Hydro increases are a recipe for economic disaster

Last fall, Ontario’s Auditor General Bonnie Lysyk was critical of the province’s smart meter program the devices the McGuinty Liberals mandated to replace the old hydro meters for all residential and most business users.

Besides noting in early December that this one billion dollar “upgrade” actually cost double this amount (a fact vigorously disputed by the energy minister), Ms. Lysyk stated unequivocally that the purpose for which the smart meters were designed—to levy a higher rate for energy used during “peak” daytime hours and, correspondingly, to reward “off-peak” energy consumption with a lower rate. That is to say, the meter records the time of day when energy is used and sends this information to Hydro One’s billing department.

Ms. Lysyk noted, however, that with respect to encouraging people to use more energy at night (the off-peak time), that because of an adjusting factor Hydro One calls “global adjustment,” the difference between on peak and off-peak pricing has narrowed to the point where it is “undermining time-of-use pricing as an incentive for ratepayers to shift to off-peak,” to quote from the Auditor General’s report. She also noted that peak electricity demand actually rose slightly between 2004 and 2010.

Then last week, Ontario Environment Commissioner Gord Miller picked up this thread, saying bluntly that Ontario’s energy consumers should be paying four or five times more for peak-time energy usage compared to off-peak times in order to promote the conservation which had been the goal of installing the smart meters in the first place.

Consistent with Auditor-General Bonnie Lysyk’s claim that adjustments applied to the final billing process for energy consumed have rendered the difference between peak and off-peak usage so small as to defeat the smart metering program, Mr. Miller stated the effective off-peak rate was “only” 1.8 times higher than peak rated energy.

Hence the recommendation that, to effectively justify the notion of smart metering, there should be a difference of four or five times.

It’s a fair assumption that what Mr. Miller had in mind is to price peak-time (daytime) energy consumption at four (or five) times more than the off-peak (nighttime) rates rather than leaving where they are now and lowering the nighttime prices to a quarter or a fifth of the peak-time prices.

Perhaps he has in mind a model where the existing peak-time rate would be somewhat higher and the off-peak rate would be correspondingly lower but the fact remains that for those people in Northern Ontario who for one reason or another find themselves mostly in their homes most of the day and who already feel that they are paying too much for the electricity they use, for these people a substantial increase in the daytime consumption of electricity would be nothing short of punitive.

The fact the smart meters cost too much to install, as the Auditor General plainly states, is hardly the problem of any one of us who is forced by circumstances to spend the winters inside our homes where, presumably, we want to stay reasonably warm and comfortable and for Mr. Miller to suggest as much as a four or five times increase in the rates people are already paying for the “luxury” of staying warm is ludicrous at best and, at worst, irresponsible.

Including debt recovery and transmission charges, as well as the fees for the energy actually consumed that are listed on our monthly missives from Hydro One, we already pay plenty. The proprietors of one restaurant on Manitoulin Island that sadly closed its doors permanently a couple of years ago made no bones about the fact that the high cost of electricity was chief among the factors that determined the business was no longer viable so this particular aspect of “the cost of doing business” is something on which virtually all small business owners keep a very wary eye.

It’s also interesting to note that the Auditor General, in her late 2014 report, also expressed concern about the high rates of return guaranteed to producers of renewable energy (wind, solar, hydro electric) over a long term.

Mr. Miller, for the record, has consistently supported the increase of these energy sources and has little time for their critics.

Of course it’s important for all Ontarians to be concerned, with Ms. Lysyk, about how public funds are being spent and the consequent impact on the provincial debt and, with Mr. Miller, about our province’s long-term environmental health.

But, in the mean time, there is this body of 11 million souls in this province who will have to bear the brunt of any tinkering the politicians and their advisors choose to make in order to deal with issues Ms. Lysyk and Mr. Miller have raised and also, we will add, in the process to justify their own past actions during political administrations that have spanned every major political party during their respective terms holding the reins of government in Ontario.

Did the smart meter program cost too much? Ms. Lysyk stops short of saying this but she does say it cost double what had been publicly predicted by its proponents, the Liberal government.

Does the on-peak and off-peak rates need major adjusting in order to fulfill the promises of savings predicted by those who made smart metering public policy? Mr. Miller said last week that this was so, so we must take this as his recommendation.

Not too many years ago, the government of this province was actively promoting the use of electricity as a safe and economical heat source for homes.

It is certainly quiet on that particular issue now but the fact remains that enormous numbers of homes in Ontario are warmed by means of basic resistance heating: electric baseboard heaters.

Changing the means of heating a home, even a small one or an apartment complex of any size, is a major retrofit that costs thousands and thousands of dollars and is well beyond the means of a majority of homeowners; certainly elderly citizens living on fixed incomes.

The smart meters may have cost an extra billion dollars, as Ms. Lysyk says, or may not have delivered their promise, Mr. Millers concern.

But business people learn early and fast that they cannot simply keep on increasing the prices of their goods and services as a fix for bad judgment. One way or another, their customer base will erode.

In Ontario, the customer base is measured, by politicians in votes cast for them and their parties and, even though Ms. Wynn’s Liberals won a commanding majority in the provincial legislature last year, we’re now only shy of three years away from the next election.

A four or five times increase in daytime electricity rates?

Unless such a change is phased in over at least a seven or eight year period, there goes the customer base. Count on it.