Why you pay so much for hydro

By Andy Frame

Adam Beck, the founder of the electric power system in Ontario, had a vision in 1906. “Power at cost” was his cry. He would sell electricity at an affordable cost to everyone in the province — if there was a surplus of revenue, it would be used to improve the system or reduce rates. Nothing else!

But in 1998, Jim Wilson, minister of energy in the Harris government, declared: “The Adam Beck vision is over, a new vision for Hydro has arrived.”

The electric power system in Ontario would be operated like a private business, and it would have lower costs and rates.

Twelve years later, we know that the cost of electricity in Ontario for residential, commercial and industrial customers is more than twice the 1998 rate, and that jobs have been lost because of high electricity rates.

Wilson’s Energy Competition Act came into effect Oct. 31, 1998. It ended Ontario Hydro’s status as a Crown corporation and split it into two parts, Ontario Power Generation (OPG) and Hydro One, both to operate under the Ontario Business Corporations Act. Municipal hydro utilities were put under the ownership of the local municipality as their shareholder under the Business Corporations Act.

Under the old Power Corporation Act, Ontario Hydro had paid no corporation taxes or dividends. Instead, the Ontario government issued Ontario Hydro bonds and collected a guaranteed rate of return from Hydro. It also charged Ontario Hydro and private power companies a water-use fee for power generated on Ontario rivers. Ontario Hydro paid a fee to support the Niagara Parks Commission as well. In 1998, these three costs totalled about $180 million a year.

Under the new legislation, there were 10 new charges that cost hydro users at least $1.5 billion on their hydro rates:

• Corporation taxes paid by OPG and Hydro One.
• Dividends paid by OPG and Hydro One to their shareholder, the provincial government.
• Corporation taxes paid by local distributors.
• Dividends paid by local distributors to their shareholders.
• Cost of operations of the Ontario Energy Board (previously a provincial expense).
• Cost of operating the Ontario Power Authority (a new agency).
• Cost of subsidizing wind power and solar power generation through the Global Investment Fund, now about 4 cents per kWh, hidden in your hydro rate.
• The GST, although not the PST.
• Tax on lands held by OPG and Hydro One (not including land used for transmission or distribution lines). Previously, Ontario Hydro had paid property taxes only on buildings.
• Decommissioning fund and used fuel fund for nuclear plants.
On top of these, the McGuinty government has added a new set of costs and charges to hydro customers’ bills:
• Effective May 1, a special service charge to pay for conservation and renewable energy programs.
• Increase of 9 per cent on energy generation rates to replace lost industrial revenue.
• The HST, 13 per cent replacing the GST at 5 per cent.

• Increase in the Global Investment Fund charge to pay for new windmill and solar power programs operated by the Ontario Power Authority.

• Smart meter program. Some may save under this program if they can manage their load but estimates are a 10 per cent increase for most customers.

There is no accurate summary of what the extra costs add up to, but the best estimate is about $2 billion. In 2008, OPG alone paid $670 million in business taxes, $128 million in dividends and $151 million in land tax, for a total of $949 million. Hydro One, local distribution utilities and other charges provided the remainder.

The changes in rates have been driven by the decision to shut down coal plants and replace power supplies with green energy sources, as well as the need for revenue to deal with the provincial deficit. Adam Beck would be appalled.

Retail customers are paying much higher rates but the real damage is to the industrial sector, which was built on low power costs and made Ontario the economic engine of Canada.

Here are some changes that should be made to reduce costs:

• Eliminate all corporate profit taxes and the HST on all electric power facilities, and municipal distributors.
• Control the level of dividend payouts to shareholders of electric power facilities. There should be a fixed rate and no share options for management.
• Stop paying exorbitant prices for wind and solar power, and no more long-term contracts.
• Cut back regulatory and promotional programs financed by charges on the hydro rate.

Adam Beck’s ideal of “power at cost” is gone and it is clear that we cannot go back to the old system. But the dangers of the current approach to the Ontario economy are obvious.

None has said it better than Dr. Jan Carr, former president of the Ontario Power Authority, at the Waterloo Institute for Sustainable Energy in September of last year:

“Current policies reflect public concern about global warming at the expense of securing a stable and economic energy future. If such publicly popular but economically unsound policies continue, the province’s prosperity will be seriously jeopardized.”

Andy Frame is a consultant in the electrical power industry. He was formerly a senior adviser on electric utilities for the Ontario Ministry of Energy, a municipal hydro chairman and chair of the Utility Association.

