Hydro One: Exploiting the Exploitable

With 25% of captive clients purchasing only 18.6% of the product sold in the market how can you increase your profits (after tax) by 135% in only 6 years, and beat your competition in gross profit by 91% in a regulated market?

For an exercise in marketing moxie and an answer to the above question one need only look at Hydro One, the Provincially owned distributor (and transmitter) of electricity in Ontario to 25% of (mainly rural) captive ratepayers. As the Sarah Vaughan song goes; “whatever Lola wants Lola gets”, except in this case it becomes whatever Laura Formosa (CEO of Hydro One) wants they get and their ratepayers pay dearly for the love that the Ontario Energy Board (OEB) has for them.

The Yearbook of Distributors for the year ended December 31, 2011 discloses the above facts and several more about Hydro One versus the other 74 municipally owned local distribution companies (LDCs) in the province. Hydro One actually pay 15.2% less for the cost of power per customer (a pass through at cost) but collect $493.00 (91%) more in gross profits and $107.00 (122%) more in after tax (payments in lieu of tax or PILT) profit per customer. The reason that extra $493.00 in Gross Profits doesn’t find its way to the bottom line is because Hydro One has much higher operations, management and administration costs (OMA) and higher amortization costs on their capital assets which are respectively $216.00 (91%) and $49.00 (73%) higher per customer.

When Hydro One apply for rate increases they inevitably use the excuse for needing higher pricing on the fact that they claim to provide service to almost all of Ontario. In their submissions to the OEB they state they provide electricity distribution to 650,000 sq km versus the 681,511 sq km encompassing the total area all distributors (including Hydro One) serve. So Hydro One claim they service 95.4% of all areas in the province that have a connection to the grid and the area is all rural!

While the above fact might be true if Hydro One were making that claim on behalf of their transmission (where they have a virtual monopoly) and distribution businesses combined, that would make sense, but this submission is only for their distribution business. In fact, putting aside their ownership of Hydro One Brampton (not included in the foregoing or below statistics or calculations) the distribution arm has many urban communities which include a number of what most would consider small cities like Belleville, Trenton, Lindsay, etc or numerous larger towns throughout Ontario. Despite that Hydro One claims all of the area they distribute to is “rural”. Many other distributors such as Oshawa Hydro, PowerStream, etc. break out the area they serve as both rural and urban. Despite the false claim by Ontario Hydro that they serve over 95% of the electrified province the OEB does not seem to challenge them on that issue and generally give them the rate increases they seek.

Yet another interesting piece of information can be gleaned with a little mathematics from the “Yearbook” relating to the percentage of “delivery” costs for the average ratepayer. For the 74 municipally owned LDCs, the delivery cost averages 20% of their ratepayers total bill (including “costs of power”) whereas the delivery cost for Hydro One ratepayers averages 36% of their ratepayers bill and they deliver an average of 580 kWh less per month. Perhaps “rural” Ontarians need to consume more power delivered by Hydro One if they want to see better economies of scale but that would mean that Hydro One would catch the ire of the OEB for not meeting their conservation targets. Is Hydro One’s conservation plan simply raise the price and they will consume less? On the latter; its not working, as the average consumption of a Hydro One customer in 2005 (1740 kWh per month) was the same as it was in 2011 (1739 kWh per month) but at that time Hydro One’s delivery costs were only 31% of their average ratepayers bill. So raising the delivery price is not achieving the desired results except for a one (1) kWh per month reduction. The OEB set the reduction target for 2011-2014 at a cumulative target that works out to 78 kWh per month for Hydro One’s average customer so we should perhaps expect to see their delivery prices rise at a faster rate over the next 2 years in the hopes they will deliver on the goal set for them.

It now appears that the Green Energy and Economy Act (Act) not only imposed giant wind turbines and acres and acres of solar panels on rural Ontario but they also got the double whammy of having all-in electricity bills that are consistently higher then the larger urban centres and likely to remain so.

