. He also posted his submissionto the Ontario Power Authority in respect to their current review of the FIT and MicroFIT programs under the new Minister of Energy, Chris Bentley. The submission is a double spaced 22 page ramble that uses the word “transparency” 16 times, mentions health only in the context of “clean air” and completely ignores other noise relatedhealth issues that have moved from merely anecdotal to scientific and peer reviewed. The submission includes two pie charts relating to FIT and MicroFIT applications and their respective percentage of generation. The submission by his company is full of one-sided hype expounding on the virtues of renewable energy while ignoring the economic impact to Ontarians. Much like the press releases emanating from former and current Liberal Energy Ministers it hyperboles its way with the usual words about “creating 50,000 jobs in three years”, “leading jurisdiction for renewable energy jobs and investment in North America”, “vibrant”, “incent proponents, large and small, to develop projects by offering an attractive price” etc.
Smitherman sincerely wants the largesse to continue particularly now that he has been appointed to the
Advisory Board of Inerjys Ventures, a “$1 billion renewable energy strategic investment fund and global leader in green finance.”

The OPA submission by Mr. Smitherman makes no mention of the foregoing however the Board Advisory appointment was recent (January 9,2011) and the submission to the OPA was completed on December 14, 2011 almost a month ago. I’m confident that if a conflict of interest in this matter existed Mr. Smitherman would have declared that in his submission.
Mr. Smitherman did dutifully register with the Ontario Lobbyist Registry back in June 2011 just about the time he was contracted by the Municipality of Greenstone. Greenstone want to benefit from the exploitation of the “Ring of Fire” by securing the building of a chromite processor on the outskirts of Nakina and Aroland First Nation and they hired Mr. Smitherman as their saviour believing he will convince Cliff Resources to build the refinery in their Municipality. Cliff Resources have noted that over the projected 30 year life of the contract it would cost them an extra $1 billion in electricity costs and are looking to either Manitoba or Quebec for the establishment of the processing unit. So the man most responsible for high electricity prices, that has driven jobs out of the province (Xstrada moved their refining operation to Quebec because of electricity prices) now has the task of trying to convince Cliff Resources to refine the chromite in Ontario. As the expression goes, it would appear that George has been “hoisted by his own petard”!
Smitherman however is noted as a fighter and to that end he intends to do what he can to win the battle for Greenstone. The Lobbyist Registry indicates that when he filed his company’s application last June he completed the “G.1. Government Funding” section and entered the following;
Is your client funded in whole or in part by any government?
If so, then list the government agencies:
— Province of Ontario – standard transfer funds (information pending), 0;
— Northern Ontario Heritage Fund Corporation – Aviation Service Business Park expansion, 692,700;
— Northern Ontario Heritage Fund Corporation – Beardmore Multipurpose Building, 655,000;
— Northern Ontario Heritage Fund Corporation – High Hill Breakwater Development, 400,000;”
The funding that Greenstone will receive is not necessarily going to be used to pay Smitherman, however one wonders if somehow he helped the municipality chop through the red tape that is often in the way. His biocertainly makes him out to be a “walk on water” type with claims like these; “During his time in Cabinet, he was responsible for the allocation of more than $250 billion Canadian Dollars.” and “His tenure brought significantly improved access to doctors and nurses. Ontario’s Family Health Team model, which serves more than 3 million Ontarians, was pioneered during this period.”
As one would expect the cornerstone of his lobbying efforts to convince Cliff Resources to process their ore in Ontario is predicated on the Provincial Government spending lots of ratepayers money. His proposal includes a new gas generating plant at either Exton or Geraldton, a hydro development (Little Jackfish) and a major expansion of transmission lines and the grid by Hydro One. There is no costs mentioned in the proposal but the list of who will pay includes; Hydro One, OPG, the Federal Government, Provincial Infrastructure Investments, and ratepayers. Perhaps Mr. Smitherman still doesn’t understand that all of the foregoing are either funded by taxpayers or ratepayers or perhaps he just doesn’t care. At the end of the day it is difficult to see how all this spending will somehow reduce the cost of electricity for Cliff Resources and entice them to build their refinery in Ontario but maybe Smitherman has another plan that he will launch at a later date.
I think most Ontarians are familiar with Mr. Smithermans ability to spend our money but perhaps were unaware that he continues to believe that he still has access to our wallets.
Parker Gallant,
January 11, 2012   

