TORONTO -- People in Ontario are paying billions of dollars extra for electricity thanks to a flawed smart meter program and the above-market rates the province pays most power generators, Ontario's auditor general reported Tuesday.
Ratepayers will pay $50 billion between 2006 and 2015 because of an extra charge on their electricity bills that covers the gap between guaranteed prices paid to contracted power generators and the market price, auditor general Bonnie Lysyk wrote in her annual report.
The report also highlighted a "high-risk" loan to a MaRS real estate project in Toronto that left Lysyk uncertain about its benefit to taxpayers, as well as public-private infrastructure projects that are costing billions more than if they were delivered by the public sector.
Lysyk also flagged Ontario's growing debt as a concern. The net debt was more than $267 billion as of March and even if the Liberal government meets its goal of eliminating the deficit in 2017-18, net debt will have risen to $325 billion, Lysyk projected.
In her analysis of the smart meter program, Lysyk found the extra electricity charge, known as global adjustment, has increased by 1,200 per cent between 2006 and 2013 -- meanwhile, the average electricity market price has dropped by 46 per cent.
Most residential and small business ratepayers pay time-of-use pricing, enabled by a $2-billion smart-meter program that has so far spent double its projected cost and has not led to the government's electricity conservation goals being met, Lysyk wrote.
The global adjustment makes up about 70 per cent of the electricity charge on those customers' bills and as a result the difference between on-peak and off-peak pricing narrowed to the point where it is "undermining time-of-use pricing as an incentive for ratepayers to shift to off-peak," Lysyk wrote.
Peak electricity demand actually rose slightly between 2004 and 2010, the auditor general wrote.
The government decided to mandate smart meters in Ontario before it did a cost-benefit analysis and when the analysis ultimately was done, it was flawed and its projected net benefit of $600 million was overstated by at least $512 million, Lysyk wrote.
"As a result, electricity ratepayers in Ontario are paying significantly more for this initiative in their monthly electricity bills than was originally intended," she wrote.
Infrastructure Ontario loans also came under the auditor general's microscope and she found that for 74 public-private projects the tangible costs -- construction, finance and professional services -- were about $8 billion higher than if they had been delivered by the public sector.
Infrastructure Ontario said that the cost difference was "more than offset by the risk of potential cost overruns" if the construction and, in some cases, maintenance of the 74 facilities was done by the public sector, Lysyk reported.
The agency is also the one that granted a $224-million loan to MaRS for its Phase 2 office tower in 2011. MaRS and the developer have been unable to repay the loan and the province now has to pay interest of up to $7.1 million a year.
The opposition parties have been highly critical of the loan and have accused the government of stonewalling them in their attempts to learn how the decision to grant the loan was reached.
It remains to be seen whether its benefits will ultimately outweigh the high risks, Lysyk wrote.
"The lack of transparency around the policy objectives and intended benefits to be obtained from the significant financial risks assumed in providing this loan, as well as the Ministry of Research and Innovation's guaranteeing this loan, may have created the perception that the government is bailing out a private-sector developer," Lysyk wrote.
The auditor general also found that one-third of licensed child-care operators over the last five years were not inspected before their licence expiry date and staff are not required to obtain vulnerable sector checks, which are more thorough than criminal reference checks.
In the health sector, Lysyk wrote that the government has no way of tracking immunization rates and has no co-ordinated system to deliver palliative care.
Ten report highlights:
-- The smart meter program -- which has cost about $2 billion so far -- was rolled out without sufficient planning or monitoring by the government, and the province's objectives of reducing power demand at peak times and eliminating the need for new sources of power are not being met.
-- The debt is growing faster than the provincial economy. By the time the annual deficit is eliminated by the government's target of 2017-18, the net debt will stand at about $325 billion -- up from $267 billion at the end of March.
-- Infrastructure projects delivered under public-private partnerships are costing much more than if they were contracted out and successfully managed by the public sector. Using the example of 74 projects under Infrastructure Ontario, Lysyk found costs were estimated to be nearly $8 billion higher.
-- The ultimate costs and benefits of a high-risk, $224-million loan from Infrastructure Ontario to a subsidiary of the non-profit MaRS discovery District are "unclear."
-- The Ministry of Health and Long-Term care has no way of tracking the percentage of Ontarians immunized for certain diseases, or whether its immunization program is cost-effective. A new management system -- which is $85 million over budget -- will also not be able to provide important coverage data if all vaccinations administered are not recorded.
-- The provincial nominee program has "serious deficiencies" that increase the risk of unqualified people immigrating to Ontario who may not be of economic benefit to the province. The deficiencies include a low follow-up rate on questionable files, a delay in formally reporting potential abuse of the program to the federal government and giving certain applications priority.
-- The Ministry of Education needs to strengthen inspection processes and enforcement actions to reduce serious occurrences at licensed daycares.
-- The government has yet to fully implement source-water protection plans -- a key recommendation from the commission that investigated the Walkerton tainted-water tragedy which killed seven and sickened more than 2,300.
-- The Ministry of Community Safety and Correctional Services needs to improve rehabilitation programs and its supervision of adult offenders serving their sentences in the community to lower the rate of reoffending and reduce the risk to the public.
-- Ontario has no co-ordinated system to deliver palliative care services in the province and does not track costs specifically enough to determine the amount spent in this area.