So rural communities, the breadbasket of the province, not only have had their democratic voices taken away by the Act but they also pay higher prices for electricity that goes into producing the foods that people in the large urban centres consume. The next time they buy their milk, eggs or fresh produce they will hopefully blame it on the Act imposed by the Liberal Government and those Hydro One people on Bay Street in Toronto, where they whip up their rate applications to the OEB so they can impose the highest electricity costs on Ontario’s farmers.

It is time to tell Lola she won’t get what she wants and the decimation of the Liberal Party in rural Ontario in the last general election certainly conveyed part of that message.

Parker Gallant,
September 26, 2012

Atikokan Conversion – Another Seat Saver for the Liberals!

In the October 7, 2011 Provincial election, MPP Bill Mauro, Thunder Bay Atikokan, beat out the NDP candidate with 39% of the vote versus 37%. The winning margin—less then 500 votes!

Ahead of that victory by MPP Mauro however, there was a major issue that affected the outcome of the election and it related to a wind development at Big Thunder. The planned development had generated a major push-back by the residents of Thunder Bay who fought their local council on granting the developer, Horizon Wind Inc., rights to access Big Thunder Mountain. The company sued the City for $126 million when the city backed out of their agreement to allow them to erect only 14 turbines (instead of the original 18 the Thunder Bay council had originally approved) on city owned land. Then on September 11, 2011, shortly after the election writ had been dropped; the then Minister of Natural Resources, Linda Jeffrey, refused to issue the developer a permit because it would harm a bird species. Despite the foregoing the developer continues to push ahead on the contract and the eventual outcome, at this point, is still an unknown but Linda Jeffrey has moved on to another portfolio.

By the September 11, 2011 date the Minister of Energy, Brad Duguid, had announced the conversion of the Thunder Bay coal plant to gas in a press release on November 23, 2010 and the Long Term Energy Plan (released on the same day by the Energy Minister) indicated that the 200 MW Atikokan coal plant would be converted to biomass. Since then we have seen other announcements from current Energy Minister Chris Bentley with one on July 19, 2012 and another September 12, 2012. Both announcements promised 200 construction jobs as did the contractor Aecon who won the award for the conversion project at a cost of $170 million. It is worth pointing out that Aecon have contributed in excess of $45,000 to the Liberal Party of Ontario over the past four years and the CEO sat on the Board of Directors of the Ontario Power Authority (OPA) almost since its creation by Dwight Duncan, when he was the Minister of Energy.

It is important to review the contribution of the 200 MW Atitokan coal plant to Ontario`s electricity supply over the past couple of years to determine if it is or was needed. In the last two years it has produced power at 2.6% of it’s capacity which means it hasn’t been needed to support Ontario`s power demands. Had it run at full capacity it could have provided approximately 1.7 million megawatt hours (MWh) annually (enough to power about 175,000 homes) far exceeding the riding’s needs whose population is about 85,000. Additionally the conversion to biomass (which will use wood chips as fuel) will reduce its ability to produce power. In fact according to a filing dated June 30, 2011 by the OPA to the Ontario Energy Board (OEB) the maximum capacity will be 140 GW per year (140,000 MWh) based on fuel availability. That means upon conversion it will operate at a maximum of 8% of capacity.

The foregoing OPA submission also makes the case for expenditures of $600 million to create a new

East West tie line (transmission) at a cost of $600 million in anticipation of activities related to the “ring of fire” and the possibility of some recovery in the pulp and paper sector. Both of these combined with the unknown quantities of hydro electric power; from mainly run of river hydro stations during low water level seasons could cause problems in respect to having sufficient power available to service the region.

Couple the foregoing with the plans for 200 MW of renewable energy (wind and solar) in the region and that will mean excessive volatility. The east/west axis tie line will require the upgrade to ensure reliability and the ability to import (and occasionally export) power from other regions.

What this means is the expenditures caused by adding intermittent wind and solar to the grid and downgrading/converting the Atikokan facility will create spending requirements of close to $1 billion dollars when the subsidies to wind and solar are taken into account.

Ignoring the foregoing expenditures on the East/West tie line and the feed-in tariff (FIT) subsidies for wind and solar the Atitokan facility’s cost of $170 million (capital costs) means that each of those 200 construction jobs promised in the two Provincial press releases and the Aecon announcement will cost Ontario`s ratepayers $850,000 each or $425,000 per employment year (assuming the project is completed by 2014 as the Aecon announcement suggests).

