Power plants have fleeced millions from system
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.