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Hydro generation gives way to costly wind
By Parker Gallant and Scott Luft
Ontario Power Generation (OPG) is the province’s premier electricity power generating firm, a government-owned utility whose future has long been hooked to government policy. Today, in the green hands of the Dalton McGuinty’s Liberal government, OPG appears to be in decline. That decline was confirmed a few days ago when the company issued its 2011 annual financial results. It’s a decline that is likely to continue even if, as expected, the government changes its green-energy regime next week.
First, the company reported declining revenue, down 5.7% to $5-billion. Profits fell 35.9% to $416-million. The company produced less electricity: 84.7 terawatt hours (Twh), down 3.9 Twh or 4.4%. OPG’s share of the province’s electricity market is now less than 60%, off from 72% in 2003.
The decline in the company’s output and share of market since 2003, when it produced 109.1 Twh of electricity, tells the story. Under government directive, the company has been forced to shut down its coal plants. Fossil fuel production was 3.7 TWh versus the 39 TWh produced in 2003 for a 95% reduction. The reduction in coal was offset by increased nuclear and natural gas-fired generation and a drop in overall demand.
|Annual Wind and Unregulated Hydro (graphic added on WCO)|
If OPG is producing less electricity, somebody else is producing more. That would be wind power, produced by scores of wind operators that have popped up around the province under the McGuinty government’s green-energy plan. In fact, OPG’s production decline of 3.9 Twh for 2011 was offset by 3.9 Twh of wind production.
If OPG had lost that market share in a competitive market, so much the better. It would have been a sign that it did not deserve to be producing electricity if it could not match the prices and supply levels of alternative sources of power. But that is not the case.
Read the full article at the Financial Post site
Wind’s cost to ratepayers is $135-million per Twh, or about $526-million for the 3.9 Twh wind delivered to Ontario in 2011. According to OPG’s annual statement, it sells nuclear power into the market at $55-million per Twh and unregulated hydro power from places like Niagara Falls for $32-million per Twh. The math is simple: Had OPG used its hydro facilities to deliver the same amount of power supplied by wind, the cost savings to Ontario’s ratepayers would have been the difference between the $32-million per TWh hydro price and the $135-million paid for wind. The 3.9 Twh of wind power that cost Ontario ratepayers $526-million last year could have been bought from OPG for $125-million — a potential saving of $400-million and delivered $125 million in additional revenue for OPG.
What’s going on here should be obvious. Under government regulation, expensive wind power is being forced down the system, displacing inexpensive hydro power. As a result, unregulated hydro power is operating at ever lower levels below capacity. Since the advent of wind power, hydro’s operating rate has declined from about 45% of capacity to 36% in 2010.
|Graphic added on WCO|
Since wind first presented itself in Ontario it has generated in excess of $1.3-billion dollars for wind developers (principally out-of-province corporations) while costing ratepayers approximately $900-million more than they would have paid for unregulated hydro. At the same time it has had the undesired effect of reducing OPG’s revenues by $400-million. That money could have either reduced the stranded debt or gone to reduce taxpayers’ liabilities.
As wind’s capacity levels increase (beyond the current 1,800 megawatts) to the 8,400 MW contemplated in the Long Term Energy Plan, the cost to ratepayers will climb and revenue and profit at the taxpayer-owned OPG will fall further, reducing its value and extending repayment of the stranded debt. All this will be happening while OPG absorbs the costs of its $1.6-billion Big Becky expansion at Niagara Falls, its $2.6-billion Mattagami hydro project and the yet unknown costs of the Darlington refurbishment. Those costs will find their way to ratepayers’ bills.
Wind has other costs. Wind power is now being exported out of Ontario at below-cost prices, which means that Ontario ratepayers are paying U.S. states to take surplus wind — which blows when no power is needed — out of Ontario.
