Tories overly optimistic, analysts say

Posted on November 13, 2002 by energyprbe

Caroline Mallan
Toronto Star
November 13, 2002

The Ontario government is being overly optimistic about coming up with the money to cushion consumers from high electricity prices, industry analysts say.

The government says a rebate for customers and a four-year price freeze will be paid for from money set aside by publicly owned Ontario Power Generation (OPG) from its wholesale electricity sales.

Premier Ernie Eves insists taxpayers will not be on the hook for the rebate money and price freeze.

But some industry insiders are predicting that higher future rates, increased taxes, increased debt or money taken from other government programs will eventually have to come into play to pay for the billions of dollars that may be needed.

Energy ministry officials seem confident that money being set aside by OPG – a successor company to Ontario Hydro that controls about 70 per cent of the province’s generating capacity – will be enough to cover the rebate scheme.

The rebates will cover the amount paid by consumers over 4.3 cents per kilowatt hour since the market was opened to competition May 1. Eves said the rebates will be at least $75 a household.

By the end of this month, Ontario Power Generation will have set aside $700 million to cover rebates to consumers, states one Ministry of Energy “reality checks” that has been e-mailed to the media.

But Tom Adams of Energy Probe, a consumer and environmental watchdog, does not mince words in his assessment of Eves’ contention that the rebate will be revenue-neutral.

“There is not a shred of truth to that statement,” he said of Eves’ assurances.

Adams said not only will the existing fund likely come up short for the rebates – which he estimates will cost closer to $900 million by the end of this year – it also does not have the money to pay companies that signed up customers with fixed-price contracts for the extra cost they have incurred.

Both Eves and Energy Minister John Baird say they will honour those contracts, most of which offered a fixed price of 5.9 cents per kilowatt hour, even though consumers will pay only 4.3 cents in the end. One industry analyst said the difference owed to those private companies – primarily Direct Energy – could range anywhere from $700 million to $1.1 billion annually.

Jan Carr, managing director of Barker, Dunn and Rossi, an electricity industry consulting firm, said he wouldn’t be surprised if the new price freeze costs taxpayers money – either in the form of increased hydro debt, higher rates in the future or tax dollars out of general revenues.

“You cannot create money out of nothing, if the cost is higher (than 4.3 cents on average), you are going to have to borrow it,” said Carr, estimating the annual cost of the new subsidy plan at between $1.5 and $2 billion.

Critics say that the Tories may have to reduce spending on health care, education or the environment to come up with the money for the rebates.

Carr said while the government may be able to cover the rebate this year, it could have a tougher time in the future because the spot prices for hydro are expected to remain high.

Julie Girvan, an electricity market analyst who advises the Consumers’ Association, said the OPG rebate money was collected assuming lower over-all rates and a plan that would give back customers only a small portion of any unexpected price spikes. It was designed so that OPG would never be asked to pay out more money than it took in.

Essentially, OPG pockets money whenever the energy price is below 4.3 cents and has to pay it out whenever that price is above 4.3 cents.

This article also appeared in the Toronto edition of Metro.

 

Posted in Power Generation in Ontario | Leave a comment

New Approaches to Energy Conservation

Posted on November 11, 2002 by energyprbe

Robert Sheppard
Maclean’s
November 11, 2002

OK CONSCRIPTS, straighten up. Shoulders back, tummy in, turn down those thermostats. Uncle Jean wants you – and you and you – to reinsulate your homes, to change your driving habits and to think twice before you take the minivan to the corner store for a loaf of bread.

This is war, don’t you know. Forget Baghdad. Forget Ralph Klein. (Repeat after me: Alberta is not the enemy. Alberta is not the enemy.) We have a planet to save here, to save from the kazillion tonnes of burned fossil fuels we earthlings have shipped skyward to clog the atmosphere and mess with the weather.

Think of yourselves as foot soldiers in what promises to be a decades-long adjustment to the post-petroleum future. The battlefield is your living room, kitchen or maybe the basement where you keep the washer and dryer. Or, if you want to feel a little more exalted – this for all you premiers and corporate chieftains out there – think of yourselves as the John D. Rockefellers of conservation. That’s Ralph Torrie’s suggestion. The irony is intended.

Rockefeller, of course, was the industrial-age tycoon who gathered the little independent petroleum producers in the United States into one huge conglomerate and so made the future bright for vertical integration, little deuce coupes, Middle East wars, cruising for burgers, Exxon Valdez, and fleets of gas-guzzling SUVs squatting like occupying tanks. Torrie is an unassuming Ottawa energy consultant who has helped 300 cities around the world save hundreds of thousands of dollars by plugging leaks and becoming more energy efficient. He firmly believes that Canada can cut its gaseous energy emissions in half by 2030 – further and faster than the much-maligned Kyoto timetable – if only we paid attention to all the little things from window panes to water heaters. And he’s crunched some numbers to prove it: from 1970 to 1998, through the first wave of OPEC oil increases, Canada’s conservation efforts, most of them haphazard and now outdated, have nonetheless saved the equivalent of 7.5-billion barrels of oil, or 16 times the output of our entire nuclear power industry. “What,” he asks, “if we really tried?”

