Power plants have fleeced mil­lions from sys­tem

Ottawa Citizen - - FRONT PAGE - DAVID REEVELY d reevely@post­media.com

On­tar­i­ans have paid $1.5 bil­lion ex­tra on our elec­tric­ity bills to com­pen­sate large pro­duc­ers and con­sumers for power we’ve made them waste, some of which they never ac­tu­ally wasted, On­tario’s au­di­tor general Bon­nie Lysyk re­ported Wed­nes­day.

We did this un­der a 15-year-old pro­gram that was sup­posed to be tem­po­rary, a pro­gram with flaws pointed out so fre­quently that one com­pany took one of those warn­ings and used it as a man­ual for cheat­ing the sys­tem.

It’s not great work by the provin­cial gov­ern­ment, when you get down to it.

Lysyk de­liv­ered her an­nual pack­age of au­dit re­ports in a 1,000-page thump at mid-day, and the truth is the col­lec­tion is not as damn­ing as some have been. She’s de­liv­ered some doozies over the years, doc­u­ment­ing fail­ures of ac­count­abil­ity, com­pe­tence and ba­sic de­cency every­where she looked. Bil­lions of blown dol­lars.

This time, well, wait times for can­cer care are a bit longer than we’d like but gen­er­ally speak­ing the sys­tem treats pa­tients well, Lysyk found. The prov­ince could be driv­ing a harder bar­gain when it buys generic med­i­ca­tions in bulk, but the phar­ma­care sys­tem that pro­vides them to the poor or el­derly works much as it’s sup­posed to. The gov­ern­ment is pay­ing for some of­fices it’s not us­ing, but we’re talk­ing about $19 mil­lion a year — not noth­ing, but not a for­tune con­sid­er­ing the prov­ince’s vast real-es­tate port­fo­lio.

Then there’s the In­de­pen­dent Elec­tric­ity Sys­tem Operator, the not-re­ally-in­de­pen­dent agency that buys elec­tric­ity, makes sure there’s enough juice to run the lights, and ad­min­is­ters a patch­work of pro­grams de­signed to keep pri­vate gen­er­a­tors gen­er­at­ing.

This in­cludes some­thing called the “Lost Profit Re­cov­ery Pro­gram.” It’s de­signed to deal with sit­u­a­tions when the prov­ince asks a gen­er­at­ing com­pany to pro­vide elec­tric­ity to the On­tario grid and then changes its mind sud­denly. There are le­git­i­mate rea­sons for why this hap­pens but it’s sup­posed to be un­usual.

Back in 2002, the then-Pro­gres­sive Con­ser­va­tive gov­ern­ment had just made ma­jor changes to how On­tario bought and used elec­tric­ity and this pro­gram was sup­posed to be a short-term so­lu­tion to a prob­lem that would be sorted out once ev­ery­body got some prac­tice with the new sys­tem.

Fif­teen years later, it’s still go­ing, pay­ing out an av­er­age of $110 mil­lion a year.

“The con­cern is that the mar­ket par­tic­i­pants involved may be sub­mit­ting bids and of­fers into the mar­ket to cre­ate the con­di­tions un­der which they can claim lost prof­its that they may not have in­curred,” the au­di­tor’s re­port says.

The On­tario En­ergy Board, the king of On­tario’s en­ergy reg­u­la­tors, has warned the IESO about this a lot, Lysyk says. Like, a cou­ple of dozen times. But the IESO isn’t ac­tu­ally re­quired to do any­thing with what the OEB says, and it hasn’t re­struc­tured the pro­gram to cut the risk of rip-offs.

One case involved Res­o­lute For­est Prod­ucts (the for­mer Abitibi-Bowa­ter), which is both a con­sumer and pro­ducer of en­ergy at its var­i­ous op­er­a­tions. Read for your­self: “The OEB panel re­ported that the com­pany used one of the panel’s past re­ports, which rec­om­mended that the IESO fix the rules, to learn how to mis­use the rules,” Lysyk re­ports.

That one cost $20 mil­lion. The IESO even­tu­ally got $11 mil­lion re­turned.

The OEB has also warned about a sep­a­rate pro­gram that pays pri­vate gen­er­at­ing com­pa­nies to keep their plants on standby in case they’re needed, even if we don’t buy power from them in the end. This is also le­git, in con­cept. But the IESO has not rou­tinely re­viewed the ex­penses they claim, Lysyk finds.

“Gen­er­a­tors claimed thou­sands of dol­lars an­nu­ally for staff car washes, car­pet clean­ing, road re­pairs, land­scap­ing, scuba gear and rac­coon traps, which have noth­ing to do with run­ning power equip­ment on standby,” her au­dit re­ports. (Scuba gear?)

One com­pany in Toronto, Gore­way Power Sta­tion, charged $6.5 mil­lion for gas to fuel a tur­bine that does not use gas.

The IESO it­self found $260 mil­lion in ques­tion­able claims, ap­proach­ing half of the $600 mil­lion it has paid out un­der the standby pro­gram. It has re­trieved $168 mil­lion. The OEB has smacked the IESO’s ears on this five times in seven years.

“Abuses within the sys­tem are com­pletely un­ac­cept­able,” En­ergy Min­is­ter Glenn Thibeault said in a pre­pared re­sponse to Lysyk’s work. “That’s why they have been in­ves­ti­gated, and where wrong­do­ing was present, costs have been re­cov­ered and re­turned to ratepay­ers. We are also work­ing to­gether with our agency part­ners to re­view the po­ten­tial for in­creas­ing leg­isla­tive pow­ers to as­sist our sys­tem operator in per­form­ing its crit­i­cal re­spon­si­bil­i­ties.”

Lysyk looked at health care, too, where some of the same patholo­gies ap­ply.

We have 75 com­mu­nity health cen­tres in On­tario, for ex­am­ple, such as the ones in Cen­tre­town, Sandy Hill and Car­ling­ton. They’re meant to fill gaps in ba­sic health care for vul­ner­a­ble peo­ple. They cost $400 mil­lion a year and they do a lot of good work, serv­ing about four per cent of the pop­u­la­tion. But they’re also ad hoc, a net­work that’s grown since the 1970s but has never, in 40-plus years, been prop­erly ex­am­ined or brought into the rest of the health sys­tem.

“The Min­istry (of Health) has not con­ducted an over­all re­view to de­ter­mine the most cost­ef­fec­tive model or mix of mod­els that would best meet the needs of On­tar­i­ans, how CHCs could be bet­ter uti­lized, and how CHCs fit strate­gi­cally within the pri­ma­rycare sys­tem,” Lysyk found.

Stop­gaps that be­come per­ma­nent features by be­nign ne­glect are al­most never as ef­fec­tive as they should be. A provin­cial gov­ern­ment is a big and com­pli­cated thing and there’s al­ways a lot to do, but when we’re talk­ing about nine-fig­ure spend­ing, maybe take a good look, huh?


On­tario au­di­tor gen­eral Bon­nie Lysyk ar­rives to a news con­fer­ence about her an­nual re­port in Toronto on Wed­nes­day.


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