If we examine the amount of energy that Atikokan can produce at 8% of its rated capacity, (outlined in the OPA submission to the OEB) over say a 20 year lifespan it will cost about $61.00 per MWh in capital costs without factoring in fuel costs or the operation, management and administration (OMA) costs. The fuel cost is a big unknown but OPG has put out a “request for indicative prices” for 90,000 tons per year to supply Atikokan. An August 2008 study by Deloitte & Touche LLP indicated the cost per ton of wood pellets at $420., so fuel costs could add almost $38 million per annum to the cost of production of that 140,000 MWh ($270.00 per MWh) if the refurbished plant requires the full 90 thousand tons to produce at 8% of rated capacity. That brings the per MWh cost to $331.00 without inclusion of the operations, management and administration (OMA) costs. Even if OPG is able to purchase the pellets at half the price of the Deloitte forecast amount the cost of production at Atikokan will still be in excess of $275.00 per MWh or more then 12 times the average hourly Ontario energy price (HOEP) to the end of July 2012 (Independent Electricity System Operator). Assuming fuel costs come in at the latter level for the next 20 years; total costs of this conversion will mean Ontarians spent $770 million dollars to ensure MPP Mauro’s seat remains in Liberal hands.

At this juncture the cost to the taxpayers and ratepayers of the Province for each of those slightly less then 500 extra votes that MPP Mauro received (not including the costs of converting the Thunder Bay coal plant to gas or the $600 plus millions being spent to improve the East West tie line) are about $1.5 million for each one of those 500 votes.

On behalf of all of the rest of Ontario`s taxpayers I certainly hope those 500 voters are happy with the outcome because the rest of Ontario’s ratepayers and taxpayers will be paying for the costs of your votes for years to come.

Parker Gallant,
September 22, 2012

Ontario’s Power Trip: Happy FIT day | Parker Gallant

Wind and solar now cost $4-billion a year

Ontario’s Power Trip: Happy FIT day | FP Comment | Financial Post:

Pop the champagne, Ontario. September is the third anniversary of one of the most expensive and least useful experiments in top-down central planning in the province’s history. Three years ago, the Ontario Power Authority (OPA) released the original pricing model for the Feed-In Tariff (FIT) and MicroFIT programs after the passing of Bill 150, the Green Energy and Economy Act, in the spring of 2009. Under FIT, the Ontario government set sky-high prices for wind and solar power: wind generation at 13.5¢ per kilowatt hour and solar generation as high as 80.2¢ per kWh.

The original pricing model was revised down slightly earlier in the current year, a move that has done little to stem the flow of applications. As of last month, OPA reports applications for 12,000 megawatts for wind and 8,500 MW for solar, numbers that dwarf the government’s long-term target of 10,700 MW by 2030 for wind and solar combined — a clear indication that FIT and MicroFIT pricing has caused developers to salivate at the returns being offered.

As for the revenue, under Ontario’s magic FIT program, the $14-million will be paid by all Ontario electricity ratepayers. In effect, Ontario electricity consumers will help defer Toronto’s municipal tax increases. Essentially, the city of Toronto’s solar-panel revenue becomes an indirect tax on all Ontarians. In addition, the power that will be produced at 48.7¢ a kWh is power that Toronto currently buys at 7.2¢ per kWh (based on its filing with the Ontario Energy Board). Had the city purchased the $15 carbon credits along with the electricity at the foregoing rates, it would have saved ratepayers $1-million per year.

Continue Reading at the Financial Post:

MPAC documents show some Wolfe Island property values plummet by over $100,000

An article in the Mitchell Advocate last week referenced MPAC lowering assessments on Wolfe Island.  Quixotes Last Stand now provides some specific properties.

MPAC documents show some Wolfe Island property values plummet by over $100,000 | Quixotes Last Stand:

Here are the addresses of residents (near the wind project) who were granted assessment reductions of over $100,000 by MPAC in the Township of Wolfe Island from 2008 until Jan. 2012.