Electricity and the Liberals Hansard History, Chapter 5

This is the fifth chapter in a series by Parker Gallant:  Chapter 1;  Chapter 2:  Chapter 3; Chapter 4Chapter 6Chapter 7Chapter 8

This is the next chapter in this look back at the promises made by the McGuinty Liberals in 2004 following their first majority government. In this review we see how the Liberals developed their electricity policy and how it affected the maufacturing sector in the province. The Ontario Legislature’s sitting on May 3, 2004 had a robust question period about this policy development with lots of cut and thrust queries and responses as noted in Hansard.
MPP Howard Hampton in questioning the Energy Minister zeroed in on an issue of his concern referring to the sale of Ontario Hydro assets to Brascan; “That was a great deal for Brascan, but a terrible deal for Ontario electricity consumers. Minister, will you confirm today that you will not sell any hydro generating stations to Brascan or any other private power company?
The response from Dwight Duncan, Minister of Energy was unequivocal:We will not sell off assets like the Tories did. We will also not jump into the harmful policies of the Tories and the NDP. Our government is taking a balanced approach to energy policy.” He went on later after further questioning, to state;

We already launched an RFP last week for 300 megawatts of renewable energy, the first time in Ontario’s history, and soon we’ll be launching an RFP for 2,500 megawatts of new electricity in this province to help address the problem that was left by previous governments.” and delivered a sharp rebuttal as the following attests;
That member and his policies were rejected by the people of Ontario last fall. Dalton McGuinty and his government are taking reasonable steps to ensure that adequate, fair and affordable electricity is available for all Ontarians.
Looking back at Minister Duncan’s remarks that day in the Legislature it is interesting to note the co-incidence between the 2500 MW announcement and the 2500 MW deal that another Energy Minister negotiated (George Smitherman) a few years later and yet another Energy Minister, Brad Duguid signed. The latter 2500 MW is the controversial Samsung contract.

The OPA did eventually get their marching orders in September 2004 from the Minister and executed most of the contracts to fufill the first 2500 MWs that Minister Duncan announced on May 3, 2004. Most of the contracts signed were gas related and included the Mississauga gas plant which was mentioned in the OPA’s 2005 annual report. This plant was cancelled by the Liberals mid September 2011, just two weeks before voting day, in an effort to save two Liberal seats. The ratepayers and taxpayers of the Province are still waiting to find out what that will cost.
On the Minister’s promise to “ not sell off assets” Dwight Duncan was certainly truthful however, those assets have been weakened substantially as the OPG’s generating capacity and output have dropped (refer Chapter 3) thereby reducing OPGs value.
As ratepayers and taxpayers we must take issue with his comment referencing “fair and affordable electricity is available for all Ontarians” as we have had to endure rising electricity prices and their effects on the Ontario manufacturing sector.
Just over one year after Duncan’s address in this sitting the foregoing was brought to light by the Economics Division of the Parlimentary Information and Research Service as they delivered a reportdated September 22, 2005 to Parliament that contained the following;

Ontario is Canada’s industrial heartland and long-time economic engine. To a large extent, that engine is powered by the supply of relatively cheap, reliable electricity, which has played a key role in the development of the province’s energy-intensive sectors such as manufacturing, chemicals, paper and metals.Today, there is growing anecdotal evidence that the lack of a reliable and low-cost supply of electricity [emphasis is the writer’s] is becoming a competitive disadvantage for many businesses operating in Ontario. For example, the Ontario Minister of Natural Resources’ Council on Forest Sector Competitiveness has warned that rising electricity prices are putting enormous pressure on the province’s already beleaguered forest industry. This industry, which employs some 85,000 people and is described by the Council as the economic bedrock of northern Ontario, has long depended on low-cost electricity, since electricity can account for up to one-third of operating costs.The Government of Ontario has pledged to close all existing coal-fired generating stations by 2009 in an effort to clean up Ontario’s air and reduce greenhouse gas emissions, which are linked to climate change.
Most environmentalists and health care professionals strongly support the government’s plan to phase out the use of coal by the beginning of 2009. But electricity experts are concerned about the impact this rapid change could have on the reliability of Ontario’s electricity grid.The IESO has characterized this initiative, the cornerstone of the government’s electricity strategy, as the “largest and most significant electricity system change ever undertaken in Ontario,” as it will remove 6,434 MW of generating capacity from the grid, representing approximately 21% of the current total.“