It’s a good question. The technology for a planet-saving future is largely available. (It’s habits that haven’t altered much.) Cities like Ottawa, Toronto and Edmonton have cut ENERGY emissions – and the promise of future bills – significantly by, for example, changing street lighting. So have homeowners who have switched to halogen or fluorescent lights. Though the sad reality is that, with house lights as with cars in the driveway, new homes tend to have twice as many as earlier households. Of course, all sorts of new appliances – refrigerators, furnaces, water heaters – are vastly more energy efficient today. But the little appliances – the constantly-on VCRs, cable boxes and microwaves – are “leaking” and need to be staunched. And if we switch to front-loading washing machines (they use half the water and offer more efficient rinsing), that would cut dramatically into washing and drying times. So would cooking teenager style – by microwave. Convenience doesn’t have to be wasteful.

Then there’s insulation. In Saskatoon, energy researcher Rob Dumont has built what experts say is the best insulated house in the world. An otherwise ordinary, two-storey wooden house on a quiet street, with a basketball net in the backyard, it has doubled two-by-four studs to accommodate R60 insulation in the walls and R80 in the attic – about triple the current new-home standards. Dumont is a keener. His latest gadget captures and recirculates some of the heat from water as it heads for the drain. But he says the added investment – about $13,000 in 1992 for the insulation, passive solar heating and a high-tech ventilation system – will pay for itself in 16 years. “It’s done much better than my mutual fund,” he notes. He also estimates that the same house in a more temperate climate like Vancouver’s would cost almost nothing to heat.

Houses and cars and light trucks, delivery trucks especially. These are the areas where real gains can be made. Ottawa’s Kyoto plan, laid before the provinces last week, would spread the sacrifices around. Each adult Canadian is theoretically responsible for reducing one tonne of carbon dioxide emissions a year, and that represents a 20-per-cent change in living or driving habits. This is a plan – not unlike free trade – that would touch all regions and all sectors of the economy. Serious cuts are expected from energy producers, big manufacturers and maybe even the car companies. For the moment, automakers are only being asked to label fuel consumption more prominently – like the health warnings on cigarette packaging – and to try to make cars that are 25 per cent more efficient by 2012.

But long-time conservationists like Torrie say this might not be the best approach. Why punish Albertans disproportionately, he asks – both as consumers and as producers of the coal, natural gas and petroleum that people burn with little thought of the consequences? Better to focus on the “pinch points,” he says – higher standards for new buildings and appliances; better fuel efficiency for SUVs, minivans and muscled-up pickups; and more direct training for delivery drivers and ordinary commuters.

In model-town Peterborough, Ont., where new products go to be tested, the feds have been trying out a retrofit program, not unlike the conservation schemes of the late 1970s. Homeowners receive a professional energy audit of their house and are eligible for about $1,000 in rewards if they spend $4,000 or more caulking windows and adding insulation or other energy savers. Initial response has been positive. But to meet the Kyoto deadline, Ottawa is counting on 20 per cent of older homes and buildings being upgraded by 2010. And in the current climate – with provinces like Ontario promising an electricity rebate after a summertime surge – how many making-ends-meet Canadians will take that challenge?

Ralph Torrie has a suggestion. Why not require energy audits on older homes every time they are sold, as with safety and pollution checks for cars in most provinces? Upgrading would be no small undertaking. By Torrie’s calculations, 40 per cent of Canadian homes have no basement insulation and 62 per cent heat with inefficient furnaces. But utilities or a government agency could lend the money – a kind of conservation mortgage – to be paid back from energy savings.

A warning note here. “Historically,” cautions Tom Adams of Toronto-based Energy Probe, “when governments have gone investing in this area and tried to pick winners we ended up with UFFI [urea formaldehyde foam insulation, banned in Canada in 1980 over health concerns] and nuclear power.” A vigorous foe of cheap energy, Adams has an unusual take on the situation. The good-guy hydroelectric provinces like B.C., Manitoba and Quebec, the ones claiming to be unfairly sideswiped by Ottawa’s Kyoto plan so that Alberta’s energy-sucking oil sands can survive, are the real gluttons, he says: if their consumers were forced by price to be more conservation-minded, there would be a surplus of electricity, enough to make all the sooty coal-burning power plants obsolete.

That’s Canada’s dilemma of course: energy is cheap. We grumble when the price of gas hits 70-odd cents a litre. But it’s at least double that in Europe – and yet Europeans are driving more each year, approaching North American habits. To reduce car emissions by 10 per cent may require only keeping your tires inflated properly, driving the speed limit and not idling the engine on those cold mornings. Well, maybe. But that supposes drivers want to be kind to the planet each time they get behind the wheel. And so far neither provincially imposed luxury-car taxes nor the high cost of SUVs has lent much support to that argument.

Automakers have done a decent job – when pushed and kicked – of eliminating nearly all the noxious, smog-inducing gases that flow from the internal combustion engine. But there is no easy end-of-pipe technology to trap carbon dioxide, the by-product of burning fossil fuels such as coal and petroleum. For car makers, the Holy Grail of the post-petroleum era is the hydrogen-powered fuel cell, a kind of super battery that NASA created for its spaceships. Its only waste product is water. Almost all the major car companies have test vehicles with fuel cell-powered motors bopping around Germany and California. But most automakers don’t see the hydrogen-powered car entering the commercial mainstream in the next 10 years. “They would certainly be outside the Kyoto timetable,” allows Blake Smith, Ford Canada’s director of environmental vehicles. Fuel cells are currently two to three times as expensive as petroleum for the equivalent mileage. But the biggest hurdles seem to be supply (if the hydrogen is simply extracted from natural gas, that’s not a huge carbon saving) and a safe, reliable refuelling network.

