Smart Hydro meters deemed dumb public investment by provincial auditor general

TORONTO—Ontario auditor general Bonnie Lysyk took sharp aim at the energy sector in the province in her most recent report, charging that decisions to implement a smart meter program were made before a proper cost benefit analysis and that the program has provided little net benefit to energy consumers.

Despite an estimated outlay of $1.9 billion (originally estimated at barely $1 billion), one in six of the 4.8 million meters that have been installed in the province have not yet transmitted any readings, the auditor general found.

The smart meters were supposed to assist consumers in moving their heaviest consumption from periods of peak demand to off-peak hours, but because of “political” decisions, the price of electricity during peak use periods was not kept high enough to influence consumer decisions, with the result that little movement in consumer habits took place. Peak electricity demand actually rose slightly between 2004 and 2010, the auditor general found.

As is often the case when an auditor general report is released, the government fired back, with Energy Minister Bob Chiarelli suggesting that the auditor general’s staff did not understand the system. The auditor general herself spent 10 years at Manitoba Hydro.

“Why are my numbers more credible than hers?” said Minister Chiarelli in response to media questions after the report’s release. “First of all the electricity system is very complex. It’s very difficult to understand.” The minister went on to say that his staff were left with the impression that the auditors did not understand some elements of the provincial energy after their meeting.

The opposition attacked the energy minister’s comments as sexist and derogatory.

“I nearly fell off my chair when the minister treated the auditor general with such dismissive disrespect,” NDP leader Andrea Horwath said following question period. “I don’t believe he would have behaved that way if there was a different gendered person sitting in that chair. That made me quite angry as a woman.”

“I have no idea whether those representatives were male or female,” retorted the energy minister, insisting he was very respectful of Ms. Lysyk despite his criticisms of her staff.

Both the opposition Progressive Conservatives and the NDP called on the premier to fire her energy minister over the issue.

Premier Kathleen Wynne did not directly respond to calls to fire her minister, standing by his disagreement with the auditor general’s figures, but insisted that it is “really important” that the government maintains a respectful relationship with all the officers of the legislature. “It is not unprecedented that there would be some small area of disagreement between the government and the auditor general,” the premier said in question period.

Minister Chiarelli pointed out that the auditor’s staff made some of its analysis based on estimated costs rather than actuals and that some of the money they claim will be passed onto ratepayers may well not find its way onto consumer’s energy bills.

Oddly, while criticizing the smart meter program and chastising the province for overestimating the net benefit of the program by almost half a billion dollars, the auditor general did point out that the program has provided an $88 million net benefit—that is the program has saved more than it has actually cost.

More damning, the auditor general found the extra electricity charge, known as global adjustment, has increased by 1,200 percent between 2006 and 2013, but the average electricity market price has actually dropped by 46 percent. She criticized the province for increasing electricity capacity dramatically at a time that energy consumption has decreased, resulting in massive sales of energy to other markets at a substantial loss.

The auditor general also pointed out that Ontario’s debt is a growing concern. The net debt was more than $267 billion as of this past March and even if the provincial government meets its goal of eliminating the budget deficit by 2017-18, net debt will have by then risen to $325 billion.

Her report also brought attention to what was caricatured as a “high-risk” loan to a MaRS real estate project in Toronto and suggested she was uncertain about the project’s benefit to taxpayers. She suggested that there are public-private infrastructure projects that are costing the taxpayer billions of dollars more than if they were delivered by the public sector.

In the Infrastructure Ontario books, she found that for 74 public-private projects the tangible costs, construction, finance and professional services, at about $8 billion higher than if they would have been had they been delivered by the public sector.

Infrastructure Ontario replied that the cost difference was “more than offset by the risk of potential cost overruns” if the construction and, in some cases, maintenance of the 74 facilities were to be done by the public sector.

“The lack of transparency around the policy objectives and intended benefits to be obtained from the significant financial risks assumed in providing this loan, as well as the Ministry of Research and Innovation’s guaranteeing this loan, may have created the perception that the government is bailing out a private-sector developer,” Ms. Lysyk wrote.

But Infrastructure Minister Brad Duguid noted that Ms. Lysyk did not say the MaRS loan was a “poor or unwise decision.”

“That’s important,” he said, “because the way this has been portrayed, often by our opposition friends, has been that somehow there’s been money that’s been spent, that’s been lost, that’s been wasted, when what we’re talking about here is a loan that is fully secured and fully repayable. This is not sunk costs. To suggest otherwise would be clearly inaccurate.”

The auditor general found that childcare workers were not being properly vetted for work with vulnerable persons through more thorough criminal reference checks, and that one-third of licenced child-care operators over the last five years were not inspected before their licence expiry date.

And if all of that was not enough to sneeze at, the auditor general found that the government could not properly account for nearly a million flu immunization shots, that it has no way of tracking immunization rates, and that the province has no co-ordinated system to deliver palliative care.