‘We’ve allowed our power system to drift into parasitism’: Summaries for Dec. 6-7 Radio Interviews

The following notes summarize about an hour of live radio interviews on three shows (Tom McConnell, Scott Thompson, and Craig Needles) addressing the December 2017 report of the Auditor General on the IESO and also a recent report of the Market Surveillance Panel on gaming by the Goreway generating station.

Interview with Tom McConnell, December 6 11:10 am on CKTB Radio (Niagara), http://www.iheartradio.ca/610cktb?autoplay=1.1748012

Segment title: Goreway shuffle

I introduce the Market Surveillance Panel as a subsidiary of the Ontario Energy Board, except that the MSP is professional, independent and credible.

I describe the complex institutional layout behind the MSP reporting (e.g. the supporting secretariat for the MSP reports to the IESO) as an illustration of who complex many subjects are related to Ontario’s power situation.

The complexity of the power system makes customers vulnerable to malicious and sharp trading by market participants gaming of the system at the expense of ordinary consumers.

The MSP warned for many years about some specific problems making the market vulnerable to gaming, particularly something called Congestion Management Settlement Credits. The specific problems the MSP warned about were exploited by Goreway to rip off consumers.

Goreway’s gaming includes what appears to be intentional malfeasance, such as making false cost claims, and also exploiting errors in the IESO’s algorithms that Goreway experts uncovered.

Other market participants that have been caught doing similar things include Greenfield Energy (a generator) and Abitibi-Bowater (a load customer now called Resolute Forest Products).

Goreway’s main scam resolved around Congestion Management Settlement Credits. Ordinary consumers have no way to protect themselves from these problems. That’s why we need effective public watchdog agencies with the independence, professionalism, governance and integrity to solve these problems.

Problems will occur. It is unrealistic to expect perfection. What matters is how problems are resolved.

Have a look at the chronology of events here: The MSP’s report, prepared by very respected and credible committee, was complete in December 2016. The covering letter isn’t dated until October 2, 2017. What’s that? And then the OEB sits on the report for a month. Why?

Why has the IESO allowed these problems go on for so long?

The OEB is supposed to be protecting ratepayers and supervising the IESO. Why the delay in releasing this report?

Both public agencies have a lot of explaining to do.

The IESO claims that they are fixing all these problems with their so-called Market Renewal process and that this will save lots of money. What credibility does the IESO have? The problems Goreway exploited have persisted for way too long. The guardians do not appear capable of protecting ratepayers. Governance change at the IESO and OEB is needed.

Scott Thompson
AM900 CHML, Dec. 6 1:05 pm (Hamilton) (I have a request in with AM900 for a podcast.)

Scott asked if it wouldn’t be better to put the old Ontario Hydro back together.

I responded that while it is certainly true that ratepayers were far better off under the old Ontario Hydro than they are now, it is not obvious that having more government ownership and control of the power system would improve the situation going forward.

Craig Needles
AM980 CFPL, Dec. 7 (London, Ontario), https://omny.fm/shows/the-craig-needles-show/tom-adams

The Auditor General’s reports this week and last month are consistent with the AG’s previous electricity work reaching back to 2011 — solid reports with hair-raising findings. The AG must be getting frustrated in reporting on electricity.

The AG and the Market Surveillance Panel have been warning the IESO to clean up its operations for years but the IESO keeps foot-dragging. The IESO is acting as a gentleman’s club for generators.

Goreway is an example. The main loophole Goreway has been exploiting was identified as a vulnerability in the market since 2001-2002. The IESO was told more than a decade ago to fix these problems.

The agencies that are supposed to be protecting ratepayers — the IESO and OEB — are not doing their jobs. The governance of both organizations needs to be sharpened up. Fixing those agencies will be challenging work. Ontario’s power system is rot from top to bottom. We cannot operate a modern industrial economy without an effective power system. We’ve allowed our power system to drift into parasitism. It used to be that the purpose of the power system was to serve the customer. Now, that’s not the case. The remaining customer service component the system is increasingly a smoke show to cover up what is really going on. About 30% of your power bill is a pure rip-off. Fixing this would require substantial effort. When Ontario final gathers the wherewithal to attempt stabilizing the power system, the work required will include: having to restructure the administrative law structure underpinning Ontario’s power situation, governance reform, and sweeping standards of disclosure.

A key ingredient is telling the truth to people about what is happening.

Now our political culture focuses on a bidding war in advance of the next election, based on arbitrary rate cuts that don’t address the underlying factors that are making electricity unaffordable now and in the future.

Q- What about conservation and Ontario’s surplus power?

The power system is increasingly being run on principles of PR. During times of tight supply, conservation can be legitimate. Now we give away surplus power to neighbouring utilities and pay generators vast but undisclosed amounts of money to not generate. Meanwhile, demand has been dropping since 2005 due to rising rates. Despite all this, in 2016 ratepayers paid $600 million to promote conservation.

Conservation is popular, but if you explain the real value proposition to people some might change their view.

(At this point, I was flustered and missed an opportunity to explain that from the perspective of the government, conservation programs are simply the marketing plan for rate increases.)

Industrial rates should not be burdened with the costs of careless government electricity spending, but right now the rate protection plan for industry is hidden within conservation programs. The rate relief provided industry is not transparent or efficiently administered.

Ontario is not learning from its electricity mistakes. The AG keeps repeat earlier findings of major structural problems in our power system