Open Letter to Premier Wynne on the Cost of Electricity

September 13, 2016

NOTL Hydro Board urges Focus on Underlying Costs

Dear Premier Wynne:

The Board of Niagara-on-the-Lake Hydro is pleased to hear that you have finally declared the high cost of electricity an “urgent issue” for the Minister of Energy.  The NOTL Hydro Board would like to help address this issue.

As you have stated, the rising cost of electricity is affecting all Ontarians so it is important that any government actions provide relief for all consumers, both business and residential.  However, it is critical that the underlying cost issues be addressed.  As the saying goes “when you are in a hole the best thing is to stop digging”.

There are concrete actions that can be taken both immediately and in the medium term to reduce the cost of electricity or slow down the increase.  NOTL Hydro has the lowest delivery charge in the Niagara region not because of anything special we have done but because of a fifteen year focus on managing the business to keep costs low for our customers.  This focus can be replicated at the Provincial level. The chart above shows that the driver of the increase in costs is generally not at the municipal LDC nor transmission level (both in line with inflation) but at the generation level.

Immediate actions include:

  1. Announce that you will stop immediately signing any FIT and MicroFit contracts and move as soon as possible to net metering.  This will prevent encumbering the system with more expensive contracts.  As you are moving to net metering you are not repudiating your climate action plan but accelerating the move to its next phase.  As a sign of our commitment, if you announce this by the end of September 2016 we will cancel our FIT contract.
  2. Eliminate the MDM/R branch of the IESO and their activities.  This branch collects the smart meter data and all their activities are redundant as are duplicated by the local distribution companies who need the information for billing.  If you announce you are eliminating this cost you can also announce you will be removing the $0.79 monthly charge on every customer’s bill.  While not a large amount this would be a symbolic gesture of the new direction.
  3. Recognize that the earlier FIT and MicroFIT contracts were overpriced and transfer the excess cost to the OEFC.  While this will increase the debt of the Province it will also reduce the cost of electricity which is needed to sustain jobs and keep Ontario competitive.
  4. Meet with industrial business representatives such as in the steel industry to develop plans that mitigate the impact time of use pricing is having on the drivers of our economy. This needs to be done in a manner that does not just transfer the cost to residential customers.

Some medium-term actions include:

  1. Break-up Hydro One between its transmission and distribution businesses.  This was recommended in the first report from Ed Clark.  The transmission business of Hydro One has a good cost performance record; the distribution business does not and is the focus of much of your bad press.
  2. Sell to adjacent LDC’s the assets of Hydro One in areas that are over-charging compared to their LDC neighbours. As an example, in Niagara Region these are Thorold and the Fonthill area. As well, stop the purchase of LDC’s by Hydro One. These purchases are being made at a substantial premium and despite a promise to us by the last Minister of Energy that these were stopped (after the Norfolk purchase).  As can be seen in the chart above, Thorold consumers have not benefited from the Hydro One ownership.
  3. In other rural areas move the management of Hydro One distribution assets closer to the customers they serve. This could include creating multiple local distributors.  An “ivory tower” in Toronto with many high paid staff is not the best organization to manage a local business. The synergies can still be achieved through collaborative outsourcing as have been undertaken by most municipal LDCs.
  4. Phase out the Conservation programs.  These cost over $300 million a year.  While the programs have been a success their objectives are no longer as relevant as we are in a supply surplus.  It is more important that we reduce costs.
  5. Establish an independent review to determine if the refurbishment of the Darlington Nuclear plan is truly required.  The rumour in the industry is that this was not recommended by the IESO.  Announcing an independent review will allow you to demonstrate you are concerned about the rising costs.
  6. Rather than build new and expensive generation seek to establish long term supply contracts with Quebec and New York State suppliers that have lower costs structures and surplus supply. We recognize that Ontario is currently in a surplus supply situation but this alternative should be considered on an equal basis to the refurbishment of the nuclear plants.
  7. Assess the real cost of solar and wind projects including the back-up natural gas facilities to support them and assess whether there is not a better approach to this initiative.

The Niagara-on-the-Lake Board would welcome the opportunity to work with you on implementing any of these action items.  We only have one objective, to lower the costs for our customers.

ABOUT NIAGARA-ON-THE-LAKE HYDRO

Niagara-on-the-Lake Hydro distributes power to over 9,000 customers in the Town of Niagara-on-the-Lake. We are committed to operating as a sustainable high-performance, customer-driven business and to providing the highest standard in safety, service and reliability. NOTL Hydro was the 2014 ENERGY STAR® Utility of the Year (Regional Category) in Canada. The Town of Niagara-on-the-Lake is the 100% shareholder of the corporation.

FOR MORE INFORMATION PLEASE CONTACT:

Tim Curtis
President
Niagara-on-the-Lake Hydro Inc.
905-537-4512
Office Phone – 905-468-4235

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