So a little over a year after Duncan’s remarks in the legislature, the Federal Government received a disconcerting report that Ontario, Canada’s “long-time economic engine” was in danger because of the lack of a reliable supply of relatively cheap electricity. That damning report and the concern expressed therein did not alter the drive by the Liberals to continue their push for expensive intermittent electricity-instead they subsequently passed the Green Energy Act which has futher accelerated the drive to create an uncompetitive environment for industry.
As further evidence the Ontario Forest Industries Association in their January 2011 pre-budget appeal to Minister of Finance, Dwight Duncan had this to say as a “Made in Ontario challenge”;

 “Despite the anticipated recovery of global markets, and the desire to put Ontario’s wood back to work, Ontario’s renewable forest sector continues to face numerous, significant “home grown” made in Ontario challenges. The continuous loss of industrial wood fibre through untested public policy, uncompetitive electricity rates,and government red tape have all contributed to the creation of an uncompetitive economic environment in Ontario.

Elsewhere in the report they make this observation; “All of these regulatory and policy initiatives have sent a clear and unfortunate message to industry – Ontario is not open for business. Instead of developing policies that stimulate growth and incite investment, the Ontario government has focused its attention over the past several years almost exclusively to protectionist agendas and unnecessary and untested initiatives that instead have only served to create considerable uncertainty, stagnate development and reduce economic investment.
Looking further the Canadian Federation of Independent Business in it’s presentationto George Smitherman July 13, 2009 noted “Fuel, energy costs” as their # 1 concern and made three recommendations:

  • Price matters! It should not be a “given” that electricity costs are inexorably rising. The Global Adjustment Mechanism must not be allowed to grow out of control.”
  • Lots of onservation programs-not many suited to the SME sector. Allow businesses to choose programs that are suited to them, as opposed to having them imposed by LDCs or the OPA.”
  • Ensure RPP and TOU fairness for small business. CFIB continues to warn that implementing TOU without understanding impacts may endanger businesses and jobs.”

The foregoing hard evidence from two of Ontario’s biggest group of employers supports the premise contained in the Auditor General’s report of December 5, 2011 wherein he states: “We also noted that studies in other jurisdictions have shown that for each job created through renewable energy programs, about two to four jobs are often lost in other sectors of the economy because of higher elec­tricity prices.
The Auditor General’s report had this to say about the Global Adjustment:

By 2014, the GA is expected to be 6¢ per kilowatt hour (kWh)—almost two-thirds of the electricity charge—and will be almost two times more than that year’s projected HOEP.Based on our analysis of OPA data, renewable energy contracts will contribute significantly to increases to the Global Adjustment. As illustrated in Figure 3, the total GA is expected to increase tenfold province-wide, from about $700 million in 2006 to $8.1 billion in 2014, when the last coal-fired plants are phased out. Almost one-third of this $8.1 billion is attributable to renewable energy contracts.”

Premier McGuinty and his Liberal Ministers have failed to deliver on his promise to bring “fair and affordable electricity” to Ontarians and instead has changed the “ anecdotal evidence” cited by the Federal report of almost 6 years ago into hard evidence that the Liberal policies have cost Ontario good well paying jobs in the manufacturing and forest product sector.
Some legacy!
Parker Gallant,
January 7th, 2012

Parker Gallant: Green Energy Agenda usurps Property Assessment and Municipal Tax Base

The Ontario Liberals, via the Ministry of Finance, gave marching orders to the Municipal Property Assessment Corporation (MPAC) yesterday tellingthem to not increase assessments for “property owners who install renewable energy technologies”.
Property assessments increase when property improvements are made. As soon as a building permit is issued the municipality sends a copy to MPAC. That permit copy is used by MPAC to increase the assessed value of the property and the following year property owners pay additional property taxes because of the increased assessment.