Still, at least two American companies have developed a fuel-cell power plant about the size of a small car to supply electricity to apartment buildings and big retail outlets. And miniature fuel cells, when they’re ready, could be a key factor in cutting the energy costs of household and office appliances. General Motors, for one, feels this is on the verge of becoming a $10-billion-a-year business.

Burnaby, B.C.-based Ballard Power Systems Inc. has begun delivering fuel cell engines for a pilot project of 30 European buses to begin next year. Ottawa’s Kyoto planning envisions 30 per cent of city buses powered by some kind of alternative fuel within a decade. That may simply entail pumping more cleaner-burning ethanol or even soy-based diesel in with regular fuel. The hybrid engine – half gas, half electric and self-recharging from the braking of stop-and-go city driving – may also be an interim solution.

Canada Post, among others, notably the giant FedEx operation out of Memphis, is experimenting with hybrid delivery vans. The hybrid car is another story. Media mogul Ted Turner drives a Toyota Prius. So do actors Leonardo DiCaprio and Alec Baldwin (he says it’s a great celebrity disguise). Vancouver’s Yellow Cab Co. has put just over 220,000 km on a two-year-old Prius, and is pleased with its performance. “Of course we don’t have as harsh a winter as you folks back East,” says Yellow Cab general manager John Palis. “But it’s worked out well. If it wasn’t for the small size we’d buy more.”

It costs just over ten bucks to fill the Prius tank. But the compact car itself sells for about $30,000 and that’s the Green dilemma in a nutshell: will consumers pay upfront for new earth-saving technology when the payback is not immediate or maybe even obvious?

Guilt alone probably won’t do the trick. Nor should it. Canada is responsible for only two per cent of the world’s greenhouse gases, though we’re the third worst emitter on a per-capita basis. (The David Suzuki Foundation says Canadians use more energy than the 760 million inhabitants of Africa.) But of course we don’t just use energy, we extract it, and expend enormous amounts producing and shipping it to the energy gluttons to the south.

“Canadians love their minivans,” notes automotive consultant Dennis DesRosiers. But in almost every other respect, he says, we are much more energy responsible than our American neighbours. We drive, on average, 2,000 km less per vehicle per year, we own fewer cars per capita and, on a market share, we buy half as many of SUVs as the Americans. (Large SUVs represent about one per cent of the Canadian cars on the road.) “Since the late 1970s, Canadians have been predisposed to buying the most fuel-efficient vehicles,” says DesRosiers. That means, he says, that to meet Kyoto, the product will have to change. And without the giant U.S. research machine in sync, that’s not going to happen soon.

The fact that the Bush administration has opted not to sign the Kyoto accord has fuelled a high-octane business and energy-sector opposition to Canadian ratification. The argument is that higher conservation-induced costs will make Canadian exports uncompetitive. But trade and efficiencies are highly complex matters. When it comes to clean-air requirements, many U.S. states are already well ahead of Canada. And as the C.D. Howe Institute – no fan of Kyoto – reported last month, if the U.S. economy grows faster than anticipated because it is not constrained by Kyoto, that should translate into greater Canadian exports, especially of Alberta’s oil and gas.

Alberta’s oil patch doesn’t see the world unfolding that way, however. It has been leading the fight to delay the Kyoto timetable for what it calls a made-in-Canada solution. The business lobby makes some good points and may well get its wish – though likely not in the way it wants. The Chrétien government intends to ratify the treaty by next month after a brief parliamentary debate, and then let industry groups thrash out the hard details of implementation themselves over the next two years.

Canada’s Kyoto commitment is to cut 240 million tonnes (MT) of carbon dioxide or its equivalent in other greenhouse gases by 2012. Plans for about 80 MT – through municipal action and improved forestry and agricultural practices – are underway, Ottawa says. Another 60 MT are being left for future consideration. That leaves 100 MT on the table now. Of that amount, heavy industry, power generation and the oil and gas sector are to be responsible for 55 MT.

Ottawa’s proposal envisions capping the large emitters at 85 per cent of their currently estimated 2010 emissions – details to be negotiated over the next few years. One strategy would be to make themselves 15 per cent more energy efficient over the next decade. Alternatively, they could invest in offsetting green power or carbon-absorbing forestry, or buy pollution permits from companies that can exceed their reduction quota and have “credits” to sell.

The share-the-pain plan is intended to affect all provinces equally. But some, like Alberta, will clearly have serious adjustments to make. The northern Alberta tar sands – energy rich but as environmentally sooty as their name sounds – may not survive without special help. Ottawa is dangling incentives for clean-air research. And it is promising to invest in a CO2 pipeline, an inducement for big emitters – the tar sands among them – to capture carbon dioxide and find a market for it. One possibility is to pump it back into Alberta’s deep coal beds. That is expected to release trapped natural gas and methane, and so provide untapped sources for – guess what – hydrogen, the fuel of the future.

None of this, though, is a quick or easy fix. For example, Calgary’s TransAlta Corp., a large coal-generating utility, the second largest greenhouse gas emitter in the country, plans to invest $2 billion in wind power. It has also invested in agricultural improvements in the Third World and pilot projects for emission trading. In short, it’s done all the things you’d want a forward-thinking corporation to do. And yet it says it can’t possibly reach its Kyoto target before 2017 at the earliest. And then only with special dispensation for its existing coal-fired plants.

