Ontario energy regulator blamed for sharp rise in hydro bills

“The gold standard used to be rates that were just and reasonable. The Green Energy Act is stuffing your power bill with hidden charges.”  ~ Tom Adams

by Karen Howlett — Globe and Mail

Ontario’s energy regulator has quietly shifted responsibility for building costly new electricity systems from investors to consumers, a move that partly accounts for a sharp spike in hydro bills, critics say.

Seven months ago, the Ontario Energy Board gave industry players the go-ahead to crank up their profits substantially. But information about the change was not widely reported until the New Democratic Party raised it in the legislature on Thursday.

Industry critics say the regulator has abandoned more than 100 years of tradition, in which an electricity utility borrowed money to build an asset and then recovered its costs from consumers once the new power was delivered to their homes.

The board’s ruling says that Ontario Power Generation, Hydro One, Toronto Hydro and other utilities can bill consumers upfront to help recover their construction costs.

“The board will allow utilities to apply to include up to 100 per cent of prudently incurred [construction] costs in rate base,” the ruling says.

It also says the utilities can earn a return on equity of 9.85 per cent for this year, up from a previous rate of 8.4 per cent. NDP Leader Andrea Horwath said on Thursday that the higher rate pads the bottom line of utilities at the expense of consumers, who will be hit with another $240-million a year in hydro costs, an average of $60 for each family in Ontario.

The board has adopted the customer-based funding model at a time when the McGuinty government is making a big push to modernize the province’s electricity system and replace pollution-spewing coal-fired plants with greener sources of power.

Michael Janigan, executive director and general counsel of the Public Interest Advocacy Centre, represented seniors and low-income consumers at board hearings on the rate increase. He said the board set the return on equity based on what utilities earn in the United States, where the risks associated with building new systems are typically greater.

“We were somewhat alarmed by the fact that fairness to the utilities was considered first and foremost over fairness to Ontario ratepayers,” Mr. Janigan said in an interview.

Alan Findlay, a spokesman for the board, said utilities need to attract investment to operate and pay for maintaining their systems. “In order to attract that investment,” he said, “their ROE needs to be competitive with other jurisdictions.”

Energy consultant Tom Adams blames the McGuinty government’s Green Energy Act for the fact that the board will now allow utilities to charge consumers for the costs of assets under construction but not yet in service.

“The gold standard used to be rates that were just and reasonable,” he says in a paper titled Electric Rate Shock: Ontario Energy Board. “The Green Energy Act is stuffing your power bill with hidden charges.”

Energy Minister Brad Duguid has been under siege in recent days over rapidly rising hydro rates. He appeared to be caught off guard by the attack on Thursday, insisting – erroneously, it turns out – that the board’s ruling applies just to private utilities and not to Crown-owned Hydro One and Ontario Power Generation.

However, Mr. Findlay at the Energy Board confirmed that the new return-on-equity rate applies to the two Crown-owned utilities.

Mr. Duguid said he has asked both Hydro One and Ontario Power Generation to scale back their requests for rate increases for 2011-12. He said hydro bills are climbing because the McGuinty government is modernizing the province’s electricity systems.

“These aren’t arbitrary investments,” he told reporters. “These are investments to make sure we can keep the lights on and have a reliable source of energy.”

Ms. Horwath said the higher rates approved by the board will just go straight to the utilities’ bottom lines.

“It’s making Ontarians pay through the nose just to pad these profits,” she told reporters.

Ontario Energy Board

Purpose: To regulate the province’s electricity and natural gas sectors in the public interest.
Head honcho: Chairman and CEO Howard Wetston.
Number of employees making $100,000-plus: 96.
Top Salary: Wetston made $492,148 in 2009.

Ontario Power Authority

Purpose: To plan and procure electricity supply from diverse resources and facilitate the measures needed to achieve ambitious conservation targets.
Head honcho: CEO Colin Anderson.
Number of employees making $100,000-plus: 75.
Top Salary: Anderson made $573,027 in 2009

Who pays the tab for the OPA and OEB?  Ontario hydro ratepayers.
(Source: Ontario government salary disclosure)

3 thoughts on “Ontario energy regulator blamed for sharp rise in hydro bills

  1. Andrea Horwath is “bellowing” disdain and outrage over higher electricity rates and how the poor consumer is being priced out of their homes by McGuinty and his Energy Policies.

    As I listen to this back and forth and if I didn’t have any memories of last May I would believe that she is well “above the fray” and would be a “hero” to the lowly taxpayer of Ontario!

    That isn’t the case. Her rhetoric highlights exactly what is wrong with Ontario Provincial Politics and the various Parties that are supposed to represent the Citizens of Ontario.

    Andrea Horwath was ONE of the FIFTY NINE MPP’s who voted in FAVOUR of the Green Energy Act on May 14/2009!

    See: http://mvwind.10.forumer.com/viewtopic.php?t=1140

    This is the reason young people have no interest in voting in the Municipal Elections whatsoever!

    They know that politics is the pure definition of ‘Hypocrisy” where all they see is adults say one thing and do another!

    Horwath should actually admit she made a mistake when she voted in favour of the GEA and then continue her attacks on McGuiinty and Gang…………

    Only then would I believe one single word from her mouth!

    Of course then she would be banished from the NDP for being HONEST!

  2. WHAT ABSOLUTE NONSENSE for Duguid to claim that the McGreeny Liberals are investing in a future, reliable source of energy. We just read three days ago that Bruce Power was paid $60 Million to NOT produce electricity last year.

    We have a clean, reliable source of energy at Bruce…yet Dalton McGreeny gives them $60 million to NOT produce electricity.

    Then Duguid turns around and says we need more electricity to keep the light bulbs on; so the McGreeny Liberals send billions of taxpayer dollars out of Ontario to Samsung in Korea, and billions more to Liberal Party insiders to carpet-bomb rural Ontario and the Great Lakes with industrial wind turbines.

    So we are paying to NOT produce clean, reliable energy at Bruce and we are also paying to build UNRELIABLE industrial wind turbines. What a Scam these eco-terrorists are selling us!!!

    And on top of that, we are paying $3 million for the Ontario Power Authority propaganda ads that pop up all over this website. Does Premier Dad really think it’s a good idea to send our children to play underneath giant industrial wind turbines?

  3. How long can this Green Rape of Ontario continue before someone has to give US a truthful answer?

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