Reduction

82 – Oak Point Rd. -$118,000
23 – Nine Mile Point Rd. – $143,000
429- Nine Mile Point Rd. -$119,000
433 -Nine Mile Point Rd. -$117,000
496 -Nine Mile Point Rd. – $107,000
136 – Lucas Point Lane – $101,000

Some of these properties are on Wolfe Island and the rest are on Simcoe Island. Simcoe Island is located just off the west end of Wolfe Island where the Wind Project is sited (see map attached). According to an e-mail I received from Gail Kenney (the prominent resident appealing their ARB decision on Wolfe Island) the Wind Project can be seen and heard from most of the south shore of Simcoe Island. She indicated that property sales have all but shut down on Simcoe Island. She now has this list from MPAC as well (they did not have it at the time of their ARB hearing).

Read the rest of the article at Quixotes Last Stand:

The Kenney’s MPAC assessment  appeal was reported on a number of places, including here.
Notably, and unusually for a property assessment appeal, MPAC had a lawyer as did the Township of Frontenac Islands.
Perhaps the lawyers were procured not because MPAC felt the Kenneys were wrong, but because they felt the Kenneys were right.

The Real Cost of Electricity and Who gets the BIG Money!

The Ontario Energy Board (OEB) recently released the 2011 Yearbook of Distributors, an annual report prepared by the current 75 local distribution companies (LDC) that deliver electricity to the residents and businesses throughout Ontario. This edition of the “yearbook” contains information for the year ended December 31, 2011.
The information contained in this report is extensive providing a plethora of data including; financial, demographics, consumption, etc. etc., on an individual and a consolidated basis. What was of initial interest was on the Consolidated Income Statement (page 8) and the line; “Cost of Power and Related Costs” which carries a total of $10,361 million. Embedded in this cost is all of the generation costs from OPG, Bruce, Brookfield, TransAlta, NextEra, TransCanada, etc. plus the other FIT, MicroFIT, and non utility generators (NUGs) that have signed contracts with the OPA. It also includes conservation spending and the budgets required to run the OPA and IESO.
Total consumption of electricity was reported in the OEB yearbook as 126,237,381,000 kilowatts (kWh) or 126.2 terawatts (TWh) which is approximately 15.3 TWh less then the 141.5 TWh the Independent Electricity System Operator reported we consumed in 2011. The difference relates to differing billing dates amongst the various LDCs and it doesn’t include the consumption of the “Class A” (over 5 MW) consumers who pay less for their electricity. The 126.2 TWh does include billings to the Class “B” customers for about 5.2 TWh of electricity caused by line losses from the generator site to the LDCs.
In 2011 the biggest supplier of electricity to the grid was Ontario Power Generation (OPG) who sold 84.7 TWh or 59.8% of the IESO reported total consumption of 141.5 TWh. OPG reported their average sale price was 5.3 cents a kWh during 2011. If OPG supplied 59.8% of the total consumption reported in the OEB yearbook they would have provided 75,487 million kWh (75.5 TWh) and cost $4,001 million of the $10,361 million cost of electricity reported in the yearbook.
The foregoing would mean that the other 50,478 million kWh (50.5 TWh) was supplied by all of the other power generators (wind, solar, gas, etc) at a cost of $6,360 million or an average price of 12.5 cents a kWh.
The difference between the two supply sources means that Ontario ratepayers are paying 138% more for the power they consume to satisfy the McGuinty Liberals to green an already green power system. OPG reported that 96% of the power they produced in 2011 was emission free. By paying wind and solar producers to generate electricity the Liberals are effectively increasing emissions if they factor in the emissions generated from the production, transportation and construction of those wind and solar generators.
The additional cost burden on Ontario’s ratepayers and small businesses has caused; job losses, economic hardship (energy poverty), health problems in rural communities, the killing of birds and bats and the loss of property values.
The only green that seems to matter to the Liberals is the amount they extract from the ratepayers to line the pockets of their private sector wind, solar and gas developer friends and campaign contributors.
Parker Gallant,
September 17, 2012

Do wind turbines affect property values?