Green Giant runs amok in Ontario

Green Giant runs amok in Ontario

By LORRIE GOLDSTEIN, QMI Agency
Last Updated: July 21, 2010 12:00am
http://www.torontosun.com/comment/columnists/lorrie_goldstein/2010/07/20/14773516.html

Living in Ontario these days under the reign of Premier Dalton McGuinty is like being held hostage by the Green Giant.

Only this time, he’s not jolly. He’s just nuts.

The advantage for the rest of Canada is Ontario has literally become a “hothouse” of all things “green” imposed by governments, ostensibly to help the environment, that don’t actually work.
Or rather, that work not to clean up the planet, but to separate hapless taxpayers from an ever-increasing amount of the “green” in their wallets.

Indeed, a good rule of (green) thumb for Canadians is if Ontario is doing something to “help the environment,” you should run screaming from the idea as if Frankenstein had suddenly been unleashed on your community.

Should you one day catch any of your politicians starting to babble like our premier does about all things green, the appropriate response would be to hunt them down with pitch forks and burning torches, before they do something really stupid.

In Ontario, alas, it’s too late. Stupid already rules.

In the latest fiasco, the environment minister temporarily suspended thousands of new “eco fees” the government introduced July 1 on everyday household products, without telling anyone.
The new charges caused so much outrage, McGuinty announced Tuesday he’s called the whole thing off for 90 days while his government retools the idea.

Unfortunately, we’ll be paying the $4 to $5 million the eco fees would have generated during that period through our taxes, until McGuinty comes up with a new fiasco.

Eco fees are supposed to pay for recycling, although we have no way of knowing whether they are, or, if they are, whether we’re getting value for money.

Shortly before that mess, McGuinty caused an uproar in rural Ontario by suddenly cutting the ridiculous 80.2¢ per-kilowatt-hour subsidy we now pay for electricity generated by small-scale solar producers (ridiculous because the normal cost of generating power in Ontario is about 5¢ per kilowatt hour) to 58.8¢ per kilowatt hour, going forward.

This because the government said it can no longer afford the higher rate, although in reality, we can’t afford the lower one, either.

Then again farmers, who were the main beneficiaries of that program, aren’t the big problem.
The big problem is McGuinty has been offering a financial bonanza to industrial wind turbine developers by giving them heavily subsidized, 20-year power-generation contracts (wind energy isn’t viable without massive subsidies), one factor contributing to our skyrocketing electricity bills, expected to rise 25% by the end of next year.

All this for unreliable energy that must be backed up by traditional power sources.

McGuinty’s also a big booster of putting a price on carbon and establishing a North American cap-and-trade market in carbon dioxide emissions, which has done nothing to lower emissions in Europe, has sent electricity prices there skyrocketing and which is beset by multibillion-dollar frauds.

Now a day barely passes where McGuinty, who didn’t know the difference between air pollution and greenhouse gases when he won power in 2003, isn’t pursuing some new “green” initiative that won’t help the planet, but will separate us from more of our green.

It’s too late for Ontario.

We let our Jolly Green Giant get out of control and now he’s running amok.

But you can still save yourselves.

BLACKOUT BRITAIN FACES BIG TURN OFF

http://www.dailyexpress.co.uk/posts/view/187749

Monday July 19,2010
By Sarah Westcott and Mark Reynolds

BRITAIN faces years of blackouts and soaring electricity bills because of the drive toward green power, a leading energy expert warned last night.

A growing obsession with global warming and “renewable” sources threatens the stability of our supply.

Derek Birkett, a former Grid Control Engineer who has a lifetime’s experience in electricity supply throughout Britain, warned that the cost of the crisis could match that of the recent banking collapse.

And he claimed that renewable energy expectations were now nothing more than “dangerous illusions” which would hit consumers hard in the pocket.

DEBATE: IS BRITAIN TOO OBSESSED WITH GREEN ENERGY?

“We are going to pay a very heavy price for the fact there has been a catalogue of neglect by the former Government which has focused on renewable energy sources,” Mr Birkett said.

“We need a mix of sources and this takes time. Renewables have the problem of being intermittent, particularly wind, and we need more back-up capacity. By having all our sources in one basket we are risking disruption.

“There is a lot of over-enthusiasm by governments to push global warming, which makes me very suspicious.” Less than five per cent of our energy comes from renewable sources but the “disproportionate” cost of implementing green technology runs into many millions of pounds, he said.

In a new book, When Will the Lights Go Out, published this month, Mr Birkett claims things will only get worse. He said the “lavish incentives” being offered to developers of green energy are being passed on to customers as the UK struggles to meet EU directives on carbon emissions.

He also warned that a growing reliance on renewable energy is creating widespread uncertainty in the electricity supply chain.

