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Tag Archives: Debt Retirement Charge

Parker Gallant: the Liberal shell game on hydro bills

28 Monday Apr 2014

Posted by ottawawindconcerns in Ottawa, Renewable energy, Wind power

≈ 1 Comment

Tags

Bob Chiarelli, Debt Retirement Charge, electricity bills Ontario, job losses Ontario, Kathleen Wynne, Ontario, Ontario economy, Parker Gallant, rate relief, small business electricity bills, small business Ontario, Wind Concerns Ontario

The Liberals’ promise of ‘significant relief’ on power bills: a closer look

The April 2014 Liberal event calendar has had a minimum of an event a day, including the Energy Minister Bob Chiarelli’s delivering a message on how the government plans to help small and medium Ontario business deal with electricity bills. The event was held at Giant Tiger’s HO in Ottawa.

Energy

Bob Chiarelli and friends: did they look at the numbers, really?

These daily announcements are leading up to the budget presentation on May 1st which is widely expected to trigger an election.

Not once in the 27-minute podcast did the Minister mention “Timmies” coffee in the context of either what it would cost ratepayers or how much it would reduce hydro bills for those small and medium sized companies. But what he did was to spin the bad news electricity story: first they rob Peter and Paul to pay wind and solar developers, and when Paul becomes vocal you rob more from Peter to pay Paul. As soon as Peter laments, you tell him you have a plan to give him a break and you simply stick Paul with higher rates. Then, while you are telling Peter he will soon get a break, you rob the company that employs him so they can no longer afford to hire Paul. Shortly after that the company laments that they may have to lay Peter off so you rob even more from Peter and Paul, so that they will be able to keep Peter on staff and may even be able to afford to hire Paul.

Should you decide to watch Chiarelli’s podcast you’ll see he doesn’t make it quite that simple. Instead, he talks about “pillars,” points and electricity acronyms like “IEI” (Industrial Electricity Incentive) or “ICI” (Industrial Conservation Initiative) programs. Like the other promises of prosperity coming daily from the government, the benefits are all in the future. Only one of his suggestions came with a specified time (2015). That was one that will instruct your local distribution company (LDC) to become a lending institution! They will be told to provide financing for “up-front capital costs” associated with “conservation programs.” Needless to say this and the other programs will be financed by other ratepayers via the Global Adjustment (GA).

The day before, the announcement was about ending the Debt Retirement Charge (DRC) at the end of 2015, and was clearly aimed at residential ratepayers (people who vote). Premier Wynne said it would bring “significant rate relief.” The DRC will continue to be collected until 2018 from those to whom Minister Chiarelli promised relief too, from his perch at Giant Tiger. By the end of December 2015 we will have paid $15.5 billion to retire the original $7.8 billion of “Residual Stranded Debt” but they want more, so they will take about $1 billion from most commercial and industrial clients before they will finally declare it paid—evidence of the Liberal trick of robbing Peter to pay Paul!

“Significant relief”?

Let’s look at Wynne’s “significant rate relief” claim. Just one year ago the Ontario Energy Board announced a rate increase that cost the “average” ratepayer $3.63 a month or $44 annually, and followed that with another increase in November raising rates by $4.00 a month or $48 annually. The more recent increase of April 14, 2014 saw another increase of $2.83 a month or $34 annually, and those announcements didn’t include rate increases for the “delivery” or “regulatory” lines on our bills, which also increased. So, in just one year the electricity rates jumped $126 annually and Wynne’s announced rate relief won’t happen until the end of 2015. That’s the year the Ontario Clean Energy Benefit (OCEB) ends. The OECB reduces the average bill by $13.30 per month or $160 annually. The “average” bill (electricity only) at the start of 2016 will be $286 higher on an annual basis than it was as of April 30, 2013. Adding the HST brings the increase to $323.
We should also expect additional increases from the OEB’s scheduled rate setting on December 1, 2014, May 1, 2015 and December 1, 2015; those add a minimum of $100/120 to our electricity line.

In other words, the average bill will have jumped by approximately $425/$450 by which time Wynne’s “significant rate relief” will become insignificant. Just as the annual DRC charge of $67 falls away, another scheduled charge from the Wednesday announcement (aimed at reducing energy poverty) of $11 will be added, so we may see a measly $56 decrease at that time.