The big winners could be Canada’s cities. Thanks in part to a $300-million federal investment, cities have had a head start in getting their environmental act together, to the point where they look to have eight MT of Kyoto credits to sell a few years down the road. Best guess, that could represent an $80-million transfer from polluters to municipalities. More importantly, if cities plough this money back into more energy-saving devices, they will have even more credits to sell down the road, transforming themselves – think globally, act locally – into engines of change.

That’s the hope anyway. But keep in mind we’re in this for a long, uncertain haul. Any emission cutbacks that humans make now will take at least 100 years to work through the atmosphere. Also, with the U.S. sitting out and developing nations exempted, fully two-thirds of the world is not covered by the Kyoto plan. Something else to remember is that there are no real penalties in the Kyoto treaty: countries that don’t meet their targets just have their overruns added to the next target like interest on a credit card. Ottawa’s response is simple: this is a serious global issue and industrialized nations have a responsibility to step up to the plate first. Still to be seen is whether ordinary Canadians will answer that call to arms.

Why We’re Talking about Kyoto

Projected increase in Canadian greenhouse gas emissions if current policies don’t change (in millions of tonnes):

2000 2010

Total 726 809

Power generation 130 126

Mining and manufacturing 142 152

Operation of buildings 80 79

Oil and gas industry 107 147

Passenger transportation 110 116

Commercial transportation 70 78

Agriculture 61 76

Gas from landfills 26 27

Other 0 8

Source: Natural Resources Canada, Environment Canada

Posted in Conservation, Electricity, Energy Probe News | Leave a comment

Nuclear risk: Make ’em pay

Posted on November 6, 2002 by energyprbe

Lawrence Solomon
National Post
November 6, 2002

Nuclear power is absolutely safe, the nuclear industry is fond of saying. Only scaremongers, the ignorant and fools think otherwise, it maintains.

Canadian governments have fallen for the nuclear industry’s assurances but, thankfully, Canada’s private sector lenders haven’t. Knowing that the risk of nuclear contamination is real, and that they could be on the financial hook in the event of radioactive contamination, banks and other private financiers have refused to back nuclear facilities.

Soon that will change, the nuclear industry believes, thanks to an innovation designed to make investments in nuclear power safe enough for banks. The innovation is not a tightened safety technology, but a weakened Nuclear Safety and Control Act. With the passage of Bill C-4, which is now wending its way through Parliament, banks and other lenders will be absolved of worrisome liabilities in the event of a mishap.

To make nuclear power safe for other nervous Nellies – such as General Electric, Westinghouse, and other nuclear reactor manufacturers – the federal government took other measures. In the nuclear industry’s early days, GE et al. were worried sick that something small could go wrong – a broken valve, a malfunctioning alarm – and the consequences could be big. One meltdown could lay waste an entire city, the manufacturers explained, adversely affecting them and their shareholders. Legislators in Canada took the manufacturers’ concerns to heart, and took steps to ensure that a simple meltdown that inadvertently took out Toronto wouldn’t also take out a nuclear manufacturer. Canada passed the Nuclear Liability Act in the 1970s to guarantee that no harm whatsoever could come to a GE should any of its nuclear parts fail. To further ease the manufacturers’ nuclear paranoia, the legislation protects them even if an accident results from defective products that they had knowingly shipped, or safety documents that they had knowingly falsified.

The government failed to allay the fears of insurance company executives, who didn’t accept the claim that nuclear plants were virtually risk-free. As a result, insurance policies do not cover our homes and property in the event of a nuclear accident. The risk of a worst-case accident – which some U.S. studies have estimated at more than $400-billion – is just too calamitous to the bottom line for any insurer to contemplate.

Everyone is now reasonably safe in Canada – the lenders, the operators, the manufacturers, the insurers. Everyone, that is, except members of the public, who can neither insure themselves beforehand nor sue for compensation afterwards.

Despite these protections, the worldwide nuclear industry wants more. Although private nuclear companies feel safe at home, they worry that a meltdown in one country would expose them to liability laws in neighbouring lands. As would exports of nuclear goods, should an accident occur during shipping. In the belief that you can never be too safe, the industry is lobbying to make the world a Nuclear-Liability-Free Zone. The industry’s goal is an international protocol, governing all countries, that eliminates any untoward risk to private companies in the nuclear industry.

The state-run portion of the nuclear industry has no great liability concerns. Not so the nuclear industry’s private-sector players. Their concerns were voiced at an international symposium hosted by the Uranium Institute in 1999 by Washington lawyer Omer F. Brown, a member of the OECD Nuclear Energy Agency Contact Group on Liability and the counsel to two major nuclear industry groups: the Contractors International Group on Nuclear Liability and the Energy Contractors Price-Anderson Group.

“It is important to reiterate the fundamental factor that underlies the concerns of privately owned contractors and suppliers: Private – as distinguished from state-owned – companies have a fundamental obligation to protect the assets of their shareholders,” he explained.

“Private companies are exposed to tort and other liabilities to the full extent of their assets. The greater the assets of a private company, the greater its liability concerns are. Private companies ordinarily do not enjoy the immunities that governments and state-owned entities do. Company directors and officers even can be sued by shareholders for imprudent business decisions.”