With many nuclear power stations and coal plants ending their lives and being taken out of service we “can’t rule out” people being left without power. The real problem is the cost of making sure this does not happen, and Britain’s lights “do not go out”, he warned.

“The country is going to have to make a choice whether to go along with green ideas of renewable generation or go back to coal and nuclear power.”

CHECK YOUR NUMBERS!

Two cases have come forward about getting your consumption numbers from H1.

The first is someone with a retailer. When she got her consumption numbers directly from H1 they were lower than what has been on her bills from Just Energy. That definitely should not be. She is trying to find out why the discrepancy.

Thus for those of you who are signed up with a retailer, you better check what your consumption is according to H1 and compare to your bills you get from the retailer.

The best is to try and get out of the retailer, they really do not save you anything.

The second is my friend down the road. He got his numbers from H1 the other day, and when I started entering them I noticed some of the consumption on certain dates did not match what I entered off his bills. So I checked the rest. Not one did. It's almost like someone elses numbers.

What's up with that!?

Now he has to go back and complain...

As for the current lag, I've been busy with a couple other projects, in particular analyzing wind data for a power point presentation I'm doing with someone else. Almost done.

I do have my numbers, but have some analysis to do on it.

Wind’s bad day

Lawrence Solomon: Wind’s bad day
Lawrence Solomon July 8, 2010 – 11:56 am

Yesterday’s scorcher scorched wind power’s reputation and its bottom line, too. This simple chart demonstrates why no company can make a profit supplying wind power to the electricity system without government subsidies, and why no society can count on wind power when the power is most needed.

The wind blew at its best in Ontario yesterday between midnight and 1 am (the first column in the chart), producing 214 megawatt-hours (1000 kilowatts to one megawatt) that hour. But it only earned $36.85 per megawatt that hour, or one-third to one-quarter the value of power during peak hours.

Over the next few hours, its next best hours for the day, wind continued to fetch very low prices.
Then, when power prices soared along with demand as society got to work, the wind turbines went to sleep. The peak production of 214 megawatts dropped to as little as 11 and never rose above 60. To put these numbers in perspective, when Ontario needed the wind most, wind was producing as little as one twentieth of 1% of Ontario’s needs –essentially nothing. Even in its best hour, wind only met 1.21% of Ontario’s needs, and that’s because other, more flexible forms of generation, scaled back their production (unlike hydro or fossil fuel generation, wind is not dispatchable).

Even had wind been able to continue producing at its rate of 214 megawatts, it would have met less than 1% of Ontario’s peak needs. Not that 214 megawatts is all that good, in any case. In that first hour, wind was operating at under 20% of its own capacity. It has better days, when the wind blows stronger and longer, but not enough of them to make wind economical.

Because wind systems will always have days when they will contribute essentially nothing, and because society will not want power blackout on those days, the only prudent course for the managers of the electricity grid is to value wind’s capacity at essentially nothing. That means other types of generating plants will always be needed to back up any wind that’s built to supply the power grid, making wind even more uneconomical, and more nonsensical as a power source to be relied upon.

Financial Post
http://opinion.financialpost.com/2010/07/08/lawrence-solomon-winds-bad-day/#ixzz0t7DSKQ00

Solar Power Price Cut Generates Objections

From: http://www.farms.com/FarmsPages/ENews/NewsDetails/tabid/189/Default.aspx?NewsId=32218


More than 10,000 solar applications in Ontario are on hold as the province dramatically drops the price it’ll offer people who sell power from their small, ground-mounted solar panels.

Without the price drop — to 58.8 cents a kilowatt-hour from the current 80.2 cents — Ontario taxpayers would have been on the hook for more than $1 billion more over 20 years, Energy and Infrastructure Minister Brad Duguid said Tuesday. “(It) would have been irresponsible for us to have let it continue.”

But some in the industry say it’s unfair to change the rate after people have submitted proposals for a contract though the Ontario Power Authority (OPA).

“We have a whole lot of unhappy customers right now,” said Bruce Knight, president of London-based Ontario Solar Farms, which designs, sells and installs ground-mounted solar installations.
He said the company has provided about 50 quotes to people who want a contract or are awaiting word on applications they’ve submitted. Many have spent money to ready their applications.

The planned price change — announced to applicants in an e-mail July 2, jammed between the Canada Day holiday and a weekend — came as a surprise because the province had said it would review its terms and policies in September 2011.

But Duguid said the OPA has been swamped by applications and had to do something sooner than that.

Knight said the province shouldn’t be changing its offering price even for applications already in the pipeline.

“It’s not the way normal business operates,” he said.

