Hydro Ottawa projects aren’t the best use of council’s money
The city should get its money back, writes Steve Robins.
Hydro Ottawa’s acquisition on Wednesday of 10 hydroelectric projects in Eastern Ontario and upstate New York from Fortis doesn’t make sense from an economic or environmental perspective.
The utility indicated it will increase Ottawa’s supply of renewable energy and increase dividends back to the city, but these benefits do not withstand a closer look.
Hydro Ottawa says it will make further acquisitions like this. Residents would be better off if council asked for its money back now.
Investing in renewable energy is important. It reduces our carbon footprint, reduces smog and will soon be more cost-effective than other sources. But it’s important to distinguish between investments that will deliver incremental environmental benefits and those that are just financial engineering.
This acquisition — and others like it — won’t deliver any new environmental benefits because these plants are already operational. We aren’t shutting off polluting sources of electricity and replacing them with hydroelectricity. We would need to build new renewable energy power stations for environmental benefits to materialize — like when Hydro Ottawa built its two landfill gas-to-energy plants.
These 10 hydroelectric projects weren’t likely in danger of closing if Hydro Ottawa didn’t buy them. If a private investor purchased these plants, it would have the same impact on the environment.
This acquisition also won’t make the electricity that Ottawa residents consume any cleaner. Hydro Ottawa sells the power it generates on an integrated Ontario-wide grid, and similarly buys power to distribute to its customers on the same market.
A portion of the power we consume was already coming from the plants we acquired and this acquisition won’t change that ratio. The New York purchase doesn’t affect our power consumption, as Ontario exports electricity to New York, according to the Independent Electricity System Operator.
Hydro Ottawa’s 2014 Annual Report shows over $60 million invested in generating capacity and associated reservoirs, dams and waterways. This transaction will add more. This is money Hydro Ottawa has invested on behalf of the city, its shareholder, and by extension all residents. I’m sure the Hydro Ottawa board’s review of this investment showed it would earn a return allowing higher dividends in the future. But so would investing in the stock market — or directly in power companies like Fortis. The board doesn’t and shouldn’t consider the competing investment priorities Ottawa faces.
The city has a limited capital budget and needs to find the resources to invest in transit, roads and other infrastructure that private investors won’t fund. Wednesday’s acquisition means that Ottawa residents are using their resources to finance electricity infrastructure in New York and elsewhere in Ontario. Instead of the utility continuing its acquisitions, it could return the money to the city, and allow council to invest in infrastructure in our community. The $60 million Hydro Ottawa has already spent would have funded a lot of infrastructure in Ottawa with larger benefits for residents. There are also other investments Hydro Ottawa could make in our own city to lower electricity prices, reduce emissions and improve financial returns to the city. It could invest to better support new clean energy sources and uses like rooftop solar and electric cars.
It could work with neighbouring utilities to seek cost efficiencies, as recommended in the 2012 review of the sector, Renewing Ontario’s Electricity Distribution Sector: Putting the Consumer First. These investments could deliver tangible benefits for residents.
Yesterday’s acquisition moves closer to the “utility of yesterday” identified in Hydro Ottawa’s own strategic plan “vertically integrated — providing generation, transmission and distribution services.” Ottawa residents shouldn’t be financing electricity infrastructure in the U.S. or even Eastern Ontario and Hydro Ottawa shouldn’t make speculative investments on our behalf. Hydro Ottawa should focus instead on providing more cost-effective service to Ottawa residents. If Hydro Ottawa plans to continue investing in additional projects like this, council should ask for our money back instead.