Ontario ratepayers pay millions in ineligible power generator expenses, auditor finds

Ontario electricity ratepayers are paying millions for power generators' ineligible expenses including scuba gear and raccoon traps and are footing the bill for large industrial companies' savings, the province's auditor general reported Wednesday.

Auditor general Bonnie Lysyk said in her annual report that the Independent Electricity System Operator hasn't implemented repeated recommendations from the Ontario Energy Board, including one that could save ratepayers $30 million a year.

In the energy file, a frequent target of Lysyk's, her report looked at a program that pays power generators for fuel, maintenance and operating costs when the IESO puts them on standby to supply energy.

Nine generators claimed up to $260 million in ineligible costs between 2006 and 2015, Lysyk said, and about two-thirds of that has been paid back. One natural gas plant in Brampton, Ont., "gamed" the system for about $100 million, the OEB has reported.

Thousands of dollars claimed for unrelated expenses

Generators claimed thousands of dollars a year 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," Lysyk wrote. One generator claimed about $175,000 for coveralls and parkas over two years, she said.

"The program was such that bills could be submitted but without any support for the bills and the bills were being paid, and it wasn't until more requests were made for detailed information that (the IESO) became aware that there were costs behind that bill that probably shouldn't be reimbursed," Lysyk said.

The program was originally started in 2003, when Ontario's grid had supply issues, though now the province has surplus power.

The OEB found in 2014 that the standby program was relied on less than one per cent of the time to meet domestic demand, and has recommended repeatedly that it be scaled back to stop reimbursing generators for certain operating and maintenance costs. Doing so would save ratepayers $30 million a year, the OEB says.

Energy Minister Glenn Thibeault said the program and other similar ones play an important role in the electricity system.

"These are programs that ensure that when Ontario families and businesses need electricity, it's there for them," he said in a statement. "If these programs were eliminated, reliability would be put at risk."

The IESO is working on a redesign of the electricity market, but Lysyk noted that some members of a working group advising the system operator on that work for companies that have claimed ineligible costs. One member resigned his post on Friday.

Lysyk also found that as electricity charges for large industrial ratepayers decrease under a program that gives them savings when they reduce consumption during peak demand, that results in higher costs for residential and small business ratepayers.

Electricity charges nearly doubled for some

The Industrial Conservation Initiative reduced charges for the large ratepayers by $245 million in the first 10 months of its operation in 2011, and that same amount was directly added to residential and small business electricity bills, Lysyk wrote.

Since then, electricity charges for residents and small businesses have nearly doubled, while they have decreased for large industrial ratepayers, the auditor found.

Those charges come in the form of the global adjustment, a charge consumers pay for above-market rates guaranteed to power producers in long-term contracts. In 2016, the global adjustment accounted for 85 per cent of residential consumers' electricity charges, Lysyk said.

"That means that this program helped avoid the need to build costly new generation in the longer term, which is a benefit to all ratepayers across the province, both residential and commercial," he said in a statement.

Lysyk also announced through her report that her office would be auditing the IESO's books. That comes amid one of two accounting disputes the auditor has been engaged in with the Liberal government.

She recently accused the government of purposely obscuring the true financial impact of its 25 per cent cut to hydro bills by keeping billions in debt used to finance that plan off the province's books. Lysyk said she will audit the IESO because of its role in the hydro plan's complex accounting scheme.

Lysyk has previously clashed with the government over how public pension plan surpluses are accounted for, suggesting that the government's method makes its bottom line look better and hides a deficit. The government disputes that and tapped an independent panel to look at the issue. It sided with the government.