The headline on the Government press release read; “Improving Property Tax System for Green Energy“ but it comes at the expense of others who can’t afford the installation costs. This change will impact municipal tax revenue increases that have normally accrued though the issuance of those building permits.
The press release carried the endorsement of Dwight Duncan, the Minister of Finance who will soon be told by economist Don Drummond to slash spending or miss (by years) balancing the budget by 2018. Minister Duncan had this to say in the press release: “Ontario is leading the way when it comes to producing reliable energy from clean, renewable sources. These changes will help ensure that property tax assessment does not discourage property owners from contributing to a green energy system that supports a cleaner environment and healthier families.” The message is clear; if you have the money to invest in renewable energy Ontario ratepayers and taxpayers will ensure you earn a healthy return!
As an example; the costs of a solar installation of say 10 kilowatts (kw) will cost from $58/$80,000 depending on location and whether it will track the sun’s movement. Under the MicroFIT program the installation is estimated to generate from $93/$150,000 profit (over 20 years) depending on the installation type chosen.
Mr. Duncan’s salvo against the municipalities will not help achieve a balanced budget for the province and might make it worse if he weakens the municipalities tax base. Those municipalities (mainly rural) with lots of small installations of wind, solar and anaerobic digestion electricity generation will be knocking on the doors at Queens Park or face the ire of their local property owners who will see the mill rate and their taxes increase. Building permits, which normally signal increased municipal tax revenues will mean nothing other then the fees collected for the permits.
The Association of Municipalities of Ontario (AMO) has an MOU (memorandum of understanding) with the province and their website contains the following message under their “Mandate”; “The MOU provides the opportunity for municipal input and reaction to provincial policy ideas (pre-consultation) so that they are fully informed as part of any provincial policy making process.” We understand that AMO was “aware” of the plan by the Finance Minister to direct MPAC to treat the assessment of renewable energy installations differently but the extent of the “pre-consultation” process was not fufilling and AMO has sought clarity.
AMO has taken issue with many aspects of the FIT and MicroFIT programs as is evident from their submissionof December 6, 2011 to the Ministry of Energy and the Ontario Power Authority (OPA) wherein they have made 14 recommendations to improve their role in these programs. It appears the fallout of the Finance Ministry’s press release of January 4, 2012 treats the municipalities with the same respect as they were given under the Green Energy Act—absolutely none!

Parker Gallant,
January 5, 2012

Electricity and the Liberals Hansard History Chapter 4

This is the fourth chapter in a series by Parker Gallant:  Chapter 1;  Chapter 2:  Chapter 3Chapter 5Chapter 6Chapter 7Chapter 8

The review of the Liberals actions on the electricity sector continues and this chapter will deal with conservation and smart meter issues raised in the Ontario Legislature and recorded in Hansard. The following response from the Hon Dwight Duncan, Minister of Energy occured on April 20, 2004 in respect to a question from Liberal MPP, David Zimmer (Willowdale). MPP Zimmer was asking how the 5% conservation target would contribute to a “new culture of conservation in Ontario?” and got the following response; Hon Dwight Duncan (Minister of Energy, Government House Leader): 

The member is right, this is a challenging target that we’ve set: 5% by 2007, 10% by 2010. Yesterday’s announcement by the Premier empowers Ontario electricity consumers by providing them with the knowledge, the tools, the opportunities and the incentives that will allow them to achieve very significant energy savings.

The announcementby the Premier the previous day had a myriad of initiatives including; conservation reduction, smart meters in every home by 2010 that would allow people to save money, developing regulations for net metering, spending money ($225 million) for community based conservation programs, launching a public education and outreach campaign and creating an “Ontario Power Authority that would include a “Conservation Secretariat”.

That announcement covered a lot of ground that should be examined today to determine if those goals generalized by Premier McGuinty and specified by the Minister of Energy in the Legislature, have been achieved.

The 5% reduction via conservation would entail a drop of 7.5 TWh from the 152 TWh we consumed in 2003 by 2007 and a 16 TWh reduction by 2010. Needless to say we didn’t achieve those lofty goals as consumption in 2007 was 152 TWh. Consumption in 2010 however did drop to 142 TWH but the drop had more to do with the fact that Ontario lost over 300,000 manufacturing jobs between the 3rd Quarter of 2003 and the 3rdQuarter of 2010 and consumption of “peak” hour electricity by large industrial users indicates it is down by close to 8 TWh. Is that what the Minister had in mind when he told the Legislature about his plans or the Premier actually meant?

