Hydro One serves less than one-quarter Ontario customers, yet has more “costs”

In late 2009, with the advent of the Green Energy and Green Economy Act, then Energy Minister George Smitherman proclaimed that electricity rates would only rise by 1% per year.  The 2010 Minister of Energy Brad Duguid launched his personal version of the Long-Term Energy Plan (LTEP) and included a forecast that electricity rates would rise by an average of 7.9 %over the next three years.   In late 2013 Energy Minister Bob Chiarelli produced his LTEP. His forecast? Electricity rates would rise by 42% over the ensuing five years and by 33% over the next three.

George, Brad and Bob have a treat in store: the Ontario Energy Board’s 2013Yearbook of Distributors is now out, and actual results show that all their forecasts appear to have been grossly understated.

Comparing the “cost of power” (COP) for the year ended December 31, 2013 to that of 2012 shows the COP increased by over $1.6 billion (for less consumption) by Ontario’s ratepayers (not including Ontario’s large industrial users and exports) which translated to a 15% jump, well over forecasts of the past and present Energy Ministers.

$350 a year more to our bills

That $1.6 billion jump in the cost of power from 2012 to 2013 added about $350 annually to the typical ratepayers bill.

The Yearbook is a labyrinth of data to be mined for more interesting information.  For example, the OMA (operations, maintenance & administration) costs for 2013 increased by $97 million (6.4%) over 2012 for the 73 LDCs (local distribution company) reporting.  One could assume that the increase can be shared equally by all 73 LDCs, but no: $68 million or 69% of that increase came from Hydro One even though they only service 24.7% of Ontario’s ratepayers.

Looking back to the first Yearbook (2005 year end) and comparing average kilowatts (kWh) consumed per customer per month, you calculate that it has decreased by 11.2% from 2,378 kWh to 2,112 kWh.  At the same time Hydro One customers decreased their usage by only 5.6 % (104 kWh) but started at a much lower average level of consumption. This is surprising in that the OEB allows Hydro One to use a higher average consumption level when applying for a rate increase.  It may be a reflection on the inability of OEB staff to look at data in a different fashion instead of the “isolation” they appear to apply to each and every rate increase application.

In 2012 the OEB started collecting new data referred to as “Full-time Equivalent Number of Employees” (FTE) and if one totes up the numbers you find that the LDC sector had 10,022 FTEs at the 2013 year-end, of whom 3,291 (33%) are FTEs of Hydro One. Again, Hydro One serves just 24.7% of Ontario’s ratepayers.

Take those FTE numbers and use the data supplied in some of the other 102 Yearbook pages you can determine the average cost of each FTE  (adding up OMA costs for 2013, all staffing costs, and then dividing by the number of FTEs).  For 2013, if you deduct Hydro One’s OMA costs and FTEs you get  72 LDCs claimed costs at $1.001 billion and FTEs were 6,731 — so the “average” cost per FTE $148,760.  For Hydro One the OMA costs were $604.7 million for 3.291 employees making the “average” cost for a Hydro One FTE $183,744.  One has to ask, Are Hydro One workers worth the extra $35,000?

The other information that started appearing in the Yearbook a couple of years ago under “liabilities” was what is referred to as “Employee future benefits” (EFB) which one assumes is what the individual LDC has allocated towards pension and other retirement benefits.   For 2013 the EFB for the 72 LDCs (excluding Hydro One) was $468 million and if one simply divides that value by the FTEs (excluding Hydro One) you determine those EFBs average $69,529 per FTE or about $70,000 per employee to cover future pension and post retirement benefits.

Do that for Hydro One and you see they allocated $824 million (increased by $248 million, up 43% in just two years, from 2011) towards their EFBs.  Calculating what that is for each of their 3,291 employees you are better able to understand what the Leech Report highlighted about the unaffordability of the pensions and benefits at Hydro One, OPG, and the other electricity-related Crown corporations. Employees chip in $1 for every $4 of employer (in other words, you and me, the ratepayer) contributions.

Hydro One’s liability for “future benefits” represented almost 64% of the total of “Employee future benefits” at the end of 2013 — again to service just 24.7% of all ratepayers.

In fact, the liability per Hydro One employee of $250,000 at the end of 2013 was more than three times that of the other 72 local distribution companies.

More pain in the future

Ontario finished 2013 with slightly less than 1,200 MW of solar and 2,800 MW of wind in operation.  That amount of wind and solar played the major role in causing the extraordinary jump in the cost of power.  As of March 31, 2014 an additional 3,000 MW of wind generation and 1,000 MW of solar is either contracted for or under construction, which will double the sources of intermittent and unreliable  generation.  Those contracts will push up the cost of power by $350, or more, per annum, for the “typical” householder — in other words,  George, Brad and Bob all missed forecasts by a long shot.

Don’t expect to see the Ontario government tackle the rising costs of electricity caused by the incredibly generous salary and benefits programs and increasing amounts of wind and solar added to the grid. With billions of dollars destined annually for wind and solar developers, and huge shortfalls in the overly generous pensions and future benefits of the (mainly) provincial owned electricity entities, Ontarians will see continuing double digit growth in electricity costs.

Ontario ratepayers simply cannot believe what the Energy Ministers say.

©Parker Gallant

August 18, 2014

The views expressed here are those of the author.

Republished from Wind Concerns Ontario.