25% increase in two years
The “average” ratepayer will have experienced an increase of over 25% in electricity prices in slightly more than 2 years by the time the December 31, 2015 date arrives. At that time our electricity costs will be charged out at over 21 cents per kilowatt (kWh). That only gets worse as more contracted wind and solar enter the grid. The price will rise further should OPG prove successful in their “significant” rate increase request now before the OEB. Add in increases expected in the “delivery” and “regulatory” lines, tack on HST and all-in costs will be in the neighbourhood of 30 cents a kWh! That average $133 monthly bill will suddenly be $240 and Ontario residents will be challenging Germany and Denmark for the privilege of having the most expensive rates in the industrialized world.

It seems the Liberal Ontario government has apparently abandoned the “Chiarelli” math (units are based on the price of a Tim Horton’s coffee) and have now moved on to a shell game. They tell us their management of the energy portfolio is constantly saving us money—you just have to look for the pea under the right shill, oops, I meant shell!

©Parker Gallant,
April 26, 2014

The opinions expressed here are those of the author and do not necessarily represent Wind Concerns Ontario policy.

Economist: Ontario’s actions on electricity bills possibly illegal

12 Saturday Apr 2014

Posted by ottawawindconcerns in Renewable energy, Wind power

≈ 3 Comments

Tags

Big Becky, Debt Retirement Charge, Dwight Duncan, electricity, Hydro One, Ontario, Ontario Electricity Act, Ontario electricity bills, Ontario government, Ontario Hydro, OPG, residual stranded debt Ontario, Robert Lyman

From Ottawa energy economist Robert Lyman:

THE $6.2 BILLION SLEIGHT-OF-HAND

 Parker Gallant is a retired banker who has done tremendous service to the people of Ontario by reporting publicly on the Ontario government’s mismanagement of the province’s electrical energy system. In an analysis he posted on April 11, 2014, Mr. Gallant applied his knowledge of financial management and accounting to reveal the damaging and possibly illegal actions of the Liberal government with respect to the Debt Retirement Charge included in the monthly electricity bills of Ontario residents. The analysis can be found online here:

http://ep.probeinternational.org/2014/04/11/parker-gallant-the-debt-retirement-charge-premier-wynnes-6-2-billion-revenue-tool-5/#more-12245

This note offers my explanation, in layperson’s terms, of what Mr. Gallant revealed.

Background

In 1998 the Ontario government launched a major restructuring of the province’s publicly-owned electricity industry. One aspect of this restructuring was the breakup of Ontario Hydro into five successor companies on April 1, 1999.

The Ontario Ministry of Finance determined that, on April 1, 1999, Ontario Hydro’s total debt and other liabilities stood at $38.1 billion, which greatly exceeded the estimated $17.2 billion market value of the assets being transferred to the new entities. The resulting shortfall of $20.9 billion was determined to be “stranded debt”, representing the total debt and other liabilities of Ontario Hydro that the Ministry judged could not be serviced in “a competitive electricity environment”. This total was subsequently reduced to $19.4 billion when it was adjusted for $1.5 billion of additional assets transferred to OEFC. Responsibility for servicing and managing the “legacy” debt of Ontario Hydro, which includes the stranded debt, was given to the Ontario Electricity Financial Corporation (OEFC), whose opening balance sheet reflected a stranded debt, or unfunded liability, of $19.4 billion. This was the difference between the $18.7 billion value of assets assumed by the OEFC and the $38.1 billion of Ontario Hydro legacy debt.

To retire the debt, the government established a long-term plan wherein the burden of debt repayment would be borne partly through dedicated revenues from the electricity sector companies – Ontario Power Generation (OPG), Hydro One, and Municipal Electrical Utilities – and partly by electricity consumers directly. (Bear in mind that all the revenues from the electricity sector companies come from electricity consumers, so electricity consumers pay all the costs, one way or the other.). The electricity companies would make “payments in lieu of taxes” to the OEFC (this is, in theory, the equivalent of corporate income taxes). It was projected that future revenues from OPG and Hydro One and municipal electricity distributors would generate $11.6 billion over the next eight to nine years.

To read the full article click here.THE $6.2 Billion Sleight-of-Hand

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