To the relief of Mr. Brown and his clients, serious efforts are now underway to create the Nuclear-Liability-Free Zone that they wish. Various states are passing legislation that would further an international protocol, and the OECD’s Nuclear Energy Agency has taken up the cause of establishing a Nuclear-Liability-Free Zone. The logic of the Kyoto Protocol also gives governments a reason to lessen the nuclear industry’s international liability, just as it gives Canada’s Natural Resources Minister, Herb Dhaliwal, a rationale for weakened domestic safety legislation.

Solving the nuclear industry’s remaining liability concerns gives governments a warm feeling of accomplishment, and it makes the nuclear industry feel better. But it will leave the public out in the cold, should the accidents everyone in the industry expects but denies come to pass.

 

Posted in Nuclear Safety | Leave a comment

Critics blast Ontario power deregulation

Posted on November 2, 2002 by energyprbe

(Nov. 2, 2002) The Ontario government has admitted it failed to protect consumers by ordering a review of the agency responsible for overseeing the new, competitive electricity market, representatives of the opposition parties charged yesterday. Continue reading →

Posted in Natural Gas Utility Regulation and Commodity Deregulation | Leave a comment

Critics blast Ontario power deregulation

Posted on November 2, 2002 by energyprbe

Richard Mackie
Globe and Mail
November 2, 2002

The Ontario government has admitted it failed to protect consumers by ordering a review of the agency responsible for overseeing the new, competitive electricity market, representatives of the opposition parties charged yesterday.

Premier Ernie Eves, reacting to increasing complaints about escalating electricity prices, last month ordered a full review of the mandate, procedures and staffing of the regulatory agency, the Ontario Energy Board.

He ordered the review more than five months after the Conservative government opened the $10-billion-a-year electricity market to competition and privatization.

“The Ontario Energy Board was clearly not resourced or financed or in any way given the opportunity to prepare for hydro deregulation and competition,” said New Democratic Party Leader Howard Hampton.

Liberal Party energy critic Michael Bryant said, “Reviewing the mandate six months into the new market means the mandate was botched in the first place.”

Tom Adams of the Energy Probe watchdog agency argued, “A regular, scheduled, bloodless review . . . is a great thing. A politicized witch-hunt, trying to pass blame over to the OEB as a way to react to public concerns . . . is just the wrong approach.”

The complaints were echoed by Burlington Conservative MPP Cam Jackson, who called on the government yesterday to freeze electricity rates at last year’s levels.

“The government must immediately review hydro rates, which have become far too high, not only for low-income families and seniors, but for most of my constituents,” said Mr. Jackson, who was dropped from the cabinet earlier this fall after his personal expenses were questioned.

He pointed to Mr. Eves’s decision to order a review of the energy board as evidence of problems in the new market.

“I . . . call for the freezing of hydro rates at last year’s levels until we can proceed with a new plan that protects hydro consumers with more assurance,” he said.

A similar call was made earlier last week by Gary Carr, the Speaker of the Legislature, who is the long-time Tory MPP from Oakville.

Dan Miles, communications assistant to Energy Minister John Baird, rejected the criticism of the decision to review the board.

“The minister wants to review the OEB to ensure we keep in step with developments that are going on and that it has the resources that it needs,” Mr. Miles said.

A consultation paper on the review issued by Mr. Baird late last month says, “Improving efficiency at the OEB itself will enable the board to better carry out its mandate – especially important as the Ontario energy sector is growing more complex.”

The paper notes that while some changes have been made at the board, “Further improvements are needed.”

Most of the changes up for discussion are procedural. But the paper also raises the issue of whether staff are paid enough to attract and retain the best people possible.

Salaries are restricted because they are tied to the public-service schedule of compensation, the paper says. “The OEB should also be able to attract and retain the best talent available. This may require more flexible compensation arrangements.”

 

Posted in Natural Gas Utility Regulation and Commodity Deregulation | Leave a comment

Hydro bills jolt users; inquiry urged

Posted on October 31, 2002 by energyprbe

Richard Mackie
Globe and Mail
October 31, 2002

Electricity users in Toronto face increases of hundreds of dollars a year on their hydro bills to match the higher charges that have hit consumers across Ontario as a result of changes to the electricity industry, the provincial legislature was told yesterday.

The prospect of higher bills arriving in the mail starting in March is only part of the bad news about soaring electricity prices facing consumers within and outside of Toronto.

Across Ontario consumers can expect an additional surcharge of up to $100 a year to pay for more expensive electricity imported from other jurisdictions because of the power shortage within the province. Power bills describe this as an “uplift charge.”

And Toronto consumers likely will be hit with retroactive bills averaging about $200 to make up for the fact that they have been paying rates below the actual cost of electricity faced by Toronto Hydro, according to Liberal energy critic Sean Conway.

He called for an independent inquiry into why electricity prices have soared in the past four months.

“Millions of electricity customers who are getting it through the teeth should demand some immediate, independent oversight of the behaviour of . . . Ontario Power Generation, which controls most of this electricity market,” he said. OPG is owned by the government.

The bills faced by consumers could be offset somewhat by rebates. By the end of September, the average consumer was owed a rebate of about $45, Tom Adams of Energy Probe said.

These rebates were to be sent out next May, but Premier Ernie Eves, faced with a flood of complaints about electricity bills, has suggested that they could be in the mail much earlier.

Within Toronto, the rebates could be applied to the retroactive bills from Toronto Hydro, Energy Minister John Baird said.

“That’s certainly something I would be prepared to consider,” he told reporters at Queen’s Park.