Some costs are non-financial. Many people claim significant health effects of these industrial wind behemoths. Some people have been forced to abandon their homes and farms. The effects have been felt throughout rural Ontario, causing a myriad of other problems. Wildlife impacts certainly exist, as 40- to 50-storey turbines have been placed in the path of migratory birds.
The McGuinty government is expected to alter some elements of its green energy program, primarily by reducing the high price it forces consumers to pay for wind and solar power. But how much of the program will be grandfathered to become a permanent feature of a power system that is undermining the government-owned OPG at the cost of billions of dollars to taxpayers and ratepayers?
Wind Turbines Displace Hydro: how OPG is spending $4.2 billion to avoid Blackouts
OPG was directed by the Liberal Ministry of Energy to spend billions on hydro projects as evidenced by both Big Becky ($1.6 billion) and the Lower Mattagami projects ($2.6 billion). Big Becky adds no new capacity it will simply make existing production at Niagara more efficient whereas the Lower Mattagami project will supposedly add 440 megawatts (MW) of new capacity to OPG’s hydro fleet. These projects are still some way from completion so it is likely those budgeted estimates will be exceeded. Only a few years ago the estimate for Big Becky was $1 billion and for Mattagami $1.5 billion. The other issue surrounding those two engineering miracles is that they are being built at a time when Ontario has a huge surplus of power. With Bruce Power expected to hook up refurbished nuclear plants this year our surplus will increase further.
|Production of Unregulated Hydro by OPG 2004 – 2011|
|Year||2004||2005||2006||2007||2008||2009||2010||2011 (9 mths)|
|Unregulated Sold (TWh)||16.8||14.1||15||13.8||17.6||16.8||11.7||8.1|
|Price per kWh received||N/A||N/A||N/A||N/A||N/A||3.2||3.7||3.3|
|Income before interest and income taxes ($M’s)||732||736||329||508||209||129|
|Total hydro capacity (MW)||6835||6982||6956||6972||6963||6944||6996||6996|
|Total hydro sold (TWh)||35.7||32.6||33.3||31.9||36.4||36.2||30.6||22.3|
|NB: All information came from OPG’s “Fact Sheets” and Annual Reports!|
Should OPG’s production and sale of unregulated hydro continue at the same rate for the last quarter of 2011 the TWh sold will be 10.8 TWh or 6.8 TWh lower then 2008. The value of that lost production based on the average received (9 months) for 2011 translates to $224 million in lost revenue to OPG and a further loss to the Provincial coffers for the payment of “water rental”. According to the Ministry of Natural Resources “Conditions Report”, 2011 was a relatively good year for water flow compared to 2007 which was considered a low water level year. Despite that; production and sale of unregulated hydro by OPG will likely come in at 3 TWh less for 2011 then 2007 when wind contributed 1 TWh. Co-incidentally wind reportedly contributed 3.9 TWh in 2011 which would indicate it is displacing hydro, not coal, as promised by the Ministry of Energy.
This is the final chapter in the journey we started which looked at the Liberal promises made in respect to Ontario’s electricity sector early in their first election victory. The journey started in early 2004 as the Liberals aggressively attacked our electricity production and distribution system. We start this visit to Hansard on November 18, 2004, the day after an evening debate in respect to Bill 100, the Electricity Restructuring Act. This day the NDP’s Howard Hampton brought out remarks made by OPG’s Chairman, Jake Epp, a Conservative, that the McGuinty government had appointed earlier in the year raising this question for Energy Minister, Duncan.
“This is what Jake Epp says: “There are a lot of issues that need to be taken care of, whether you’re talking about supply, you’re talking about the market, whether you’re talking about OPG’s role,” in the private market. But what is he saying? No direction. No five-year plan. Not even a one-year plan.”
