Dr. Dianne Saxe
Environmental Commissioner of Ontario
Dear Dr. Saxe,
On Wednesday last week, you and I were guests on the radio show “Fight Back with Libby Znaimer” on the AM radio station CFZM Toronto. A podcast of that interview is available here.
You made the following six major points:
1. Climate change means that Ontario has much higher temperatures and longer heat waves. Ontario’s infrastructure was built for the climate that we used to have but unfortunately that is over and won’t come back…If we look at the data, there is a very significant difference that we’re seeing in the last couple of decades from the average temperature of the 20th century, which is what most of our infrastructure was built to.
2. If you look at what is driving Ontario rates up, conservation contributed only 4% of Global Adjustment in 2015.
3. Residential rates in Ontario are average for North America.
4. Ontario’s eliminating coal-fired power is one of the big reasons why last year, for the first year since records began, that we didn’t have any smog days.
5. When the Ontario Liberals formed government after the Conservatives, Ontario’s whole power system was running at the very edge of its capacity with shreds and patches.
6. Ontario’s publicly-backed electricity debt is being paid down.
The evidence presented below contradicts each of your six claims.
You claim that climate change is causing much higher temperatures and longer heat waves in Ontario and that there is a very significant difference that we’re seeing in Ontario in the last couple of decades from the average temperature of the 20th century. Monthly average maximum temperatures in Toronto are available here. No trend in summer temperature over the last couple of decades appears from the data.
As I asked live on the radio, what data do you rely upon to support your claims?
Regarding the rate impact of conservation, you have relied on one component of the overall rate calculation as explanatory for the change consumers have experienced in their rates. Your approach is misleading and inaccurate. Conservation impacts many components of overall rates beyond just the direct program costs recovered through the Global Adjustment, which is the only component you cite. Conservation costs are far more far-reach that you claim. Many rate components increase when volumes decline. Electricity use in Ontario from 2005-2015 fell 11% or 16 TWh (see this IESO report). Examples of the impacts include the finding in the 2015 Audit General report, that conservation in the existing surplus power situation contributes to expensive electricity curtailments and exports (pages 215-216, Section 4.4). As the AG notes:
When the available electricity supply exceeds the maximum hourly consumption plus the reserve requirements, as it has in Ontario for the past six years, reducing electricity consumption through conservation efforts is of little value…investing in conservation during a time of surplus actually costs us more: the first type of cost is for managing the conservation programs and initiatives themselves; the second is for surpluses and the resulting costly oversupply of electricity those conservation efforts contribute to.
Notice also that the AG found that many conservation programs are not subject to cost/benefit analysis and that analysis that is performed is often fundamentally flawed. Notice also that the Environmental Commissioner of Ontario’s 2014 report finding that the Ontario Power Authority achieved a levelized delivered cost of energy efficiency over the time period 2011–2013 of 3.7 cents per kWh (Table 13) did not consider lost revenue impacts.
You claim that residential rates in Ontario are average for North America. That statement is incorrect. Of 61 contiguous states or provinces in Canada and the U.S., Ontario’s average rate ranks 8th highest or the 13th percentile. Electricity rates in Ontario vary by locale, with much higher rates in low-density and medium-density rural areas vs. urban areas and also variability between urban areas, with Toronto being the highest. Toronto Hydro’s residential rates are close to the weighted average rates for the entire province. For a Toronto Hydro residential customer using an amount of power that is average for the entire province — 750 kWh/month — the current all-in cost is $160.91. This is equal to 21.45 cents/kWh or 16.44 cents/kWh US at the current currency exchange rate. By comparison, the average residential price for the US is 12.73 cent/kWh with only 7 states in the contiguous US with rates exceeding Ontario’s average as of June 2016. (See this analysis from the U.S. Energy Information Administration. It is also interesting to note that residential rates in the U.S. declined from 2015 to 2016.) Except for PEI, which is geographically isolated and the only province in Canada where the population is mostly rural, 2016 power rates in Ontario are the highest in Canada, as documented by Manitoba Hydro here. If Ontario’s low-density rural rate — 27.55 cents/kWh or 21.11 cents/kWh US for 750 kWh — are compared with PEI’s power rate, Ontario’s rate is more costly than PEI’s and indeed higher than the average for the most costly state in the contiguous U.S., which is Connecticut.
Your claim attributing Ontario’s improved air quality to the coal shutdown, repeated from a remark in your 2015/16 conservation report (p. 19), cleaves to one of the Ontario government’s talking points justifying soaring power rates. For example, last week Liberal MPP Ted McMeekin claimed in an oped that “Our aging generation and dirty coal plants caused smog alerts”. Your claim, like MPP McMeekin’s, relies on the fallacy of mistaking correlation for causation. The largest factors driving Ontario’s improved air quality changes are less imported air pollution, a cleaner transportation fleet, and lower industrial emission. Each of these factors alone has been a bigger contributor to better Ontario air quality than eliminating coal power in Ontario. Closing our coal plants, several of which were effectively smog-free generators, contributed trivially to the smog reduction we have enjoyed since 2005. A 2005 Ontario government study determined that with respect to ground-level ozone and fine particulate matter in 2003 (a bad smog year and a year of relatively high Ontario coal output), approximately 55% of the air pollution in Ontario was attributable to U.S. emissions. Air emissions from upwind states have plunged since 2005. For example, Ohio’s SOX emissions from the electricity sector from 2005-2014 dropped by 76%. (See U.S. EPA air emission data by state here.) Even of Ontario’s own sources of smog precursors in 2005, electric power generation was a minor factor. For example, the contribution of electricity generation to total NOX emissions from all Ontario sources in 2005 was about 9%. Considering the reduction in Ontario NOX emissions from 2005 through 2014, the contribution of the electricity sector was about 25% of the reduction from transportation sources alone. Another example is that for PM2.5 over the period 1990-2005, the electricity sector never exceeded 2.5% (which was in year 2000) of Ontario’s emissions. (Data for 2005-2014 here.)
You claim that when the Ontario Liberals took over government after the Conservatives, Ontario’s whole power system was running at the very edge of its capacity with shreds and patches. This claim cleaves to another of the key government talking points justifying soaring power rates. In the same oped cited above, MPP McMeekin claims, “When we formed government in 2003, we inherited an energy system in total chaos. Ontario was losing the ability to generate its own electricity and we relied on expensive U.S. power imports. The transmission grid was old and fragile, finally collapsing when it failed to keep the summer 2003 blackout from rolling through the province.” In 2003, Ontario’s transmission system was fundamentally strong, both well designed and well operated. An official expert inquiry into the causes of the 2003 blackout exonerated Ontario. There was a deficiency in generation that occurred during the hot summers of 2003 and 2005 but this deficiency was primarily the result of a single troubled project — the Pickering A refurbishment. Other than the Pickering A project, the fundamentals of Ontario’s power generation fleet at the time were generally sound.
You also claim that Ontario’s publicly-backed electricity debt is being paid down. When Ontario Hydro existed, the publicly-back electricity debts were all in one place. Now, the Ontario public’s electricity debts reside primarily in five different categories of accounts — OPG’s debt, Ontario Electricity Financial Corporation, the power purchase agreement obligations managed by the IESO, the debts of Hydro One, and the debts of the LDCs. The present value of all of these obligations today probably exceeds by at least two times the public’s electricity debt at the worst point in the history of Ontario Hydro.
If you have evidence substantiating your assertions to Libby Znaimer’s listeners on Wednesday, I would look forward to your reply.
C: Libby Znaimer