Why you should care about Guelph Hydro risking your money to finance a flawed energy project

By Gerry Barker

May 30, 2016

The former Dalton McGuinty government launched into a misguided and costly program to move power generation away from fossil fuels to sustainable sources including wind and sun. Oh yes, then we still have a natural gas power plant generating 2,100 megawatts. Question, did it not cost more than a billion dollars to decommission the partially constructed gas generation plants in Oakville and Mississauga? Because the incoming Liberals wanted to save three seats in the area, including that of current Minister of Finance, Charles Sousa.

The first step to fulfill the McGuinty strategy of shutting down the coal-fired generating plants, was to dismantle Ontario Hydro and create three corporations: Hydro One, Ontario Power Generation Corporation (OPG) and the Ontario Power Authority.

Since that move was made, there was the small item of the $35 billion debt left behind by the former Ontario Hydro. Today, paying that charge down for the past 13 years, it was recently removed from your Hydro power bills. Regardless, during that time, we were all charged the HST on our bill. To my mind, I have never seen an accounting of the status of that old Hydro debt or what remains to be repaid?

According to the OPG since 2003, some 13 years ago, the Hydro trio of corporations has spent $16 billion on transmission and distribution. More than $21 billion has been spent on cleaner generation, read that eliminating coal fired- generation.

Since then, The Liberal governments of McGuinty and Kathleen Wynne have never balanced the books, creating an annual Ontario deficits ranging from $7 billion up to $13 billion. They did it because they could.

Let’s look at Guelph Hydro that in the past five years has seen hydro bills increase by an estimated 25 per cent. Part of this was passed through by OPG because of the aforementioned costs of converting from coal to wind, sun and natural gas.

An ignoble effort that has driven Ontario’s electricity costs to one of the highest in North America. The record shows that, there is so much power being generated 24-7 in Ontario that the surplus is sold at much less than cost, to neighbouring U.S. states. You can’t store electricity so the province has failed miserably to plan power development to match the needs of Ontario consumers. Instead, we end up subsidizing U.S. power users.

This has resulted in providing cheap Ontario power to competitors below the border, rebuilding the manufacturing base of those jurisdictions, while Ontario’s manufacturing base declines.

It is important to know that part of the high cost of power in Ontario were the deals made with private organizations, to build wind farms and solar arrays. The payoffs were juicy giving 20-year contracts to organizations that were guaranteed a kilowatt per hour rate of 20 cents, about 13 cents higher than what it cost to produce power. So the result was an enormous increase in the cost of retail power to Ontarians.

What does all this have to do with Guelph’s power customers?

Shortly following the 2010 civic election, Mayor Karen Farbridge organized Guelph Municipal Holdings Inc. (GMHI), naming herself as board chairman; four of her most trusted councillors plus two independent members were also added to the board. In 2011 Chief Administrative Officer, Ann Pappert was named Chief Executive Officer of GMHI.

The mayor believed that Guelph needed to adopt alternative energy systems to reduce greenhouse-gas emissions. Her problem was she could not use the financial resources of the City of Guelph because they were tapped out and it would affect the city’s credit rating.

So, she decided to bring the city-owned Guelph Hydro Inc (GHI) into GMHI. Her intent was to use it as the financial source to develop district energy plants and geo-thermal underground heating and cooling. The heat of the two current natural gas district energy pumps would heat the water distributed to select customers. The system was on a closed loop so it required a refrigeration unit to cool the circulated water during the warmer months.

This underground piping has already been installed.

I know, it sounds very complicated and I apologize for using the alphabet soup of acronyms. As it turned out, it has cost the citizens $26,637,244 and the current GMHI CEO/CFO, Pankj Sardana, says there is no hope that the money will ever be recovered. He further said the project should never have been started in the first place.

So, who put up the $26 million? We know that Guelph Hydro separate corporation, Electric Services Inc. (GHESI), inherited Envida Corporation; the organization charged with implementing the failed Community Energy Initiative passed by the Farbridge controlled council in 2007.

And where did GHESI get the money for this energy adventure? They got it from every Guelph Hydro customer in the city. And that’s why Guelph has one of the highest Hydro rates in the country.

In her eight years in office, the former mayor drove up property tax rates by some 38 per cent compounded. Now we learn the truth of her willful use of using Guelph Hydro to finance a thoroughly mismanaged and badly planned project without any regard for risk. She did it in secret, without public consultation or an environmental study.

The final question is why did the Guelph Hydro board of directors never object or question the GMHI operation? They knew what was happening because the GHI leadership was part of the GMHI.

The solution is to abolish the appointed board of Guelph Hydro and elect three Hydro Commissioner in the 2018 civic election. Only this way, the people may get some accountability.

All the players in this from the former mayor and GHI management should share the complicity and blame in the planning and execution of the geo-thermal project. There was no assessment of the number of thermal customers who were ready to sign up. This reminds us of that famous line: “If we build it, they will come.”

CEO Sardana was blunt when he said there was not sufficient number of thermal customers to pay the capital costs or operation of the district energy plants.

It is incredible that senior staff making eye-popping salaries and benefits failed to intervene and prevent this from occurring. Equally, why did Councillors Karl Wettstein, Leanne Piper and June Hofland fail to speak when they were involved? Why did they not question the decisions surrounding the development that cost more than $26 million?

They can achieve a measure of redemption by recommending the whole system be shut down and the equipment moth-balled.

Then, council should order an independent investigation into how this project failed and identify the mistakes that were made, resulting in this enormous financial loss of public money.

It was recently revealed that the originator of this debacle was the former mayor, Karen Farbridge. Today she is operating a consultancy to provide a “tool-kit for local elected leaders to build more resilient, sustainable and prosperous communities for all Canadians by taking action on climate change.”

With respect, any potential clients should check Ms. Farbridge’s track record in eight years as mayor of the City of Guelph.

In another post on her blog she said: “It’s the low-carbon economy, stupid.” I guess anyone who doesn’t like her tools are, well: Stupid.

That would include the 20,000 voters who defeated her in 2014.