The County Coalition for safe and appropriate Green Energy website has an informative post on property valuation

Do wind turbines affect property values? CCSAGE pec wind turbine news #1 source:

…some real estate agents report that they can’t even get prospective purchasers to look at properties situated within several kilometres of a proposed wind project.

Consider your own situation. Would you buy such a property — at the right price or at any price, or would you look elsewhere? In an October, 2011 CBC News poll, two-thirds of respondents said that they would not live near wind turbines.

When there are few potential purchasers, market values become depressed, perhaps severely. The general consensus is that the market value of a home within 2 km of a wind turbine will be depressed by 20% to 40%, depending on how close and how many turbines. In an extreme situation (e.g. 10 turbines within 2 km) a home may not be sellable at any price.

[This link] provides further links to more than 50 articles on property values near wind turbines, including several on the topic of market value guarantees…

However, if you only have time to read one article, it should be this one, published by CBC News on October 1, 2011 and titled Ontario wind power bringing down property values .

Read the entire entry at CCSAGE pec wind turbine news #1 source

Windfall Ecology Centre Receives Taxpayer and Ratepayer Windfall

“The name came from sitting under an apple tree in the graveyard. “The apples were plunking down around me as they fell off the tree, and I thought, there’s a lesson here. If you take care of things and leave nature alone, it provides.” The foregoing was from the February 2008 edition of York University’s magazine story about Brent Kopperson, the founder of Windfall Ecology Centre an environmental not-for profit. Perhaps Mr. Kopperson felt that his comment put him on a par with Sir Isac Newton but the short story doesn’t give us that insight!

Kopperson in the story claims responsibility for co-founding the Ontario Sustainable Energy Association (OSEA) and in his biography on the Windfall website it states he was a founding director in the creation of the Canadian Renewable Energy Alliance (CanREA), the Community Power Fund , which led the Green Energy Act Alliance (GEAA) and was the former Chair of Green Communities Canada. His bio also claims he authored “Ontario’s landmark Standard Offer Program or Feed-in Tariff for renewable energy”, that he was a Director of the World Wind Energy Association and “Along the way he earned his private pilot licence and solo aerobatics Endorsement.” Considering his reputed commitment to the environment the latter effort doesn’t sound very carbon neutral, now, does it!

Mr. Kopperson was one of the 14 individuals instrumental in the creation of the Green Energy & Economy Act and his bio and the short story mentioned above confirms that. He purports, in my opinion, to have discovered (with the help of the UN IPCC) the gravity (perhaps a play on words) of “fossil fuels as a finite energy source” as he clearly states in this MaRS video filmed at the “Social Finance Forum”. In his speech he states Ontario is using 19th century technology and further on in that speech he pushes wind turbines (19th century technology) to source our future electricity.
That particular speech (late 2008) confirms that the Community Power Fund, which Kopperson says he co-founded; received $3 million from the Ontario Provincial Government. This was upped to $10 million annually by Brad Duguid in his directive of November 26, 2010 to the Ontario Power Authority (OPA). Part of this fund was subsequently allotted to OSEA, one of the entities Kopperson co-founded. Prior research on OSEA indicated they received almost $2 million ($1.5 million from the Trillium Foundation plus $200,000 from the Toronto Atmospheric Fund or TAF) from various Ontario government (taxpayer funded) ministries and institutions but perhaps that was just part of the “windfall” that came to Kopperson when those apples were falling!

Just to put the latter point in perspective it is worth pondering the fact that Trillium Foundation have approved grants to Windfall Ecology of $1,047,600, to Green Communities Canada, $1,181,000 and $465,000 to another entity that Kopperson is involved with—Chippewas of Georgina. In fact Kopperson has been involved with the Chippewas of Georgina for many years almost since the advent of Windfall itself.

