December 11, 2014 – Ontario’s Ministry of Energy did not develop a cost-benefit analysis nor a business case before it made the decision in 2004 to install smart meters across the province, and the business case it released after the decision was seriously flawed, says Ontario’s auditor general Bonnie Lysyk in her 2014 Annual Report.

“Our audit found that the smart metering program was rolled out with aggressive targets and tight timelines, but without nearly enough planning or monitoring by the Ministry [of Energy],” said Lysyk following the release of the report.

As of May 2014, overall costs related to implementing smart metering in Ontario had reached $1.9 billion. With additional costs to ratepayers still to come, the expected benefit of such a large investment is not yet being fully realized.

“The ministry submitted a business case to cabinet, but only after the government announced the roll-out in April 2004. And the analysis was flawed; its projected net benefit of $600 million was overstated by at least $512 million,” she added. “The ministry has neither updated the projected costs and benefits, nor tracked the actual costs to determine the actual net benefits realized.”

But wait… it gets better!
The ministry has not met its targets for reducing peak electricity demand. As well, the difference in peak and off-peak rates has not been significant enough to change consumption patterns, finds the auditor general. When ToU rates were introduced in 2006, the peak rate was 3x higher than the off-peak rate; “by the time of our audit this year, the peak rate was only 1.8x higher”.

A $249-million provincial data centre was established to collect, analyze and store smart meter data (I never knew that!). However, most distribution companies use their own systems to process such data. The cost of this duplication—one system at the provincial level and another locally—is passed on to ratepayers.

A little history…
In 2004, the government announced plans to reduce energy consumption in the province by creating a “Culture of Conservation”, which entailed installing smart meters in homes and businesses. These meters log electricity use by time of day, which allowed the introduction of time-of-use (ToU) pricing to encourage ratepayers to shift electricity usage to off-peak times. The reduction in peak demand would, consequently, reduce the need to expand or build power plants. As of May 2014, 4.8 million smart meters had been installed across the province.

— Anthony Capkun, Editor, acapkun@annexweb.com .