Surveying the state of electricity politics thus far in #ONelxn

Here are two columns, originally published in the Niagara Independent, surveying the state of electricity issues in the pronouncements of the major parties leading up to the June 7th election in Ontario. The first was published May 18 and the second May 22.

Ontario power politics: Glimmer of light
Niagara Independent May 18, 2018

by Tom Adams

Electricity concerns have been major political issues in Ontario over the entire course of the McGuinty/Wynne Liberal governments starting in 2003. Judged by their platforms, their 15-year sojourn on the opposition benches has been too brief for the PCs and NDP to develop credible options for disgruntled electricity voters.

For this election, the Ontario Liberals have hitched their wagon to their Fair Hydro Plan. It provides temporary rate relief for residential customers “” high and low-income alike “” through government borrowing. The Fair Hydro Plan has attracted a storm of criticism from the Auditor General and the legislature’s Financial Accountability Officer.

The NDP set out their plan about two years ago. The headlines of that plan, as the NDP’s leader Andrea Horwath has stated during the leadership debates, are to cut rates for everyone by 30 per cent and to use dividends from Hydro One to fund the repurchase of privatized shares of the company. What the NDP appear to have not noticed is that much of the 30 per cent reduction is to be achieved by shifting costs between customers and also that every penny of the current dividend income coming to the government from Hydro One flows straight to ratepayers through a Crown corporation, Ontario Electricity Financial.

Doug Ford’s PCs have followed in the footsteps of Patrick Brown’s PCs by adopting a plan that combines the worst elements of both the Liberal and NDP plans. Notwithstanding long and thoughtful opposition to the Fair Hydro Plan from the PC caucus and their support for the Audit General and Financial Accountability Officer, the starting point of the Ford plan is to endorse the Fair Hydro Plan. But Ford says the Fair Hydro Plan doesn’t go far enough, upping his vote bidding by promising a further 12% reduction for all households. Ford promises to deliver this extra 12% largely by adopting the NDP’s idea of spending the Hydro One dividends twice. Ford says he’ll send the Hydro One dividends back to customers, apparently unaware that customers are already getting the dividends.

In contrast to this dark political landscape of irresponsibility compounded by ignorance, there is a solid workable plan on offer for disgruntled electricity customers.

Back in February of this year, independent MPP Jack MacLaren, affiliated with the Trillium Party, introduced his private member’s bill, Bill 197 the “Affordable Electricity Act”.

The most significant element of the Bill is that it names and shames Premier Wynne’s Fair Hydro Plan.

In developing the plan, the Trillium party reached out to many, including me, for suggestions and comments.

During the debate on the bill, MacLaren asked for support “so as to begin a process in this House that will lead to the adult conversation about electricity that has been desperately needed in Ontario for more than 15 years by the citizens of Ontario.”

Far from an adult conversation, the response to MacLaren’s bill epitomized the degraded state of mainstream electricity politics.

With deliberate obtuseness, Liberal MPP Bob Delaney “” whose resume includes an MBA “” derided the bill’s prohibition on the Fair Hydro Plan borrowing to provide temporary rate relief, claiming that this would prevent utility investments in capital projects.

The PC Energy Critic Todd Smith praised the bill. That was until the NDP’s John Vanthof mentioned, “The interesting thing about the PC energy platform, or at least the PC platform for today, is that it’s going to keep the Liberal fair hydro plan as part of their platform.”

The Trillium Party seems unlikely to be an electoral factor in this election. The party is only running candidates in about a fifth of the ridings in the province and is polling far behind the Green Party.

The next government in Ontario will face a horrendous electricity mess. The best available package of thinking to start fixing this mess can be found in Bill 197.

*Tom Adams is a Toronto-based energy consultant.


Ontario’s coming power finance crisis
May 22, 2018

by Tom Adams

If he wins the current Ontario election, PC leader Doug Ford promises electricity rate relief “” Kathleen Wynne’s 25% household rate cut plus a further 12% cut. The NDP’s Andrea Horwath’s promises a 30% cut, apparently for everyone, instead of Wynne’s 25% for households.

The only way either of them could deliver on these promises is to shift electricity costs to taxpayers to the tune of many billions of dollars per year.

What neither of them is acknowledging is that even without these expanded rate cuts, there is already the financial crisis ongoing within Ontario’s power system that is about to burst the dams the Wynne government built to temporarily contain it.

Much higher costs are coming at the people of Ontario. Vapid election promises will not protect us from the hit coming to us both as ratepayers and as taxpayers.

The fundamental trends driving Ontario’s power finances are ugly.

The demand for power has been dropping since 2005. Officially, demand dropped another 3.6% last year to a level not seen since the mid-1980s.

Falling grid demand combined with rising grid supply means growing surpluses of power. Disposing of this excess production is a large but undisclosed financial burden for consumers.

Meanwhile, perverse incentives and even direct subsidies paid by ratepayers combined with improved technology, low interest rates, and low natural gas prices are driving almost all large industrial and many large commercial customers to install self-generation, further increasing the wasteful surpluses.

Stopping the expansion of excess capacity “” even banning self-generation “” will be a critical step to stabilizing the province’s power situation but massive investment losses are already locked in.

Wynne’s 25% pre-election rate cut “” her so-called “Fair Hydro Plan” “” is accumulating unpaid power bills at a rate of about $2.6 billion per year before considering interest. One of Wynne’s top priorities is finding ways to keep the running tab hard to track.

Any attempt to renege on high-cost/low-value green energy contracts will run into a phalanx of country’s best energy lawyers now on hot standby for the banks, utilities, hedge funds and insurance companies that hold billions of dollars worth of such contracts.

The decades-long period of relatively low-cost nuclear power Ontario has enjoyed is coming to an end. Instead, managing Ontario’s ageing fleet of nuclear power plants, which today supply over 60% of our needs, will be one of the many epic challenges the provinces’ power system will face in the immediate future. Hard questions abound. When should we stop squeezing the last drops of juice from Pickering, the nuclear station with the highest operating costs in the OECD? How to manage the simultaneous refurbishment outages at Darlington and Bruce? What do we do if any of the refurbishments repeat the miserable experience of every other major Candu refurbishment ever attempted in Canada, two of which never completed?

Embarrassment would befall either the PCs or the NDP if they attempt to justify reneging on their rate cut promises once in power by claiming that they “˜had no idea the books were so bad’. Such excuse-making would fly in the face of extensive documentation from the Auditor General and legislature’s Financial Accountability Officer. In addition, both the PCs and the NDP have had cogent parliamentarians calling out the Liberal’s power finance profligacy. PC finance critic, Vic Fedeli has documented the issues extensively in his “Focus on Finance” series. NDP energy critic Peter Tabuns has been a standout in parliamentary debates outing the Liberal power finance scams.

After silly games of financial musical chair ends and the politicians run out of wiggle room, what is the future outlook for rates?

In Ontario, the electricity homes and business will consume will be cheap almost all of the time, with short periods of very costly juice.

What’s going to be really expensive all the time is the price the system will have to charge customers for connection to the grid. Big fixed monthly connection charges are needed to service the legacy of debts and bad long-term contracts the people of Ontario have allowed to metastasize.

*Tom Adams is a Toronto-based energy consultant focused on consumers