Outside of Toronto, the rebates would provide some payback for bills that have increased by hundreds of dollars in many cases since the government allowed competition in the electricity industry starting last May 1.

But these rebates would not go to most of the one million consumers who signed on to fixed-price contracts. In exchange for getting electricity at a guaranteed price, most of these consumers signed contracts that allow the supplier to keep the rebates.

Bills in Toronto will start catching up to those in most other municipalities on Jan. 1, when Toronto Hydro starts charging its customers the rapidly fluctuating spot price for electricity.

Until then, the bills are based on a base charge of 4.3 cents a kilowatt hour, which the Ontario Energy Board had calculated as the average price that municipal distribution systems would pay over a full year.

For May and June, these calculations seemed to be on target as prices were about 3.3 cents. But they started soaring as demand increased in the hot summer months of July, August and September. Prices have continued to be high through October, and are expected to average 6.51 cents for September and October together. As the colder weather sets in, they are likely to hit an average of 8.31 cents through to the end of February.

Pushing up the prices is a shortage of supply of electricity in Ontario. Four of the eight nuclear reactors at Pickering are out of commission and their return to service is three years overdue.

The higher-than-expected prices are putting a severe squeeze on Toronto Hydro, it said in its application filed on Tuesday to change the way it charges its 400,000 customers.

At the end of September, it was owed more than $619-million. At the end of last year, customers owed it $280-million. Toronto Hydro said the $339-million increase in unpaid bills was being financed by loans from the banks.

Since the system was changed, Toronto Hydro has paid the Independent Electricity Market Operator, which supplies the power, $276-million in a single month. Its previous record monthly payment was $154-million.

 

Posted in Electricity | Leave a comment

Pickering renovation faces financial crisis

Posted on October 30, 2002 by Other News Sources

Canadian Press

October 30, 2002

TORONTO — A public inquiry is needed to find out why a nuclear power station being rebuilt east of Toronto is $1 billion over budget and still months from getting back online, Energy Probe said Wednesday.

“This is out of control,” Tom Adams, head of the consumer and environmental group, said of the rebuild of the Pickering A plant on the shore of Lake Ontario.

Energy Probe has long been critical of nuclear power, arguing that it’s too costly and unreliable.

Ontario is not the only province where nuclear power plants have required expensive repairs.

In New Brunswick, provincially owned NB Power is looking for a partner to help pay for a refurbishment of its Point Lepreau nuclear station, slated to cost $845 million.

In Quebec, the Gentilly II reactor is operating near Trois-Rivieres after an expensive refit in the late 1990s.

On Monday, Ontario Power Generation, which owns the Pickering complex, said the cost of rebuilding four Pickering nuclear units designed and built in the late 1960s and early 1970s could be almost $2.5 billion.

That’s more than twice what was originally estimated by OPG, the province’s publicly owned dominant power supplier.

“We need disclosure,” Adams said. “We think that the Ontario Energy Board ought to convene a hearing and get OPG in to provide sworn evidence on what the heck is going on.”

Pickering A has been out of service since 1997. The four reactors were originally scheduled to be back in operation last summer – when shortages forced Ontario to import higher-cost electricity to meet demand.

Now, OPG expects one unit to reach the “commissioning” stage in the first quarter of 2003, a testing process which the utility says could take one to three months.

The remaining three units will be reassessed once the first unit is back online.

Adams suspects an undisclosed problem or array of problems in the design or construction of the reactors.

“The public’s entitled to know what is causing these problems, and I think once we get the information on the table it will be abundantly clear that the best way out of this situation is to simply stop spending any more money on three of the units,” Adams said.

He noted that Darlington, an Ontario nuclear project started in 1981, required four years of commissioning and cost $11 billion, far above its initial $2.5-billion estimate.

“We have seen these problems repeated going back into the early 1970s,” he added.

“It’s 30 years of the same garbage – nuclear projects are always over budget, they’re always behind schedule, they always find exotic technical problems. And never, ever, ever in history have any of the people responsible for these screw-ups ever been held accountable for it.”

Further delays, Adams said, mean more costs for consumers, partly though higher rates to cover imported power.

He also said the Pickering problems and uncertainty over when it will be operational have discouraged alternative energy investments.

The project’s rising cost “translates into higher taxpayer-backed electricity debt, and ultimately higher electricity taxes to pay that electricity debt.”

OPG chief executive Ron Osborne said Tuesday the delays and higher expenses at Pickering A arise from “overly optimistic” early budgets, too much outsourcing of project management and lengthy environmental assessments.

He said the outsourcing was intended to allow OPG staff to concentrate on the Pickering B and Darlington sites. But it ended up producing “unrealistic deadlines, conflicting demand and poor overall management.”

Opposition politicians have been calling for more information from OPG, including provincial Liberal energy critic Sean Conway, who wants the power producer to explain itself to the legislature or the Ontario Energy Board.

Even John Baird, Ontario’s energy minister, has acknowledged unhappiness that the project is so far behind schedule and over budget.

Posted in Nuclear Economics | Tagged | Leave a comment

Electricity rebates might disappoint

Posted on October 30, 2002 by energyprbe

John Spears
Toronto Star
October 30, 2002

Electricity users counting on a rebate from Ontario Power Generation should lower their expectations about how big it will be, says Energy Probe‘s executive director Tom Adams.

