Ontarians paying billions extra for electricity, auditor general finds
Allison Jones, The Canadian Press
Published Tuesday, December 9, 2014 12:03PM EST
Last Updated Tuesday, December 9, 2014 3:39PM EST TORONTO -- People in Ontario are paying billions of dollars extra for electricity thanks to a flawed smart meter program and the above-market rates the province pays most power generators, Ontario's auditor general reported Tuesday.
Ratepayers will pay $50 billion between 2006 and 2015 because of an extra charge on their electricity bills that covers the gap between guaranteed prices paid to contracted power generators and the market price, auditor general Bonnie Lysyk wrote in her annual report.
The report also highlighted a "high-risk" loan to a MaRS real estate project in Toronto that left Lysyk uncertain about its benefit to taxpayers, as well as public-private infrastructure projects that are costing billions more than if they were delivered by the public sector.
Lysyk also flagged Ontario's growing debt as a concern. The net debt was more than $267 billion as of March and even if the Liberal government meets its goal of eliminating the deficit in 2017-18, net debt will have risen to $325 billion, Lysyk projected.
In her analysis of the smart meter program, Lysyk found the extra electricity charge, known as global adjustment, has increased by 1,200 per cent between 2006 and 2013 -- meanwhile, the average electricity market price has dropped by 46 per cent.
Most residential and small business ratepayers pay time-of-use pricing, enabled by a $2-billion smart-meter program that has so far spent double its projected cost and has not led to the government's electricity conservation goals being met, Lysyk wrote.
The global adjustment makes up about 70 per cent of the electricity charge on those customers' bills and as a result the difference between on-peak and off-peak pricing narrowed to the point where it is "undermining time-of-use pricing as an incentive for ratepayers to shift to off-peak," Lysyk wrote.
Peak electricity demand actually rose slightly between 2004 and 2010, the auditor general wrote.
The government decided to mandate smart meters in Ontario before it did a cost-benefit analysis and when the analysis ultimately was done, it was flawed and its projected net benefit of $600 million was overstated by at least $512 million, Lysyk wrote.
"As a result, electricity ratepayers in Ontario are paying significantly more for this initiative in their monthly electricity bills than was originally intended," she wrote.
Infrastructure Ontario loans also came under the auditor general's microscope and she found that for 74 public-private projects the tangible costs -- construction, finance and professional services -- were about $8 billion higher than if they had been delivered by the public sector.
Infrastructure Ontario said that the cost difference was "more than offset by the risk of potential cost overruns" if the construction and, in some cases, maintenance of the 74 facilities was done by the public sector, Lysyk reported.
The agency is also the one that granted a $224-million loan to MaRS for its Phase 2 office tower in 2011. MaRS and the developer have been unable to repay the loan and the province now has to pay interest of up to $7.1 million a year.
The opposition parties have been highly critical of the loan and have accused the government of stonewalling them in their attempts to learn how the decision to grant the loan was reached.
It remains to be seen whether its benefits will ultimately outweigh the high risks, Lysyk wrote.
"The lack of transparency around the policy objectives and intended benefits to be obtained from the significant financial risks assumed in providing this loan, as well as the Ministry of Research and Innovation's guaranteeing this loan, may have created the perception that the government is bailing out a private-sector developer," Lysyk wrote.
The auditor general also found that one-third of licensed child-care operators over the last five years were not inspected before their licence expiry date and staff are not required to obtain vulnerable sector checks, which are more thorough than criminal reference checks.
In the health sector, Lysyk wrote that the government has no way of tracking immunization rates and has no co-ordinated system to deliver palliative care.
Published Tuesday, December 9, 2014 12:03PM EST
Last Updated Tuesday, December 9, 2014 3:39PM EST TORONTO -- People in Ontario are paying billions of dollars extra for electricity thanks to a flawed smart meter program and the above-market rates the province pays most power generators, Ontario's auditor general reported Tuesday.
Ratepayers will pay $50 billion between 2006 and 2015 because of an extra charge on their electricity bills that covers the gap between guaranteed prices paid to contracted power generators and the market price, auditor general Bonnie Lysyk wrote in her annual report.
The report also highlighted a "high-risk" loan to a MaRS real estate project in Toronto that left Lysyk uncertain about its benefit to taxpayers, as well as public-private infrastructure projects that are costing billions more than if they were delivered by the public sector.
Lysyk also flagged Ontario's growing debt as a concern. The net debt was more than $267 billion as of March and even if the Liberal government meets its goal of eliminating the deficit in 2017-18, net debt will have risen to $325 billion, Lysyk projected.
In her analysis of the smart meter program, Lysyk found the extra electricity charge, known as global adjustment, has increased by 1,200 per cent between 2006 and 2013 -- meanwhile, the average electricity market price has dropped by 46 per cent.
Most residential and small business ratepayers pay time-of-use pricing, enabled by a $2-billion smart-meter program that has so far spent double its projected cost and has not led to the government's electricity conservation goals being met, Lysyk wrote.
The global adjustment makes up about 70 per cent of the electricity charge on those customers' bills and as a result the difference between on-peak and off-peak pricing narrowed to the point where it is "undermining time-of-use pricing as an incentive for ratepayers to shift to off-peak," Lysyk wrote.
Peak electricity demand actually rose slightly between 2004 and 2010, the auditor general wrote.
The government decided to mandate smart meters in Ontario before it did a cost-benefit analysis and when the analysis ultimately was done, it was flawed and its projected net benefit of $600 million was overstated by at least $512 million, Lysyk wrote.
"As a result, electricity ratepayers in Ontario are paying significantly more for this initiative in their monthly electricity bills than was originally intended," she wrote.
Infrastructure Ontario loans also came under the auditor general's microscope and she found that for 74 public-private projects the tangible costs -- construction, finance and professional services -- were about $8 billion higher than if they had been delivered by the public sector.
Infrastructure Ontario said that the cost difference was "more than offset by the risk of potential cost overruns" if the construction and, in some cases, maintenance of the 74 facilities was done by the public sector, Lysyk reported.
The agency is also the one that granted a $224-million loan to MaRS for its Phase 2 office tower in 2011. MaRS and the developer have been unable to repay the loan and the province now has to pay interest of up to $7.1 million a year.
The opposition parties have been highly critical of the loan and have accused the government of stonewalling them in their attempts to learn how the decision to grant the loan was reached.
It remains to be seen whether its benefits will ultimately outweigh the high risks, Lysyk wrote.
"The lack of transparency around the policy objectives and intended benefits to be obtained from the significant financial risks assumed in providing this loan, as well as the Ministry of Research and Innovation's guaranteeing this loan, may have created the perception that the government is bailing out a private-sector developer," Lysyk wrote.
The auditor general also found that one-third of licensed child-care operators over the last five years were not inspected before their licence expiry date and staff are not required to obtain vulnerable sector checks, which are more thorough than criminal reference checks.
In the health sector, Lysyk wrote that the government has no way of tracking immunization rates and has no co-ordinated system to deliver palliative care.
