Wednesday, January 15, 2014

Chiarelli steps it up; finds a $7 billion lie

Very disappointed to hear Ontario's Energy Minister on CBC Ottawa Morning, again just making up numbers that he finds convenient.

Here's what he said on OPG:
...they’ve generated over $7 billion dollars bottom line profit which goes to the gov’t of Ontario to help pay for schools and other necessary services.

Well, I happen to have some figures compiled from actual work I did in preparation for writing on OPG and it shows that Wynne's Chiapetti is once again making a bold statement in error.

Here's OPG's "Net Income" since it's first annual report: annual on the left axis, and the red line is cumulative on the right axis.  From inception to the end of 2012, cumulative net income was just shy of $5 billion.

If you added the taxes indicated in the annual reports, which are actually payments in lieu of taxes (PIL), you get a slightly different picture, that does total close to $7 billion.

But PIL isn't supposed to do anything but pay down the debt deemed stranded when Ontario Hydro was broken up - it doesn't pay for "schools and other necessary services."

The big drop in OPG Net income, from 2002-2004 with the lowest low in 2003, is due to two things; mostly Ernie Eves' freeze of hydro rates which included a clawback of revenues from OPG (ending up at about $4 billion by 2005), and Dalton McGuinty's writing off of the coal plant assets he planned to shutter by 2007.

In hindsight, OPG actually performed reasonably well from 2005 to 2010 - the exception being 2008, but that year's performance was scuttled by an enormous loss on the enormous nuclear decommissioning/waste management fund (all enormous funds lost in 2008).  Even in those good years taxes (or PIL) were very moderate.  Since 2010 OPG's performance has been poor due to the government's actions driving down the market price and gutting OPG's non-regulated hydro business (explained here).

Payments in lieu of taxes go to the OEFC (Ontario Electricity Financial Corporation) to, allegedly, retire the stranded debt.
Profits that exceed those considered a fair return to the shareholder (the Province) for it's equity in OPG (all of it), were also to pay down the stranded debt.

And yet you still have a stranded debt charge applied to your hydro bill.

Not only is Chiarelli wrong, if he was right how would he justify the debt retirement charge still remaining on your bill?

Stranded Debt - Abandoned Responsibility explains all you ever wanted to know about the origin and neglect of the debt retirement charge, and probably more.

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