The solar industry has become super-heated since Ontario announced it would heavily subsidize green energy sources — wind, solar and bio-mass — under a program called a feed-in-tariff (FIT) that also mandates Ontario-sourced parts and technology.

The micro-FIT program, for farmers, businesses and homeowners feeding 10 kilowatts or less into the power grid, has become the most popular.

Micro-FIT producers who already have a 20-year contract at the 80.2-cent rate will continue to receive the original price, the OPA says.

The price for solar installations producing more than 10 kilowatts won’t change, at 44.3 cents a kilowatt hour.

Duguid said owners’ costs for small, ground-mounted solar installations have proved to be lower than expected, so that their annual rate of return is about 25% — a rate that is “way out of whack,” and for which consumers would otherwise ultimately bear significant cost.

Click here to see more...

Smart Meter charge has increased 1,548%

Ontario’s Power Trip: Is this ‘smart’?
By Parker Gallant

Financial Post Staff July 6, 2010 – 7:03 pm

While Ontario’s electricity infrastructure deteriorates, the province is spending billions on smart meters. For more instalments in FP Comment’s series on Ontario’s Power Trip, click here



Six years ago, on April 19, 2004, Ontario Premier Dalton McGuinty delivered a speech to the Ontario Legislature entitled “Building a Culture of Conservation.” A few quotes from that speech: “That’s why our government is committed to replacing the dirty coal plants that are polluting our air and damaging our health”; “Our government will make it possible for Ontarians in every home, business and government office to save energy, save their hard-earned money and save our environment”; “Smart meters, together with more flexible pricing, would allow Ontarians to save money if they run appliances in off-peak hours.”

He didn’t mention that the lights might go out more frequently or that power to major centres could be cut off due to exploding transformers and other manifestations of underinvestment in basic electricity infrastructure.

On Monday, the electricity supply to about 250,000 residents of Toronto cut out in the middle of a major heat wave, a system failure triggered by an exploding transformer, but widely blamed on failing and deteriorating infrastructure.

Ontario is on a massive electricity spending binge, but the money is going to green-energy gimmicks, expensive “smart” metering systems, elaborate “time-of-use” computer feedback systems to control consumer power use, windmill farms that produce little power when it is needed, solar-panel installations and costly grid expansions to accommodate the green expansions.

Under a succession of energy ministers, including Dwight Duncan (now Finance Minister) and George Smitherman (now running for mayor of Toronto), the province has mandated multi-billion-dollar expenditures. By my count, the cumulative cost of the initiatives under clean energy programs and mandates runs to more than $25-billion.

The OPA has projected installed capacity of wind energy by 2014 at 5300 megawatts, which is 4100 MWs more than currently installed. The capital cost of this additional capacity is approximately $4-billion. It also is looking to have approximately 1500 MWs of solar. Solar’s capital costs are almost 10 times wind, so the additional solar it wants in place will have capital costs of approximately $8-billion to $9-billion. That doesn’t include new transmission lines, new transformers and other new infrastructure needed to connect these new renewables. On top of that, gas production is planned to increase by approximately 3,000 MWs (backup for wind and solar) and the capital cost of that is approximately $3-billion (all capital cost estimates are in today’s dollars and based on approximate costs per kWh of each power source).

On top of this, we have the massively expensive “smart meter” initiative of perhaps as much as $10-billion. For perspective, that’s equivalent to more than 90% of the combined 2010 revenue for Ontario’s three major power companies: Ontario Power Generation, Hydro One and the Independent Electric System Operator. It’s also almost 10 times their net profit. The end result will be an increase in debt of a like amount, further delays in payment of the “stranded debt” and a large jump in ratepayers’ “delivery” and “regulatory” rates. Not one cent of this spending will improve the old infrastructure at OPG, Hydro One or the local distribution companies ­such as Toronto Hydro.

The smart meters, mentioned by the Premier in 2004, are worth a close look in themselves. Smart meters are part of an overall attempt to force electricity consumers into “time of use” electricity pricing, generally known as TOU. The idea is to use computers on a micro and massive scale to get consumers to consume less electricity at times when demand is high. With new technology, and by pricing electricity at different rates depending on when it is being used, consumers will be prompted to consume less electricity at peak times and more electricity when overall usage is low.

This is called a market mechanism, using prices to shift consumer behaviour. The fact that TOU pricing is completely at odds with Ontario’s other pricing schemes — especially feed-in tariffs — is a rarely explored contradiction.

Smart meters, while technologically jazzy on the surface, are a bit of a mystery in terms of operation, deployment and costs. For example, a recent article in a rural Ontario newspaper said Hydro One, which distributes electricity locally in parts of the province, had replaced one brand of smart meters with another in the area. A spokesperson for Hydro One said the reason for the change was that “Some are just more suitable than others to certain areas of the province.” Why?

