Few benefits from $2 billion smart meter program, auditor says
Ontario’s $2 billion smart meter program hasn’t delivered value, says auditor-general Bonnie Lysyk
Ontario's auditor general says the province's smart meter program has failed some key objectives. In a new report, Bonnie Lysyk says the $2-billion initiative has not met electricity conservation or cost-reduction goals.
Ontario’s $1.9-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 installed have not yet transmitted any readings, she found.
“Based on a $2 billion investment, there doesn’t seem to be $2 billion of value coming yet,” she said.
But Energy Minister Bob Chiarelli sharply disputed Lysyk’s findings, and suggested she doesn’t understand the electricity system.
“The A-G’s estimates of total costs are not accurate,” Chiarelli told reporters.
“Why are my numbers more credible than hers?” he said, when challenged. “The electricity system is very complex, is very difficult to understand.
CHRIS YOUNG / THE CANADIAN PRESS FILE PHOTO
Energy Minister Bob Chiarelli, left, sharply disputed auditor general Bonnie Lysyk’s findings, and suggested she doesn’t understand the electricity system.
“And I can tell you that some of our senior managers in discussing these issues with some of the representatives from the auditor general’s office had the feeling they didn’t understand some of the elements of it.”
Lysyk also took a roundhouse swing at the province for plunging into the system without proper planning, and making it impossible for consumers to understands their rising hydro bills.
She saved 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:
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.
CHRIS YOUNG / THE CANADIAN PRESS FILE PHOTO
Energy Minister Bob Chiarelli, left, sharply disputed auditor general Bonnie Lysyk’s findings, and suggested she doesn’t understand the electricity system.
“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.
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 centre duplicates the data collected by many utilities. (The IESO responds in the report that there’s no duplication because it has “exclusive authority” over the function performed by the centre.)
At a news conference, Chiarelli accused Lysyk of doing some sloppy accounting in adding up the cost of the smart meters and coming to nearly $2 billion.
For example, he said, for one item she used an estimated cost figure of $450 million for her calculation, when the actual figure was only $253 million — verified by the Ontario Energy Board.
She also used an estimated cost for scrapping old meters of $400 million when only $280 million in costs was actually incurred, he said.
Chiarelli also said there’s no duplication in the function of the IESO’s new data centre does.
Interim Progressive Conservative Leader Jim Wilson said the report showed “an unprecedented level of arrogance” for Energy Minister Bob Chiarelli and Infrastructure Minister Brad Duguid to disagree with the auditor’s findings.
“There are times when you’re a minister you find the auditor’s advice tough medicine but you swallow that tough medicine . . . you certainly don’t challenge the credibility of an officer of the legislature,” he added.
“They blame everybody but themselves.”
NDP Leader Andrea Horwath said “it’s a level of arrogance I didn’t even expect from Liberals.”
In her report, Lysyk also challenged the claim that smart meters save money.
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.
Lysyk 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.
Lysyk wrote that it’s difficult for customers to even understand their bills.
Most power generators are paid not through a visible market, but through contracts with private generators, and regulated rates from Ontario Power Generation.
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.
Lysyk estimates consumers will pay $50 billion in global adjustment fees in the period 2006 to 2015 — enough to cover the 2014 provincial deficit five times.
She 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.
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