Kopperson has ingratiated himself with the Chippewas to the point where he is a director of the Pukwis Energy Co-operative which has a contract with the OPA for a 20 MW wind turbine development (Phase 1) on Georgina Island. The development is to consist of ten (10) 2 MW turbines on the island which Kopperson purports to be capable of producing enough energy to supply 7500 homes meaning it would produce energy at a level of over 41% of capacity. [Strangely the link that should take you to the “Pukwis” website posted on Windfall Ecology’s page actually leads to a “coupon” website.] The Kopperson suggested level of production would trump any wind development project in the province and pretty well anywhere in the world. Wind turbines, in Ontario during 2011 operated at a level of about 27% of capacity which is consistent with global experience. The claim was not disputed by the Ministry of Energy but a June 20, 2011 posting on the Ministry blog said the Pukwis development would generate enough power to power 4500 homes. Lake Simcoe’s Georgina Island is approximately 14.5 Sq Kilometres with a population of 220 and 1.5 kilometres from the mainland. The foregoing means the costs of hooking this development to the grid will be borne by Ontario’s ratepayers as the projected amount of energy produced is well in excess of what should be required for a population of that size.

Georgina Island is approximately 50 miles north of Toronto and outside the area of financial interest to the City of Toronto, yet TAF (Chaired by councillor Shelly Carroll) at a Board meeting on December 15, 2010 approved financing of $500,000 for the Pukwis Energy Co-Operative to erect the 20 MW Pukwis Community Wind Park. Later that month the Deputy Mayor of Toronto, Doug Holyday, got wind of this approval and raised the issue in the press and was quoted as follows: “I just don’t see the benefits to the citizens of Toronto to be sending $500,000 up to Georgina Island.” As time passed TAF reported that Pukwis was able to raise cheaper financing and the TAF financing was no longer required. Despite that claim, one wonders if that is really the truth. Perhaps Kopperson was able to arrange alternate financing from conventional sources, however, it certainly appears that Pukwis may have instead tapped into other government financing sources including the Aboriginal Renewable Energy Network which may have provided funding of up to $770,000.

Needless to say the Pukwis Energy Co-operative has received a lot of attention from Mr. Kopperson in his efforts to push this project forward to conclusion. Those efforts included one of the Trillium grants ($150,000) for Windfall to “develop a community owned wind farm”. His efforts to utilize the Sheppard House in Aurora as Windfall’s offices resulted in Trillium grants of $100,000 to make it “energy efficient” and another $100,000 for “office equipment” and hire an “education co-coordinator”. Sheppard House and the Sheppard’s Bush conservation area it occupies is managed by the Lake Simcoe Region Conservation Authority (LSRCA) which in 2011 received almost $9 million of taxpayer (municipal, provincial & federal) funds which represented 65% of their gross revenue. [As a taxpayer I find it insulting that conservation authorities and many other quasi-government entities believe an annual report is; nature pictures, verbiage and two pie charts showing revenues and expenditures-actual disclosure is devoid of facts].  Windfall reputedly pay $12,000 (in kind) in annual rental payments to use the Sheppard House which seems to be very cheap rent.

Windfall obtained another $568,000 grant from Trillium to develop and launch Repower Ontario. Repower operates out of the Sheppard House and according to its website it:

“is a learning program that orients, trains, and connects eager participants with employment and self-employment opportunities and provides insight into what is possible and what is driving rapid growth in the new green economy.”

Mr. Kopperson has done an admirable job of multiplying those falling apples into what can only be properly described (in my opinion) as a windfall for him and the various entities he claims he founded or co-founded.

Amongst his other claims Kopperson reputes he introduced George Smitherman, former Minister of Energy, to Herman Scheer of German renewable energy fame at the 2008 World Wind Energy Conference and that introduction led Smitherman (after a tour of Germany) to bring the Green Energy & Economy Act forward.

The ratepayers and taxpayers of Ontario are paying dearly for those falling apples; since Brent Kopperson had his “aha” moment. Based on his numerous claims, in this writer’s opinion, it certainly appears he deserves to be included in the small club of people that greatly influenced the Liberal government pushing the creation of Bill 150, the Green Energy & Economy Act that has cost Ontarians billions of dollars, created health problems, driven down property values in rural Ontario, killed tens of thousands of birds and bats and set in place the causes of the rural/urban divide that exists today.

Some windfall for Ontario!

Parker Gallant,
September 10, 2012