Financial Post, 2015

Parker Gallant, the former banker who several years ago launched FP Comment’s prophetic Ontario’s Power Trip campaign against the province’s expensive and pointless electricity industry reforms, has some new advice for the government. As the price of electricity soars, Ontario industries and consumers are being hammered by rate increases that seem never-ending. In an open letter today to Energy Minister Bob Chiarelli, Mr. Gallant lists a few easy initiatives the government could undertake to stop some of the madness and save consumers billions of dollars.  Terence Corcoran

LETTER FROM PARKER GALLANT

April 1, 2015

The Honourable Bob Chiarelli, Minister of Energy,

Legislative Building, Queen’s Park, Toronto ON, M7A 1A1

Dear Minister Chiarelli:

Re: Dropping Ontario’s Price for Electricity

I have noted the difficulty you have experienced over the past several months trying to convince the media and the general population of Ontario they should simply bite the bullet and accept the fact that electricity prices will continue their above inflation climb. Having studied the situation I believe I have come up with some suggestions that would allow you to move things in the opposite direction.

First I suspect that Premier Wynne and Finance Minister Sousa exerted considerable pressure on you to come up with a scheme to help out the 500,000 to 700,000 “low-income” households in the province experiencing what is generally referred to as “energy poverty.” While the plan recommended came from the Ontario Energy Board and was altered somewhat by yourself I believe I have a better plan.

More on that later in this letter.

I also suspect that the Premier and Finance Minister told you unequivocally the OCEB was finished at the end of the year as they wish to wave better deficit numbers in front of those pesky credit rating agencies. The $1.2 billion that went to keep electricity rates down, a little bit, would no longer be available and they made that clear to you.

While you did your best to dance around the issue associated with the upcoming big jump in our electricity bills I could see the criticism was troublesome for you. As a result I believe my suggestions on what you should do will put some spring back in your step.

Here they are:

Recommendations to reduce future ratepayer bills

Conservation spending for the period 2015 to 2020 is forecast and budgeted at $1,835 million so drop it and that will provide close to $400 million annually that can go to reduce electricity prices.

Next, cancel the acquisition of the 500 MW of renewable wind and solar that you instructed IESO to acquire. That will save an estimated $200 million annually in future costs that would increase our rates.

I note there are 510 MW of wind generation contracts awarded that have not yet obtained their REA from the MoE and I recommend you also cancel those. I estimate that would provide relief from future increases of another $200 million per annum. I would suspect the costs of exiting these will be nominal.

Needless to say the cancellation of the above 1,010 MW of renewable energy will reduce future power surpluses meaning the HOEP might show some upward movement. That would allow all the dispatched wind and solar, spilled hydro, steamed off nuclear and idled gas to be sold via the market place to our neighbours. I estimate we could sell anywhere from 10/15 TWh annually at a price of somewhere around $40 million per TWh which would earn revenue of $400/600 million annually.

I would also cancel the new OESP plan which is estimated to cost $200 million (including a new administrative bureaucracy costing $20 million) annually.

Now if you do the math on the above the amount of money your portfolio would save in the future and also generate new income it totals $1.7 billion.

You could than use some of that $1.7 billion to both decrease electricity prices and provide relief for those suffering from “energy poverty.”

My recommendations on those two issues follow:

Recommendations to relieve “energy poverty”

First you should instruct the OEB that the .12% allocated to the LEAP program be increased immediately (providing you have completed the other recommendations) to 1% which will immediately make over $30 million available to the social agencies for relief purposes. You should also increase the maximums per household to $1,000 and instruct the OEB that the Return on Equity and/or Return on Assets for the LDC are to reflect a reduction to accommodate this.

Second you should drop the TOU off-peak rate from 7.7 cents per kWh to 5 cents per kWh. The cost of this would be about $350 million. It would also benefit many of those “low-income” households meaning they would no longer suffer from “energy poverty.” The other benefit is that the ratio of offpeak to on-peak would be much closer to the 3 : 1 ratio that the Auditor General suggested it should be and get more people to shift their use. It would also benefit our business community.

The cost of the two above recommendations are less than $400 million meaning ratepayers will be better off by avoiding future rate hikes and seeing some relief on existing rates. At the same time the TOU pricing will provide a clear signal that usage should shift preserving the “conservation” theme.

I certainly hope you will give my suggestions some serious thought and I do look forward to your response.

Yours truly,

Parker Gallant