All leaders made dubious claims about electricity system

by Steve Rennie, The Canadian Press June 5, 2014

Regulation Energy Public Sector

The Baloney Meter shows claims about Ontario's electricity system made by each of the provincial party leaders omitted important details

OTTAWA—Ontario’s soaring electricity rates were a hot topic in this week’s election debate, and each leader had their own explanations. The Baloney Meter ranks the accuracy of political statements based on a scale of “no baloney” to “full of baloney” (complete methodology below).

The Canadian Press Baloney Meter puts their claims to the test:

Claims

Ontario PC Leader Tim Hudak: “One of the reasons … that your hydro bill has gone up is because of the gas plant scandal,”

Ontario Liberal Leader Kathleen Wynne: “When we came into office in 2003, the electricity system was in disarray. We were having brown-outs and black-outs. … The investments that we have made in the system to build, for example, more than 10,000 kilometres of transmission line, were desperately needed because the system had been neglected.”

Ontario NDP Leader Andrea Horwath: “It’s interesting that Mr. Hudak has a plan to privatize what’s left of our electricity system when in fact it was the privatization that came in to Ontario when he sat around the cabinet table that has caused the problem that we have now with our electricity rates.”

Indeed, each statement earns a rating of “some baloney.”

Analysis

The cost of electricity for the average Ontario consumer has indeed risen in recent years. During peak hours in 2006, customers were paying 10.5 cents per kilowatt hour for their power, according to the Ontario Energy Board. Last month, they paid 13.5 cents during peak hours.

Hudak
Hudak claims electricity rates went up as a result of the Liberal government’s decision to cancel gas plants in Oakville and Mississauga, which is expected to cost up to $1.1 billion over the next 20 years.

Last fall, Ontario auditor general Bonnie Lysyk pegged the cost of cancelling the Oakville plant and building a new one in Napanee at $675 million—plus potentially another $140 million. Mississauga will cost another $275 million, Lysyk said.

So, what’s the impact on electricity rates?

Last December, Ontario Power Authority chair Jim Hinds said the cancellations would add between $1.03 and $2.01 to the average household’s annual electricity bill, starting in 2017.

The lower estimate is based on the OPA’s calculations, which put the total cost of the Oakville cancellation at $635 million, not including $40 million in so-called sunk costs to be paid by Ontario taxpayers, not hydro ratepayers.

The higher estimate is based on the auditor general’s numbers.

The impact of the cancelled plant on hydro bills would be spread over the 20-year life of electricity contracts and divided among the province’s 4.4 million residential customers.

Jim Burpee of the Canadian Electricity Association, who worked for Ontario Hydro and later Ontario Power Generation, called it a stretch for Hudak to say people are paying more on their hydro bills as a result of the cancelled gas plants.

Ontario energy analyst Bruce Sharp, a mechanical engineer who has spent 25 years in the energy sector, agreed. “I would say it’s probably not that accurate to say the gas-plant scandal has materially increased costs.”

Electricity consultant and researcher Tom Adams said the latest rate increase in May had nothing to do with the cancelled plants, because that added cost only kicks in when the relocated plants go into service in 2017.

Wynne
Kathleen Wynne’s statement about investments in the province’s hydro infrastructure also contained some baloney.

Ontario’s Ministry of Energy says since 2003, more than $19 billion has been invested in the province’s transmission and distribution networks. Of that, $11 billion has been spent by Hydro One, while the province’s other distributors have spent another $8 billion.

Ontario has added about 12,000 megawatts of new or refurbished generation since 2003 at a cost of more than $21 billion, according to the province’s latest long-term energy plan.

Wynne’s statement is partially correct, the experts say. The province has spent a lot of money on infrastructure, but that’s partly because of Liberal government efforts to phase out coal-fired power.

“They wanted to accelerate and take very usable coal-fired plants and shut them down,” Adams said. “But in the process of supporting and driving an early closure, which was their main thrust, they had to make a number of other investments in the system.”

Sharp and Adams both say that while the electricity system may have been underfunded, it wasn’t to blame for incidents such as the massive power outage that struck a large portion of North America in August 2003.

Nor is it entirely accurate to say the investments were needed because the electricity system had been neglected, Adams said.

Horvath
Lastly, let’s look at Horwath’s claim that privatization by a previous Conservative government is behind higher hydro prices.

In 1998, former Tory premier Mike Harris split Ontario Hydro into five companies: Ontario Power Generation, Hydro One, the Independent Electricity System Operator, the Electrical Safety Authority and Ontario Electricity Financial Corporation.

The idea was to have an electricity market where private companies competed with each other to produce power.

Today, there’s a mix of public and private operators supplying the province’s power.

Publicly owned Ontario Power Generation, which supplies about 60 per cent of the province’s power, says it was paid 5.7 cents per kilowatt hour last year. In its 2013 annual report, OPG notes that’s well below the average of 9.9 cents a kilowatt hour the rest of Ontario’s power operators received in 2013.

The experts also had trouble with Horwath’s statement about privatization raising people’s electricity bills. “To say that’s the reason we have a problem today, I would say absolutely not,” Burpee said.

The Verdict

Hudak’s claim, while technically accurate, contains hyperbole. The OPA says the cancelled gas plants will add no more than $2 to a homeowners’ annual electricity bill.

In Wynne’s case, the experts question whether the system her government inherited was really as badly off as she makes it out to be. The Liberal plan to phase out coal-fired power played a role in the infrastructure spending, they note.

Horwath’s statement blaming the previous Conservative government’s decision to split up Ontario Hydro for today’s higher energy prices raised the eyebrows of experts, who felt privatization is not the main reason people are paying more for their power.

For those reasons, all three claims contain “some baloney.”

Methodology

The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:

No baloney: the statement is completely accurate

A little baloney: the statement is mostly accurate but more information is required

Some baloney: the statement is partly accurate but important details are missing

A lot of baloney: the statement is mostly inaccurate but contains elements of truth

Full of baloney: the statement is completely inaccurate