Smart meters not living up to their billing
Conservation-minded consumers see their bills increase, despite using off peak power
The auditor general of Ontario, Bonnie Lysyk, has been very critical of the Ontario smart meter program in her 45-page report delivered on Dec. 9. She reports that the $1.9-billion project was poorly planned and had a high impact on Ontario electricity costs, but achieved only a small reduction on the power system peak load, while increasing electricity rates for most of Ontario’s 4.8 million smart meter users.
The term smart meter refers to a digital meter that can track “time of use” by the customer of electricity; how much and when, and transmit the data to the supply utility. The information is used to bill electricity at a higher cost when used at “peak” load times, when generation costs are high. The objective is to encourage customers to shift their usage to a time when generation costs are low: The “off-peak” period. The program is promoted by telling electricity users the shift will save them money. The overall program objective is to stop the peak load from increasing and avoid having to invest billions of dollars in new generating capacity.
The smart meter program is in support of the Ontario government’s initiative to look green and help the Dalton McGuinty program of 2004 eliminate coal-fired generation in Ontario.
The AG’s review of the program clearly states that:
• The project was poorly planned.
• No cost benefit analysis was done before the project was started.
• The cost of smart meters and installation was an unknown.
• No proper co-ordination was done with the 73 distribution utilities such as Toronto Hydro and Hydro One in the rural areas to determine their cost of buying and changing meters.
• No monitoring of costs was done during the six years of the program, and there was no cost control as costs escalated. The program was originally estimated at $500 million, the AG’s best estimate of all parts of the program up until 2014 is $1.9 billion.
The AG notes that the program produced only a small reduction in peak load and that it is difficult to measure that reduction. The AG shows that because of ministerial directives, (i.e. the minister of energy through the Ontario Energy Board, the rate regulator) electricity rates have increased. However, increases to the peak-load rates were a smaller percentage than to the off-peak rate. Many customers who transferred some peak-load use to off-peak found that their hydro bill was higher when they were expecting a savings. The AG also reports many problems with smart meter operations and some meter installations are not yet operational.
The estimated cost of $1.9 billion for smart meters is transferred to your hydro bill by way of global adjustment fund (GAF), which pays the money spent on administrative projects such as smart meters, wind and solar generation and other programs. The other part of your hydro bill is the actual cost of generating electricity and delivering it to your home. The GAF has had major increases, from 0.4 cents per kWh in 2006 to 5.5 cents in 2014, and is expected to rise to 6.7 cents per kWh in 2015. The actual generation cost is only 2.7 cents per kWh and is expected to decrease to 2.4 cents in 2015. The GAF showed a cost of $7.7 billion in 2013, smart meters are part of the cost. The GAF is dominating your hydro cost. The AG has made a strong recommendation that this cost should be shown as a separate cost on all hydro bills.
The AG report is a significant criticism of the smart meter program that was poorly planned, with no cost monitoring or control. The result has been very little benefit to the generation system, with the major impact on cost and rates. Ontario rates are higher than all provinces except New Brunswick and P.E.I., and some industries cannot compete. The Ontario economy has suffered.
Andy Frame, P.Eng., is now a consultant in the electrical power industry and was formerly a senior adviser, Electric Utilities, Ontario Ministry of Energy and a past Municipal Hydro chair and chair of the Utility Association.