We can give the Premier full marks for his promise that would see smart meters in every Ontario home and business by 2010 but the full cost of that has never been disclosed. We are aware that Hydro One reported that they spent $700.54 per household as reportedinstalling their version of the smart meters which indicates a cost to Hydro One for their 1.3 million ratepayers of $900 million. If the other 3.3 million provincial ratepayers smart meter costs were only 50% of that figure another $1.2 has been spent adding over $2 billion to what those ratepayers will need to pay without any benefits. It is difficult to find any evidence that those smart meters have allowed anyone to “save money” as he also promised. The benefit to the Province has enabled them to set time-of-use rates that ensure ratepayers are billed at levels as much as 130% higher per kWh then in 2004. The Environment Commissioner in his report released December 7, 2011 indicated the smart meters cannot even be used to determine if any shifting of demand has occured. A large part of the claimed conservation was recently shown to come from reduced demand from the manufacturing sector as jobs have left the province. Still to hit the ratepayers will be the billions in planned spending to produce the “smart grid” with IESO alone noting their requirement is in excess of $1.5 billion.

In respect to the Premier’s promise that “net-metering” regulations would be established we can find no evidence this low cost option was even pursued as the OPA never received a Ministerial directive to develop it. Instead, they embarked on setting contract prices under several programs eventually replaced by FIT and MicroFIT contracts that paid above market prices decreed by the Energy Minister, George Smitherman shortly after the Green Energy Act was passed.

The “community based” spending program, in the Premier’s announcement appeared to be $225 million in total and is spent on, coupons, rebate programs, media ads and costs involved in picking up old fridges and is well over $300 million per year. Additional to that annual spending is the reclaiming of revenue lost through conservation by the local distribution companies (LDC) for “revenue deterioration”. Ratepayers will find their LDC applying to the Ontario Energy Board (OEB) for recovery of that lost revenue as noted in a recent applicationby Toronto Hydro as just one example.

Later in the sitting of the Legislature on April 20, 2004 the Energy Minister Hon Mr Duncan said: 

Smart meters are a key conservation tool. With this technology, consumers will be able to see, understand and learn when it’s appropriate to adjust their electricity use. Smart meters will also allow consumers to benefit from time-of-use rates. These rates will benefit consumers who use electricity when demand is lower. Many consumers who currently use electricity during these times will now be able to benefit from these rates. Not only do smart meters help consumers use electricity during peak demand periods, but they also benefit their local system and grid by keeping costs and prices down even more.

Perhaps the “benefit” referred to in Minister Duncan’s remarks was meant to pass as the “cost/benefit” analysis that the Auditor General indicated was not used by the Liberals in his reportreleased December 5, 2011 critizing the Liberal Government for their failure to complete those analysis in respect to their renewable energy push.

Just a couple of days later on April 22, 2004 Hansard records this from Leona Dombrowsky, Minister of the Environment: 

We are also taking action to improve air quality. We are committed to shutting down the coal-fired generating plants that produce smog-causing pollutants and greenhouse gases. It will not be easy, especially given the shambles of Ontario Power Generation and the strains on our power grid, but there are alternatives. I am heartened by the success of projects such as Toronto’s first windmill.

The Exhibition Place windmill is the poster child for the Liberals and is reverently mentioned by them whether in the Legislature or in interviews yet it has performed abysmally and has been nothing more then a complete waste of money. It has had operating problems since it was first erected including a recent bearings replacement that cost $200,000.

So looking back the Liberals have spent in excess of $2 billion on smart meters, plan to spend billions on the smart grid and have spent billions more on their conservation efforts all without a cost/benefit analysis. None of those billions will produce any additional electricity or financial benefits for the province. Any analysis done would clearly show the costs of the Liberal dictates, but would indicate benefits; from a financial and conservation side to be lacking. The unfortunate happenstance however is that all of the costs of those efforts are finding their way onto the ratepayers bills.

Some legacy, some benefit!

Parker Gallant,
January 2, 2012