In its latest earnings statement, OPG says it has set aside about 1.8 cents a kilowatt hour on a portion of its output to refund customers. OPG must refund revenue it collects under a formula triggered when the average price for electricity exceeds 3.8 cents a kilowatt hour. But Adams notes that the refund is based only on a portion of a customer’s consumption, since other companies provide some of the power on the Ontario grid.

How big the portion might be is now being debated before the Ontario Energy Board but Adams says it could be less than 60 per cent. If that were the case, a typical consumer might get a rebate of $11 a month, instead of $18 based on the full amount of consumption.

Many customers who have signed fixed-price contracts with electricity retailers – nearly one in four Ontario customers – won’t get the rebate at all. Most such contracts assign the OPG rebate to the retailer.

 

Posted in Power Generation in Ontario | Leave a comment

Power ‘fix’ costs $1B extra nuclear plant price has nearly

Posted on October 29, 2002 by Other News Sources

John Spears and Richard Brennan
Toronto Star
October 29, 2002

The cost of bringing the troubled Pickering A nuclear generating station back online has ballooned to $2.5 billion – almost twice its original projected price tag, the chief of Ontario Power Generation Inc. said yesterday.

And it will take a year longer than forecast to finish the project.

The news prompted Energy Minister John Baird to warn that part of the project might be scrapped – despite Ontario’s electricity shortage.

“I’m certainly concerned about the management of the project and I’m concerned about the delays of the project,” Baird told reporters yesterday afternoon. “They (OPG) made estimates that were overly ambitious . . . there has got to be closer scrutiny on this project.”

But at a speech just a few hours later, Baird said the project would likely go ahead.

“At this stage every indication is that it’s still commercially viable, and a clean source of power to the grid,” he told reporters at a meeting of the Independent Power Producers’ Society of Ontario.

Pickering A has four generating units and OPG says it will “reassess” the cost and schedule for bringing the remaining three units back to service once the first unit returns about the middle of next year.

It’s “appropriate” to review plans for the remaining three units, Baird said, then added, “I expect you’d see them proceeding, but that doesn’t negate the work that they should do after they complete the first one.”

In the Legislature earlier yesterday, Baird said “it is no secret that this project is not Ontario Power Generation’s finest hour. As minister, I’m not happy with what we’ve seen.”

Ontario Power’s chief executive Ron Osborne insisted yesterday he’s pushing ahead with the project, despite seeing the estimated cost rise to as high as $2.5 billion from an initial estimate of $1.3 billion. Preliminary estimates had pegged the cost at $800 million, but Osborne said they weren’t based in detailed analysis.

In its annual information form filed at the end of last year, OPG had pegged the cost of restarting Pickering A at $2 billion.

Earlier this year, Ontario’s auditor-general, Erik Peters, urged the province to probe the delays and cost increases at Pickering A, but the province didn’t act on his advice.

The Pickering A plant was supposed to have one of its four reactors in service early in 2003, according to the most recent estimate.

But Osborne said yesterday that starting the first unit has been pushed back to mid-2003.

As for the three other units, instead of coming on stream at six- to nine-month intervals as previously announced, they’ll now come back at one-year intervals, Osborne said.

That means the plant won’t be fully up and running until mid-2006, rather than the previous estimate of 2005.

OPG’s third-quarter earnings statement, released yesterday, warns “the cost and schedule to return the remaining units to service will be reassessed based on OPG’s experience with the first unit returning to service.”

Liberal MPP Sean Conway said if OPG halts the retrofit on the remaining three reactors, Ontario will experience a serious power shortage and will require action to find other sources in fairly short order. “I think we are going to face in the short and intermediate term, over the next two to three years, some really significant pressure in supply,” he said.

Critics also noted that OPG over the past several months has made windfall profits during a time Ontarians have seen their electricity bills double.

In a speech to the Independent Power Producers’ Society of Ontario, Osborne insisted OPG is still proceeding with Pickering A, despite the wording of the earnings statement.

“This is not intended to signal any lack of confidence in the Pickering A project,” he told his audience. “We are simply tired of setting artificial deadlines for the sake of having deadlines.”

Osborne said costs have increased because it has taken much longer than expected to rehabilitate the plant, and “time is money.”

It is Ontario’s oldest big nuclear plant, designed in the 1960s and built in the 1970s. It was shut five years ago, when the province’s power supply essentially met the then-lower demand.

But Osborne also acknowledged that OPG erred in not running the project as the primary manager from the beginning.

Initially, Osborne said, the restart was being run by a “three-headed monster” of which OPG was only one head. Atomic Energy of Canada Ltd., which provided much of the engineering work, and the building’s chief construction contractor, were also partners at the table, Osborne said.

In retrospect, Osborne said, “I would have outsourced less.”

Osborne said OPG has now taken over as the primary project manager.

He also blamed regulatory delays – such as a full environmental assessment that OPG had not expected to be required – for delaying work and pushing up costs.

The ballooning costs of the project have pushed up the cost of producing power at Pickering A to about 4 cents a kilowatt-hour from the initial estimate of 2.5 cents, Osborne said.

But he noted that the generating cost of a gas-fired plant is about 6 cents a kilowatt-hour.

Because OPG dominates Ontario’s electricity market, it’s required to refund customers revenue it collects if the average price exceeds 3.8 cents a kilowatt-hour. Since the average price to date is over 5 cents a kilowatt-hour, OPG has set aside about $500 million in refund money. That works out to about 1.8 cents a kilowatt-hour.

