Ontario’s $2 billion smart meter program for hydro utilities has delivered few benefits for the hefty cost, says Ontario’s auditor-general Bonnie Lysyk.
In fact, one in six of the 4.8 million meters have not yet transmitted any readings, she found.
And Lysyk took the occasion of her probe of the smart meter program to take a roundhouse swipe at energy bureaucrats for plunging into the system without proper planning, and making it impossible for consumers to understands their rising hydro bills.
Lysyk took a special jab at Hydro One, which she said incurred about 50 per cent of the cost of the smart meter program — but installed only 25 per cent of the meters.
Smart meters allow utilities to charge different prices at different times of day, a function that’s supposed to encourage conservation, especially at peak times when the system is under stress.
But Lysyk said the pricing system has had only “a modest impact on reducing peak demand” among householders and “no impact at all on energy conservation.”
Among her findings:
- Smart meters were supposed to cost $1 billion. In fact, the total cost will be double that amount.
- The energy ministry grossly over-estimated the benefits of the smart meter program. It figured the benefit would be $600 million over 15 years. But it forgot to include a yearly inflationary increase of $50 million. That reduces the net benefit of the huge project to $88 million over 15 years.
- The cost of smart meters varied wildly among Ontario’s 73 local utilities, which paid from a low of $88 per meter to a high of $544.
- Energy bureaucrats have bamboozled consumers for years by hiding the true costs of energy in a catch-all fee called the “global adjustment” that now makes up the majority of the cost of energy.
Lysyk said that neither the energy ministry nor the Ontario Energy Board — which is supposed to protect ratepayers — did a cost-benefit analysis of smart meters before plunging ahead with the program, first estimated in 2005 to cost $1 billion.
“Given the large scale of smart metering and the high risk associated with new technology, its implementation should have warranted strong governance and oversight,” Lysyk wrote.
The initial cost-benefit estimate — which proved wildly inaccurate — was performed only after the energy board had approved its implementation plan.
Costs continued to rise after the initial $1 billion estimate. They stood at $1.4 billion by the end of 2013, Lysyk reports.
In addition, the Independent Electricity System Operator (IESO) — which operates the Ontario power grid minute by minute — spent $249 million on a provincial data centre to collect the torrent of information that flows out of smart meters.
The cost is billed to ratepayers.
But Lysyk found that, in many instances the quarter-billion-dollar centre duplicates the data collected by many utilities. (The IESO responds that it has “exclusive authority” over the function performed by the centre.)
After all that expense, did smart meters produce savings? Lysyk was hard put to find them.
Smart meters send in data by electronic signal, so meter readers are no longer required. But Lysyk said that only 5 per cent of utilities reported savings. The others said their costs were the same, or higher.
Nor did the meters do much for consumers, Lysyk found. The province claims the meters and time-of-use pricing should help customers save money, and lower stress on the system during peak demand periods.
When peak demand is reduced, there’s less need to build expensive generating stations that operate for only a few hours a day, and stand idle the rest of the time.
Those benefits have not materialized, Lysyk said.
For one thing, she said, the difference between peak and off-peak rates hasn’t been large enough to encourage consumers to change behaviour patterns. In fact, over the years, the difference has narrowed, providing less and less incentive to cut back during peak demand.
Earlier in the day, energy minister Bob Chiarelli had stood by smart meters. “Studies have shown people are saving money with smart meters,” he insisted in the Legislature.
But Lysyk wrote that it’s difficult for customers to even understand their bills.
Most power generators are laid not through a visible market, but through contracts with a set price schedule.
The cost of all those contracts is now rolled into a single, opaque ball and charged back to customers through a fee called the “global adjustment” that now makes up about 70 per cent of the energy charge on hydro bills.
Consumers will pay $50 billion in global adjustment fees in the period 2006 to 2015, Lysyk estimates.
How much is that? It would cover the 2014 provincial deficit five times.
Lysyk also slams the province for increasing the supply of electricity beyond what the province needs.
Ontario has always exported some power, but exports grew 158 per cent between 2006 to 2013.
The problem is that the electricity is usually sold at a steep loss: “The total cost of producing the exported power was about $2.6 billion more than the revenue Ontario received from exporting that power.”
The losses are made up for by Ontario ratepayers through the global adjustment fee.
Lysyk didn’t save all her criticism for electricity.
She also criticized the Ontario Energy Board for failing to monitor gas utilities as closely as it should.
The utilities, which are paid to deliver natural gas to their customers, are not supposed to profit on the commodity cost of the gas. They are simply supposed to pass on what it cost to buy from producers.
On the whole, Lysyk found, consumer gas prices are in line with commodity costs.
But she found that energy board staff rely almost entirely on the gas utilities for their version of what the commodity cost is: “Board staff seldom obtained source documents to verify the information.”
Complaints against gas marketers who sell fixed-price natural gas contracts declined by 81 per cent from 2009 to 2013, Lysyk found.
But she said the energy board could do more to help consumers by providing rate information from the various gas providers on its website.
