Do not think about, write about or deal with human behavior without determining the effects of incentives.
The eruption of the Icelandic volcano will be “an atypical event” which explains temporary global cooling which will “do nothing to the long-term trend of Global Warming caused by Man”. Count on this interpretation, especially the “atypical event” part. Our theory is perfectly sound, only the facts are uncooperative.
The following is from the National Post of April 15, 2010 by Parker Gallant, retired banker who looks into the operation of the notoriously inefficient and unofficially corrupt public utility which generates and distributes electricity in Ontario. My jurisdiction is apparently in a race with California and New York State to terminal trendiness and bankruptcy. Private citizens do worse while public employees do better.
“As a former banker I have no direct expertise in the electrical sector. I was simply curious as to why my electricity bill in Ontario went up when my consumption went down. What I found as I researched is a bewildering story of a province whose electrical sector is in trouble. Ontario is a high-price energy province and, under current policy, it is poised for a further escalation in prices. In short, Ontario is pricing itself out of the market and will not have the ability to attract any manufacturers or service sector companies that require significant energy in their daily processing.”
Politicians, as Thomas Sowell says, are only interested in solving their own problems, not ours.
“Electricity is already priced 65% higher in Ontario when measured against neighbouring Quebec and Manitoba, and the gap is likely to get bigger. How Ontario got to this state is not totally clear, but as a banker I looked first to the institutions that make up Ontario’s electricity sector and the numbers behind those institutions. The government entities involved in the electricity sector all present their public profile as open and informative and priced competitively. What’s really going on is another matter. Finding financial information is often difficult. Finding ratepayer information is almost impossible.
What I did find is a complex, unproductive, costly and expanding beehive of corporate and institutional activity that produces less and less electricity at ever rising cost. There are now six key institutional players in the Ontario power market and one regulatory body. It’s a giant megaplex of state control, each unit a part of the government power structure.”
Since 2000, Gallant found:
“Consolidated revenue grew by $1.3-billion or 14.3% to $10.5-billion, but gross revenue after fuel purchases were up by less than 1%. Expenses are another matter. Operations, maintenance and administration jumped by 44.9% to $4billion. This is likely mostly employment costs. Employment jumped from 15,800 to 18,000 permanent and 3,000 contract and non-regular (Hydro One¹s word) employees after allowing for the 5,000 jobs OPG and Hydro One outsourced between the years 2000 and 2003. Despite the addition of all those people, electricity sold and distribution dropped 33.8 % and 5.5% respectively. Likewise available power capacity in megawatts fell from 25,800 to 21,729, a decline of 15.7%. Meanwhile, the cumulative debt as at December 31, 2010, had soared to $11.1-billion, a gain of 31% or $3-billion….”
Less electricity, more cost, more people making more money producing less.
“Collectively the CEOs managing these provincially owned companies took home $4.7 million in salaries in 2009. Each of the three operating entities tells the same story. At OPG, whose responsibility is the generation of electricity, revenue is down from their-2000 year-end by $338-million or 5.5%. Net profit is nominally up by $18-million, or 3%. But that number was the result of a $683-million gain from appreciation in the value of the company’s Nuclear Decommissioning Fund.”
“Since 2000, OPG’s generating capacity has fallen 15.8% to 21,729 megawatts from 25,500. Actual electricity sold in 2009 was 92.5 terawatts, down 33.8% over the same period. One reason for OPG’s declining sales: It is unable to sell power to the grid because the new green clean power from wind and solar gets first priority. OPG is forced to throttle down hydro generation when wind and solar are producing power. The most expensive power gets priority access to the power grid. The McGuinty Liberals have turned the law of “supply and demand” on its head.”
Less electricity, more cost, more people making more money producing less.
“But its employment numbers continue to skyrocket. Between 2000 and 2009, it took on 1,739 (after outsourcing 900 jobs in 2002 and granting early retirement to 1400 in the year 2000) employees, a gain of 52%. Almost half of its employees (5,032 in total for the year 2008) earned more than $100,000 a year.”
“IESO (another government agency) gives priority to the most unreliable and most expensive electricity generators; wind and solar ranging in price from 13.5 to 80.2 cents per KWh. When supply exceeds demand IESO throttles down the cheapest electricity, hydro and fossil (gas and coal). IESO also sets the “wholesale” and “spot” price through its trading activity. The “wholesale” price (when low) creates a “provincial benefit” which is added to electricity bills of all wholesale clients and to direct marketing retail distributors . It adds 3 to 4 cents per KWh to ratepayer’s bills. Excess power is sold or bought at a “spot” price from other distribution networks such as the New York Power Authority.”
The taxpayers buy the unreliable and more expensive power–solar and wind–while they’re available and pay twice–once for the subsidy to build the generators and then the extra price of the generated electricity.
“What is exactly behind all this new activity and employment levels? While the private sector has to contend with increasing productivity, downsizing or moving production elsewhere, Ontario’s government-owned energy sector employees just keep getting fatter under legislation that has forced this sector to accept expensive undertakings that have driven capital expenditures up and market share and revenue down, largely to subsidize the green energy agenda.”
And that’s just another aspect of government for you.
Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies
