Sunday, 4 January 2015

Auditor General's Report

                       Read all about the hydro screw up
 The price of electricity has fallen by 46%.  Then, why do our electric bills keep going up? 

Because the Global Adjustment (i.e. government mismanagement) has gone up almost 1,200 percent since 2006.

Folks - you really must read this short article!!!

Last week the Ontario Auditor General released her Annual Report and it included some pretty damning conclusions about Ontario's hydro pricing.

I wrote the following letter to the Gravenhurst Banner and What's Up Muskoka. Let's see if they publish it. I am going to do a shorter version with more Bala Falls background for the Toronto Star. And a version for MPP Norm Miller.

The Auditor General is not someone to be easily dismissed - although that is what the Energy Minister tried to do - and her conclusions are extremely strong.

Please feel free to distribute this and to use my arguments. All the facts are in her report.


Dear Editor

Here is a great trivia question to ask your friends: How much has the price of electricity fallen in Ontario in the past seven years? No, that is not a misprint. How much has the price of electricityfallen in Ontario in the past seven years? The answer, contained in the Ontario Auditor General's 2014 Annual Report, is 46%.

So why do you not see that reflected in your hydro bill? Why does your hydro bill just keep going up and up? The answer is due to something called the Global Adjustment, but which would be more accurately called the Ontario Subsidy of Hydro Producers. The price of electricity that shows up on your hydro bill (and here I am not talking about the delivery charge, or the debt retirement charge, but simply the charge for the electricity that you use) is made up of two components: 1) the price that Ontario's electricity sells for on the open market; and 2) this Global Adjustment. And while the price of electricity has fallen by 46%, the Global Adjustment has gone up by almost 1,200%, from $654million in 2006 to $7.7 billion in 2013! That's why your electricity bill has kept going up while the price of electricity has kept coming down.

So just what is this Global Adjustment? Basically it is a subsidy that is added to our electricity bills, in the Auditor General's words, “to cover the gap between the guaranteed prices paid to contracted power generators and the electricity market price. It exists because most power generators in Ontario have contracts with the province that pay them considerably more than the market price” which is actually only about 3¢/kWh.

By 2015, the 10 year cumulative Global Adjustment cost is expected to reach a staggering $50 billion! To put this in perspective, $50 billion is sufficient to cover the 2014 provincial deficit of $10.5 billion almost five times; it is enough to pay the annual salary of about 2.3 million Ontarians working full time at the provincial minimum wage; and it is about 7.5 times more than the $6.6-billion spent in the 2012/13 fiscal year on social-assistance programs.

And things are going to get worse. As more new hydro plants come online, we will all pay even more in Global Adjustment charges.

The root of this problem is that Ontario is paying huge subsidies to generate electricity that is not needed. Since 2005 demand for electricity in Ontario has been falling. However, instead of adjusting to this fall in demand by reducing supply, the province actually increased capacity. As a result, the supply of available power has steadily increased, and has been consistently higher than peak demand, and consistently much higher than the reserve that Ontario's Independent Electricity System Operator is required to maintain above peak demand. And what happens to this surplus? It ends up being exported to our neighbours, who also happen to be our business competitors. Between 2006 and 2013 net exports have grown by 158%, from 5.2TWh in 2006 to 13.4TWh in 2013. Unfortunately, as the export price has been well below cost, those exports are being sold at a loss.

It is economically unsound to keep adding capacity to an over-saturated market. The fall in the market price of electricity would normally result in a decrease in supply, but because of the subsidy, there is no check on the subsidized producers, who keep producing and producing (or even being paid not to produce) whether there is a demand for their production or not. It's as if GM kept increasing production as their dealers were unable to sell their inventory. GM would not normally do that; they would cut their prices, they would cut back production, shut down plants, and definitely cancel any plans for new facilities. But if they were guaranteed that they would get the same price for every car that they produced whether or not any of them could be sold, then of course they would just keep right on producing, and would even add new plants to increase production. And that is exactly what is happening in the Ontario electricity market.

Unbelievably, the province is planning on even more over-capacity - as the people of Bala know only too well. In the light of the Auditor General's report, it just makes no sense at all to build the proposed Bala Falls hydro plant. It would simply increase the oversupply of electricity in the Province, and add to the Global Adjustment, and therefore add even more to your hydro bill.

The Bala Falls hydro plant is not just a disaster for Bala, destroying the park beside the Falls where people have come for generations to visit one of the most beautiful spots in Muskoka, and endangering the water based recreation on the Moon River. It is part of a larger disaster for all the people of Ontario, who are being gouged through their hydro bills to subsidize a few wealthy developers to produce something that is not needed.

It is not just the people of Bala who should feel aggrieved, as their concerns and questions have been ignored by the government and the proponent for the past ten years. Nor it is just the Wahta Mohawks, whose historic portage would be destroyed while the government ignores their Duty to Consult with them. Every hydro user in Ontario, including everyone in Muskoka and everybody reading this newspaper, should feel angry at a government policy which makes no sense and which is costing them dearly.

It is not only the people of Bala who will suffer if this proposal goes ahead – it is everybody in Ontario.

Allan Turnbull, Bala

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