And, more important, what is the installed cost of a smart meter? Laura Cooke, director of corporate communications at Hydro One, confirmed what I had located in one of its rate applications to the Ontario Energy Board. Part of a 3,400-page submission gave the installed cost per smart meter as $700.54. At the end of 2009, Hydro One had installed 1,217,000 such meters, so the capital costs would have been upwards of $852-million. This will be recovered from ratepayers. The monthly bill for smart meters has progressed from 27¢ per month in 2007 to $2.32 per month in 2010. If OEB approve the latest application, it will be $4.45 per month in 2011. By that time, the smart meter charge will have increased 1,548%. Extrapolating the Hydro One smart meter cost across the province’s four million ratepayers brings the cost to about $2.8-billion.

All these individual smart meters must communicate with the grid, which means the grid has to be made smart too. Former energy minister Smitherman, under his Green Energy Act, allocated $50-million for smart grid pilot projects. Three are before the OEB, at a total cost now of about $95-million. But that’s just the beginning.

IESO, the operator of the grid, is charged with leading the smart grid initiative. IESO’s vice-president of corporate relations, Terry Young, provided some of the answers on operation and costs. IESO likens the term “smart grid” to “using information or digital technologies to modernize the power system, enabling a more efficient use of electricity and electrical infrastructure.” Mr. Young went on to say the smart grid is “a technological revolution taking place around the world.”

On the question of cost, he cited a government-appointed smart-grid advisory forum of representatives from the public utility companies with a smattering of people from the Ministry of Energy and university professors. “The forum estimated incremental costs of $320-million per year over five years for grid enhancements.” These costs, he said, “do not include the smart meter initiative, improvements to support renewables, nor the private sector investments in smart grid capabilities.” So the grid enhancements will consume another $1.6-billion in ratepayers’ cash.

At the distribution level, the costs are higher. Hydro One chose Owen Sound, a city of 22,000, for its pilot. Starting on page 520 of the 3,399-page application, it said its initiatives were to cost $27.5-million in 2010 and $59.7-million in 2011. So $86.5-million for its smart grid, or $3,800 per household.

At Toronto Hydro, the average is $270 for phase one. Orangeville Hydro, with 11,000 customers, had a modest cost of $3-million or, they said, “$420 per household.”
For some reason their numbers don’t add up. They weren’t looking for all the same bells and whistles as Toronto Hydro or Hydro One. They indicated that only one new staff position would be required to achieve their goals.

Who knows what the real numbers will be? The three applications, on a per-household basis, average $1,500. If you then multiply that over four million or so ratepayers throughout the province, you arrive at a cost of $6-billion for what appears to be phase one of what your local hydro has on its wish list. This is additional to the $1.6-billion IESO estimate. Including the smart meter cost raises this to $10.3-billion, none of which will improve the old infrastructure.
There are also issues of smart-meter accuracy. Measurements Canada approved the smart meters installed by Hydro One and local utility companies, so Hydro One is adamant that its meters are accurate when ratepayers call to complain their consumption has mysteriously doubled or tripled since installation of a smart meter. In the case of Hydro One, you are not even speaking with its employees, as it outsourced the customer service department in 2002 (900 people) to Inergi, a subsidiary of CapGemini of Paris, France. In the first quarter, Hydro One quietly extended the contract for a further three years beyond its current expiry date of 2012. It estimated the cost of this over the next five years at $650-million. We could find no press release announcing this.

Newspaper articles, letters to the editor, internet blogs, and a conversation with an official at Hydro One indicated a lot of anecdotal evidence that smart meters are not always right. Smart meter installations in other jurisdictions such as California, coupled with time-of-use billing, has resulted in skyrocketing complaints. Expect the same in Ontario and consistent with those complaints some have supposedly resulted in admissions (after testing) that smart meters can be faulty.

We are six years advanced from the McGuinty speech where he envisaged a utopia full of cheap green power, ratepayers managing their daily consumption and saving money, no coal plants, and a wonderful legacy for our children. McGuinty has not delivered on one of his ideals and instead has brought in electricity costs that are the most expensive of any province, (except PEI) and higher than half of the American states. At the same time, Ontario’s public sector electricity debt continues to increase.

Financial PostParker Gallant is a retired Canadian banker who looked at his Ontario electricity bill and didn’t like what he saw. This is part of his ongoing series, Ontario’s Power Trip. For others in the series, click here.

Read more: http://opinion.financialpost.com/2010/07/06/ontarios-power-trip-is-this-smart/#ixzz0t0DWW8Hd