The Ontario Energy Board: Transparently Opaque!

Parker Gallant takes on the OEB over their jargon in presenting of rate hikes.

The Ontario Energy Board has an impressive Mandate which states; “The Ontario Energy Board oversees the province’s electricity and natural gas sectors through effective, fair and transparent regulation and in accordance with the objectives set out in the governing statutory framework.”

The foregoing evokes a warm and fuzzy feeling particularly where the OEB speak to “fair and transparent regulation” however the OEB’s current view of “fair and transparent” is not quite fair or transparent. A recent example of that is their announcement that time-of-use (TOU) rate increases would be “approximately $3.99 on the “Electricity” line, or about 3.3% on the total monthly bill, for a residential consumer with a typical consumption pattern who uses 800 kWh per month.”

If that “typical” residential consumer understands his bill he will discern that the “electricity line” typically represents about 45% of his bill with the balance (55%) made up of the “regulatory”, “delivery” and “stranded debt charges” That 3.3% increase is in reality a 7% increase in the electricity line and with the TOU rates reset every 6 months the 7% increase is a 14% annualized increase. The “trickle down” effect is also not dealt with in the OEB’s announcement as an increase in the “electricity price” increases the HST payment.

For the OEB to cite transparency in their “Mandate” then put out an announcement that seeks to trivialize or hide the actual increase indicates they are either being directed to do so or, their reputed transparency is Orwellian.

The OEB by citing the overall effects on a ratepayers bill, effectively allows “rate creep”. One recent example is the OEB’s approval to Grimsby Power issued February 12th where their “news release” states: “The delivery line of electricity bills will increase by approximately $3.06 for Grimsby’s residential customers using 800 kWh per month. The total bill impact is an increase of 2.8%.” As the “delivery line” represents about 35% of a “typical” electricity bill the increase is actually an 8% annual increase to the “delivery line” not the 2.8% that the OEB obliquely hide through reference to the “total bill”. Bundle the TOU increase together with the delivery increase and the Grimsby ratepayer is facing a 22% annual increase on 80% of their bill. Still to come in the current year are; rate increases for IESO’s smart grid spending (part of the “regulatory” line), Hydro One’s transmission spending (part of the “delivery” line) and conservation spending (part of the delivery and regulatory lines) by the OPA so the Grimsby ratepayer could be facing an annual increase of 25% or more.

Taken together the “typical” ratepayers bill is increasing much faster than forecast in the Long Term Energy Plan (3.5% over 20 years) and will increase further as more expensive renewable energy is added to the grid at a time when demand is falling. The current contracted supply surplus is sold by IESO at wholesale prices that are also falling. The result of the latter two circumstances is that the Global Adjustment (the pot where the subsidies temporarily reside before the OEB sets the TOU and RPP rates) is rising at an incredible rate and for March 2012 was $666 million (a 21% increase from February 2012) which, if it continues at the March level, will become a pot of $8 billion in the next 12 months or 60% more then the $5 billion that accumulated for 2011.

It is time for the OEB to have a long hard look at their mandate and recognize that their view of “transparent regulation” is opaque. Perhaps its time for the OEB to either “man up” or rewrite that “Mandate!

Parker Gallant,
April 21, 2012

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