A consumer using 1,000 kilowatt-hours monthly would receive a refund of about $18.

 

Posted in Nuclear Economics | Tagged | Leave a comment

Less government, less greenhouse gas

Posted on October 24, 2002 by energyprbe

Lawrence Solomon
National Post
October 24, 2002

Contrary to the naysayers who claim Western countries would face economic ruin in meeting Kyoto’s greenhouse gas targets, three winning models are proven to exist and proven to yield spectacular results.

The first model – the USSR approach – involves privatizing an entire economy. Russia became the world’s greatest greenhouse gas reducer by abandoning its centrally planned economy.

The second model – the German approach – involves privatizing a neighbouring economy. After West Germany absorbed East Germany, and converted the decrepit state-run machinery to modern markets, East Germany’s economic efficiency rose so dramatically that the new, unified Germany today produces 17% fewer greenhouse gases per capita than East and West Germany combined did in 1990.

The third model – the British approach – involves privatizing inefficient government-run sectors and giving competition freer rein. Following the U.K.’s privatization of its energy, transportation, steel and other sectors, greenhouse gases plunged while the country’s economy soared. Today, the U.K. produces 9% fewer emissions per capita than in 1990.

All industrialized countries would benefit by adopting the U.K. model of aggressively privatizing sluggish government sectors and otherwise introducing market-oriented reforms. Instead, countries such as the United States and France have only slowly continued to liberalize their economies, leading to small increases in per capita greenhouse gas emissions since 1990, and Japan and Canada, which lag far behind in modernizing their economies, have racked up double-digit increases.

But while all industrialized countries could reduce their emissions by following the U.K.’s lead – and impressively profit in the process – the one that would profit the most would be Canada, because Canada has the industrialized world’s least efficient resource sector.

Most of Canada’s increase in greenhouse gas production comes from risky investments in our energy sector, where government subsidies have led to a plethora of export projects. Without the past subsidies, the projects – whether Hibernia in the east or tar sands in Alberta – would never have materialized, to the benefit of taxpayers as well as the environment. But these export projects only begin to account for economically uncalled for emissions.

If Canada’s provincial premiers established competitive electricity markets, the way the U.K. did so successfully, the coal plants now on Alberta’s drawing boards would vanish, and many existing coal plants in Alberta, Ontario and the Maritimes would soon be mothballed. The outdated coal technology – one of Canada’s biggest contributors to greenhouse gas emissions – would be replaced partly by high-tech natural gas generators, the technologies of choice in all modern power systems, and partly by the existing hydroelectric generation in B.C., Manitoba and Quebec, provinces whose consumers now overconsume because their non-profit Crown monopolies underprice the power they produce.

Non-profit monopolies also do great damage at the local level, where public transit systems’ failure to modernize encourage more private automobiles to take to the road. If Canada’s mayors privatized public transit systems, as also occurred successfully in the U.K., our public transit vehicles would stop losing market share against the automobile. If Canadian governments at all levels also eliminated free roads – as the U.K. has begun to do through road tolling of various means – the auto’s market share would gear down further.

Even where the private sector owns industries, government interference protects them from more efficient competitors. If yesterday’s steel plants, mines, and pulp and paper mills were allowed to go bankrupt, the more efficient recycled metals and recycled papers industries would gain greatly in market share. But neither mines, mills nor factories offer the greenhouse gas savings offered by one of Canada’s most environmentally and economically ruinous sectors – agriculture.

Canada’s agricultural sector, though it represents a mere 1.5% of GDP, accounts for almost 10% of Canada’s greenhouse gas emissions, more than is produced by all of Canada’s manufacturing industries combined. The 10% figure, however, excludes the fuel used by farm equipment, the energy embedded in fertilizer, and other major sources of greenhouse gases. Once these are calculated, according to Canada’s 1996 Greenhouse Gas Emission Summary, the agriculture sector’s greenhouse gas emissions climb by another 40%.

Yet unlike the manufacturing sector, which turns a handsome profit for society, the agriculture industry – particularly the large-scale, mechanized farms – runs at a loss: For every dollar of profit that the average farmer earns, society provides $3.50 in subsidies. Without subsidies, most if not all of the large farms producing low-value export crops would disappear, many small, labour-intensive farms producing high-value crops for local markets would reappear, the farm sector would become a bigger employer and profitable, and the majority of greenhouse gases from the once oversized farm sector would vanish. The conversion to an economically sized small farm sector has another greenhouse gas bonus, too: Unlike large mechanized farms, whose crude tillers deplete carbon from topsoil, small farmers tend to enrich the land through methods that pack carbon back into the soil.

Because so many of Canada’s greenhouse gas-emitting industries are so inefficient, it’s possible that our governments’ current approach to reducing them – Soviet-style central plans, one for each sector, each plan providing a reduction quota – may succeed in reducing greenhouse gases at little or no economic pain. There’s no reason to think the next central plan won’t improve on the last.

But rather than counteract the failings of the last central plan with those of a new one, we could dispense with the central plans altogether and put our trust in the only greenhouse gas reduction strategy with a proven track record — the competitive marketplace.

To read the Saskatchewan Soil Conservation Association’s response to this article, please see:
http://www.urban-renaissance.org/urbanren/index.cfm?DSP=content&ContentID=5904

Posted in Costs, Benefits and Risks | Leave a comment