Joseph Heller couldn't have written a better novel. But this story, sadly, is true.
Electricity projects connected to distribution lines in the Hydro One territory have to pay a fixed monthly fee just to be connected. In addition, they pay for any electricity they use, the debt recovery charge on that electricity, the transmission charge, the distribution charge, and demand charges. The Ferndale turbine uses about 2000 kWh/month, similar to a large house, and pays about $450/month in total, which is a lot more than a large house.
The main reason the charges are so high is that the turbine is connected to the 44KV feeder line. The fixed monthly charge on this is $250/month. Needless to say, this high fee is a deterrent to people building new generation capacity on such lines.
A similar project connected to transmission lines (115KV or higher) pays no fixed monthly fee. And a similar project connected to 27.6 KV lines pays just $39/mo. Fairness is not part of Hydro One's tariff structure.
Two years ago, recognizing that this fee was a deterrent to new projects, I approached Hydro One to see what could be done to get it changed. I explained that projects like mine, where all of the power is used locally on its feeder, reduces line losses, since when the wind is blowing, the Bruce Peninsula is not supplied from afar. Line losses in rural Ontario average 9%, and the consumer pays for them. I explained that I paid 100% of any connection cost as required by market rules, including the cost of a study to confirm that I could be connected. My connection requires no incremental capital to be deployed by Hydro One. I paid for the meters. I pay for the phone line so they can read it. I paid for the taller pole across the road. But they get the $250/month whether I use power or not. Their only cost is to read the meter, which is automated, and send an invoice.
They agreed with me. My project was good for the system, and they have no incremental cost.
"So, can you change the rate?", I asked. "No, we only charge what we are told to charge by the regulator (the Ontario Energy Board - OEB)".
So, after several telephone discussions, I arrange a meeting with the OEB staff. I explain that this type of project reduces line losses. It is compatible with the government's stated objective of enabling distributed generation projects like mine, and that Hydro One has no incremental costs. They agree with me, and tell me to write a letter to their Director. Finally, the Director tells staff to respond.
"We don't set rates. We only approve what a Local Distribution Company applies for,", they say. "So, since you agree this needs changing, how do I get Hydro One to apply for a rate change?" I ask. "You would have to speak to their owner - the Ministry of Energy."
So, I contact the Ministry of Energy. Once I find the right person, I explain the situation. They agree with me. And I am asked to write a letter outlining my position. I write the letter, and cc: the OEB staff, and Hydro One. I request a meeting with the appropriate decision maker, who is an Assistant Deputy Minister (ADM). I wait for a meeting. I call. I wait. I call. I wait some more.
Finally I call Marion Fraser, staff advisor to the Ministry of Energy, and Donna Cansfield, who was then Parliamentary Secretary to the Minister of Energy. I quickly get a meeting, and it includes the ADM. The meeting participants agree to convene a meeting with Hydro One and OEB staff to try to plan a course of action. The meeting is convened within 2 weks. In the meeting, Hydro One is asked pointedly and directly by the Ministry what action they will take. They indicate that perhaps this could perhaps be integrated into their 2006 rate application.
I leave, happy that this problem is about to be solved.
The 2006 rate application comes out. I scan it excitedly to see if this issue is in it. I can't find it. So I call Hydro One to enquire as to where it might be. I receive a prompt and polite call back, and am informed that it is not in the application. Apparently they were concerned that this little issue could derail their overall application, which of course is vast.
Needless to say, I go ballistic, emailing everyone who has been involved with this file (there are about 15 people so far). Hydro One's total revenues from their distribution connections for generators are $160,000 per year. This is a $4 billion/year company. They spend more than that on paper clips on Monday morning. This works out to about 1 cent per month per direct customer per month. And my project alone reduces line losses by about $10,000 per year, saving ratepayers far more than they would give up in revenue.
The Ministry makes pointed enquiries at senior levels in Hydro One. After more delay, Hydro One informs me that they will be making a application for an interim rate change. Within a couple more months, Hydro One's application to change their rate for generators appears.
So far so good. Now we just need OEB approval.
The OEB process is rather peculiar. It is an "open and transparent" process. I guess that is good. So Hydro One's rate application is posted on their web site. And people are allowed to provide submissions to the OEB on specific timelines. People who do this are called "Intervenors". An Intervenor can apply for costs from the Board. That means that the Board will direct that Hydro One will pay their costs of hiring consultants or lawyers to make the submission. Costs are rarely awarded for people who will benefit from a ruling, like my firm. But outsiders can apply for costs.
As this was viewed as a routine relatively small issue, all intervenors agreed that a written hearing was appropriate. First, the OEB staff asks Hydro One some questions, in writing, to which Hydro One responds. Then intervenors supply their questions, and the answers to all are distributed. Finally, intervenors provide submissions. On this little tariff issue, the Board had 8 intervenors. Evidently there is a cottage industry of legal and consulting firms that make a living asking for and claiming costs. The Vulnerable Enery Consumers Coalition was worried about the impact this application would have on rates. Evidently there are thousands of consumers who will be sunk by 1 cent/month. The School Energy Coalition weighed in. I guess schools will be sunk too. And the Canadian Manufacturers and Exporters.
Does the OEB hold hearings on the Hydro One paperclip budget?
Finally, the board hearing results are published. They turned down Hydro One's application for interim rate relief. So the rates remain unchanged. The Vulnerable Energy Coalition arguments won. But their consumers will lose, because there will be less line loss reductions, because there will be less projects built. The announcement of this ruling was made the same week than the OEB announced that rates for energy consumers in the Province would be going up by 17%.
The Board quoted the Vulnerable Energy Consumers. "Investment in distributed generation is a long- term investment and reducing rates in the short- term while there is continuing uncertaintly as to what rate generators will ultimately pay over the long term is unlikely to have a significant impact on the development of new generation in the province."http://www.oeb.gov.on.ca/documents/cases/EB-2005-0528/dec_honi_190406.pdf
So there you have it. Lower prices to connect will not help get more distributed generation.
There is a silver lining. The Board did instruct Hydro One to develop cost estimates for use on designing their 2007 rate application. So that's the next step - to engage in a stakeholders process, with the hours that entails. Here we go again.
Joseph Heller, eat your heart out.