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.
Energy Minister Bob Chiarelli disputed the auditor’s conclusions, suggesting her numbers were inaccurate because she didn’t understand the “complex” electricity system.
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 cost double its projections 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 energy minister hit back hard, saying the global adjustment is “irrelevant” because it would be on people’s bills with or without smart meters, and he said Lysyk got the numbers wrong.
“Why are my numbers more credible than hers?” Chiarelli asked, rhetorically, in response to questions after the report’s release. “First of all, the electricity system is very complex. It’s very difficult to understand.”
He pegged the smart meter cost at closer to $1.4 billion, and said Lysyk’s conclusions are premature.
“It remains likely that some significant charges will not be passed onto ratepayers after the Ontario Energy Board (OEB) has an opportunity to review the appropriate regulatory submissions,” Chiarelli said.
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.
The leaders of both opposition parties called Chiarelli’s reaction to the report “unprecedented” arrogance.
“Billions and billions of dollars piled up and what do they do? Turn around and say the auditor isn’t accurate. Yes, Mr. Chiarelli should resign,” said interim Progressive Conservative leader Jim Wilson.
“You’ve been ripping off consumers and someone’s head has to fall for it.”
NDP leader Andrea Horwath called the auditor’s report “troubling” and said the government should take it seriously.
“While we’re entitled to our own opinions, the Liberals aren’t entitled to their own facts and trying to trash the auditor simply doesn’t change that,” she said.
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 more 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.
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 as much as $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.
Infrastructure Minister Brad Duguid noted that Lysyk did not say the MaRS loan was a “poor or unwise decision.”
“That’s important because the way this has been portrayed often by our opposition friends has been that somehow there’s been money that’s been spent, that’s been lost, that’s been wasted, when what we’re talking about here is a loan that is fully secured and fully repayable,” he said. “This is not sunk costs. To suggest otherwise would be clearly inaccurate.”