The scathing report by Ontario’s auditor general that the province’s program to install hydro smart meters in some 4.8 million homes cost ratepayers almost double of what the government originally expected and had failed to reduce energy consumption as it was intended to, reveals flaws in planning in implementation rather that defects on the meters themselves.
In her annual report tabled in the legislature this week, auditor general Bonnie Lysyk revealed that the installation of smart meters across the province cost the government $1.9 billion instead even when the government originally told the public the project will cost only $1 billion.
The smart meters are equipped with low-powered radio transmitters that report back to central command station how much electricity a household is consuming during certain times of the day. The rationale was to charge people lower rates when they consumer energy during off-peak hours and to bill them more when they user power in day-time hours when power is more expensive.
Over time, it was assumed, people would learn to adjust their daily use of energy in order to minimize their electricity bills.
One of the first things that went wrong was the lack of planning, according to the auditor general.
She said the meters were “rolled out with aggressive targets and tight timelines, without sufficient planning and monitoring by the Ministry (of Energy).”
Lysyk said the ministry failed to conduct a cost-benefit analysis and underestimated the cost in deploying the meters before it went ahead with the program.
Ontario Hydro installed 1.2 million smart meters, the rest of the 4.8 million smart meters were installed by 73 independent distribution companies. Yet, Lysyk said, Ontario Hydro accounted for 50 per cent of the program’s $1.4 billion initial cost even if it only deployed 25 per cent of the meters.
The report also revealed that the infrastructure needed to collect the data from smart meters cost a lot more than the government initially calculated.
A lack of market assessment was another flaw that was cited. When the meters were switched on in 2006, the cost three times more to use electricity at peak hours compared to off peak hours such as in the evening. But since then, the cost of power has slowly declined.
Government policy also played a part by failing to charge bigger premiums for power use during peak hours.
In 2010, the provincial government began charging lower power rates at 7 p.m. instead of 9 p.m. on weeknights, even when it was known that demand for power was high and many businesses still used electricity during the earlier hour.
The result, Lysyk said, was that instead of cutting the province’s peak power consumption by 2,700 megawatts by 2010, electricity use jumped by 100 megawatts.