“Now, this government has put a new board and chair in place at OPG. We have made decisions about the future of the company, and we’ll make them according to our timetable. Remember, when we came to office we inherited a company that was in complete disarray. We have to be deliberate and careful in the decisions we make. It would be impossible to turn OPG around in 10 months. The last thing we need to do is make knee-jerk decisions that result in flip-flops like we saw under the previous government, because it creates even further instability. I’m the first energy minister in almost a decade to give clear and consistent direction to the sector. Given the strong response we’ve received to our RFPs, I believe the industry recognizes this. We’re moving forward in a deliberate and positive fashion. When Bill 100 passes, we will have a new power authority and conservation bureau. We believe these are the right steps to ensure a reliable, affordable, safe supply of electricity for the people of Ontario.”
“roughly three-quarters of our production is sold for a price that is considerably lower than the price other market participants receive, after taking into account market rebates.”
“Under Bill 100, the Ontario Energy Board would have a stronger role in protecting Ontario consumers through licensing and rate regulation, something the previous government rejected. They left small consumers at the will of the free market. The OEB would ensure economic efficiency, cost-effectiveness and financial viability of the elements of Ontario’s electricity system. Its mandate is to protect consumers and ensure that the industry operates efficiently and effectively. Bill 100 strengthens its role by mandating it to publicly review electricity plans prepared by the Ontario Power Authority and market rules prepared by the IESO. It’s a venue for stakeholder and public involvement in the energy sector.With regard to electricity rates, the OEB would approve an annual rate plan for low-volume and other smaller consumers. These consumers would pay a blended price. It would be based on regulated contract and forecasted competitive prices. This will ensure that prices are fair, stable and predictable, something this province desperately needs to generate new electricity.” (writers emphasis)
“Its role will be to ensure that 20 years from now this province has adequate, affordable power that will enable us to grow and prosper economically, as we have done under the first year of change in Ontario in the McGuinty government.These changes, coupled with the economic management of this government, mean real change that means more jobs, better jobs, protection for the people of this province and ultimately better health care and better education, change that we’re delivering every day of this mandate and change that we as a government are very proud of.”
|Chart Data from CANSIM table 282-0054|
No doubt Minister Duncan would still brag about the “changes” his government has created but he has and will continue to take a lot of heat from many in Ontario that view the “changes” in a negative light. With 300,000 manufacturing jobs gone, electricity rates higher then only one other province (PEI) in Canada and a health system that has shown continual strain because of wrong-headed spending. Ontario has not grown or prospered economically. Those “better jobs” have not materialized as Duncan promised and Ontario has continued to suffer higher unemployment rates then the Canadian average as recently reportedwith the unemployment rate in Ontario jumping to 8.1% in January.
“Mr Hampton: They say that Premier McGuinty’s Bill 100 follows “the same old failed and discredited electricity program” as the Conservatives’. They warn that your plan “will increase consumer electricity rates dramatically, and force electricity-reliant industries to move production out of Ontario, taking good jobs with them.” And they say the best way forward is to “give Hydro One and Ontario Power Generation the mandate to provide power at cost for the people of Ontario.”
“Let me be clear. This government will not go back to the old public monopoly. It was a failure. It left this province $38 billion in debt. Your government cancelled conservation programs. Their government left a mess. They’re voting against the bill because they think we’re undoing what they did. You people just aren’t consistent. This government made a commitment to change, and we’re changing for the better. I reject the old Ontario Hydro model and I reject the old Ontario Hydro vice-presidents who want to go back to it. It didn’t work. We’re fixing it. We’re cleaning up the mess that you, and the Conservatives after you, left this province in on the hydroelectric file”
“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?”
“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 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.”
“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?”
“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.”
“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?”
“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.”
“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.”
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.
January 23, 2012
This is chapter 7 in a series by Parker Gallant: Chapter 1; Chapter 2: Chapter 3; Chapter 4; Chapter 5, Chapter 6, Chapter 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
This is chapter 6 in a series by Parker Gallant: Chapter 1; Chapter 2: Chapter 3; Chapter 4; Chapter 5, Chapter 7, Chapter 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?
“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.
January 10, 2012