Community Generation Network

Article Post

Auditor General rips into the Fair Hydro Plan

The newest band-aid solution from Queen’s Park to fix the province’s ailing electricity sector is laced with poison.

That’s the latest damning assessment from Ontario’s Auditor General (AG) on Queen’s Park’s most recent distortion of the province’s electricity sector, the Fair Hydro Plan. The AG concludes that the Fair Hydro Plan will cost electricity customers more in the long-run, contravene the government’s own accounting practices and eliminate the independence of the province’s energy regulator in setting rates.

Like countless assessments before her, the AG again points out that while the Fair Hydro Plan may deliver lower bills today, it does so at the expense of future electricity customers. The AG confirms earlier figures from the province’s other watchdog, the Financial Accountability Office (FAO) that, while the savings over the next decade will amount to $18.4 billion, accrued interest costs on the debt needed to deliver those savings will add up to $21 billion. The FAO also warned that a one percent rise in interest rates could push total interest costs to $30 billion – meaning future electricity customers could pay $11.6 billion more in rates to cover the costs of the new policy.

Today’s savings are, in short, a mirage.

The AG also pointed out that the province’s decision to create a “needlessly complex” accounting and financing structure to deliver the savings – rather than simply issue provincial debt and push it back into deficit budgets – adds $4 billion of unnecessary costs to future hydro bills. Worse still, the province was fully aware that its financing scheme was needlessly expensive, as bureaucrats within the government admitted as much, saying it “would be a lot simpler and cheaper” if the province simply issued its own debt to cover the rebate to electricity customers

But the AG takes particular aim at the province’s decision to, in essence, make up “its own accounting rules”. She concludes that, while the government says publicly that it follows Canadian Public Sector Accounting Standards (PSAS), the accounting methods it’s using with the Fair Hydro Plan “are actually not in accordance” with those rules. The AG says internal documents make it clear that the province was fully aware its accounting methods likely wouldn’t get a positive audit from the Auditor General, but “accepted this risk” solely to avoid the embarrassment of once again tabling a deficit budget.

The AG also points out that the province has a history of dealing with something like the Fair Hydro Plan, but has in the past accounted for it using recognized and accepted accounting methods. The much-disliked Debt Retirement Charge – which paid for the mistakes of the old Ontario Hydro – was added to electricity bills in 2002. At the time, the government included the debt on its consolidated financial statements and counted the money received from ratepayers to pay down that debt as revenue, which allowed it to accurately “track ratepayer costs and taxpayer costs separately.” The AG is encouraging the province to do the same with the Fair Hydro Plan.

The Fair Hydro Plan also furthers the province’s decade-long dismantling of the regulatory system and, once again, transfers greater control of the electricity system to the Ministry of Energy. The AG rightly notes that the Ontario Energy Board (OEB), which by law is tasked with setting rates, had little input in the implementation of the Fair Hydro Plan, which breaks the regulatory practice of fully charging electricity customers the cost of providing them power. The OEB’s main function – setting rates – is now being usurped by the Ministry of Energy, which will now have an outsized role in determining how much of the cost of generating and delivering power is included in rates.

Clear and effective regulation over the electricity sector has taken another step backwards.

Republished with permission from the Consumer Policy Institute

Explore Related Topics:


The present and the future of HYDROELECTRIC POWER GENERATION
All currently existing hydroelectric power generation methods use - fully, or at least partly – the POTENTIAL ENERGY (volume) of the water.
There is no way to control (INCREASE) the velocity (speed) of the water unless we increase the height of the dam, or – for example – increase the vertical drop in case of a run off the river generating station.
These kinds of “increases” are rarely possible at all, or even if physically possible, it would be so expensive that the cost makes it meaningless.

There is a recent Canadian innovation that makes it possible to fully control (increase or decrease) the velocity of the water, and doing so in an absolutely economical way.
This patent utilizes KINETIC ENERGY (SPEED) instead of POTENTIAL ENERGY (VOLUME) of the water.

As laws of physics go KE = (m*v2) / 2 – water running with double speed would pull through the penfold double volume of water.
This would generate 8 (EIGHT) times more torque on the turbine.
Even if we draw just the same volume of water, but with double speed – we generate 4 (FOUR) times more electric power – and we need much smaller penstock.

It is evident what effect this innovative patent will bring to the hydroelectric generation world.

This new generation method can be utilized at already existing power stations, as well as at new installations, or even at currently non-powered dams without causing any environmental impact.
Therefore, we can substantially increase the generating capacity, without any large additional investment, and without any additional water volume requirement.

Due to the above facts, many sites previously considered being unfit for hydroelectric generation purpose, now come up as very potential opportunities.

For further information contact:

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.