With the current threatened tariff war with the United States, many Canadians are evaluating their purchases and trying to “Buy Canadian” as much as possible.  This is something I wholeheartedly support as makes sense for a number of reasons including the environment, the local economy, the quality of items being purchased and the general quality of living.  As an aside, and for any readers outside of Niagara, let me also recommend Niagara wines and Niagara vacations.

Because electricity is a provincially managed industry, most people in Ontario will assume that their electricity is Canadian…and they are correct.  I think the percentage of the electricity product that comes from Canada is in the high 90’s in percentage terms.

Electricity Commodity

For an average residential customer, the electricity commodity represents about 60% of the monthly bill before HST and before the Ontario rebate.  These percentages are all based on a NOTL Hydro residential customer using 750 kwh.  The allocation of costs will vary depending on the user (location, customer class, consumption) but should all be roughly the same.

97% of the electricity consumed in Ontario in 2023 was generated in Ontario.  The total consumption in Ontario was 137 TWh and the total imports to Ontario was 4 TWh.  Most of these imports are from the Provinces of Quebec and Manitoba so the percentage of consumption generated in Canada is even higher than 97%.

Distribution Costs

The next biggest cost on a customer’s bill is distribution costs at about 28% of the total bill.  Distribution costs cover the annual costs in providing distribution services plus a return on the investment in the distribution infrastructure. 

The annual costs include staff wages and benefits, supplies, software services, interest costs, taxes and profit.  Staff wages are 100% Canadian and benefits will be mostly Canadian other than any prescriptions using foreign-sourced medications.  Supplies will be mostly Canadian.  That was not something we previously looked at in this context except to use local services where feasible.  Some of the software services we use are from US companies (billing system, GIS, Microsoft) though even there most of our costs are for ongoing support which is local.  Our SCADA system and payroll software is Canadian.  Our interest costs, taxes and profits are 100% Canadian.  I would estimate over 95% of our annual costs are Canadian.

Identifying the source of most of our distribution infrastructure is more challenging.  The infrastructure is made up of poles, wire, transformers, meters, conduit and various devices.  Poles are 100% Canadian.  No surprise there.  Our transformers are also mostly Canadian.  The large transformers in our stations were all made in Canada though the materials came from around the world.  The regular transformers on the grid have also been exclusively purchased from a Canadian company for the past number of years.  Our meters all come from the US.  With wire and other devices it is hard to tell.  We purchase through hardware distributors and they would have a mix of US and Canadian suppliers.  We do know that the newer smart grid devices such as switches and reclosures tend to be made in the US.  All the labour installing this hardware is 100% Canadian.  To be conservative I would estimate that our distribution infrastructure is over 75% Canadian.

Annual operating costs are over half of the costs that go into rates so in total I would estimate that distribution costs are around 90% Canadian.

Transmission Costs

Transmission costs make up about 8% of the bill.  Transmission services in Ontario are almost entirely provided by Hydro One; an Ontario based company.  I do not have enough insight into their operations to provide a detailed breakdown, but my guess is that they are not dissimilar from NOTL Hydro in the make-up of their costs so would be around 90% Canadian.

Regulatory Costs

These charges go primarily to the Independent Electricity System Operator (IESO) to manage the electricity grid though there is also a charge to fund subsidies for electricity distribution to some remote users.  As a result, these costs are almost 100% Canadian.

Conclusion

Electricity users in Ontario and all of Canada can comfortably assume that their electricity is almost 100% Made in Canada.  Like our users, NOTL Hydro is also evaluating its purchases to try ensure that they are as Canadian as possible.

Every year I prepare a comparison of the delivery rates across the electricity distributors in Niagara (LDCs).  The comparison for 2025 for the three primary rate classes (residential, small business and large business) is provided.  The rates for Welland are not final as they are nearing the end of their cost of service application.  As this comparison uses the latest rates from that hearing, any additional changes will not affect the arguments in this blog.

I perform this analysis to see if NOTL Hydro’s rates are still the lowest in the Region.  This year they are but they are not every year.  What does not change from year to year is that the three lowest rates are always in NOTL, Welland and Grimsby.  There is a reason for this.

I have talked to the Presidents of both Welland Hydro and Grimsby Power and they have the same mandates from their Boards as I have.  That is to earn a fair return on equity, which is set by the Ontario Energy Board at around 9%, and to have a long-term objective to strike the right balance between low rates and investing for system reliability and performance.

It is this last bit that is important.  This is not the long-term objective of all LDCs.  CNP (part of Fortis) and Hydro One are both parts of large publicly-traded companies.  Their long-term objective is, most appropriately, to maximize the long-term return to shareholders.  As investors we would not have it any other way.  However, the impact is that this also leads to the highest rates. 

This rate impact is not created by anything devious: both CNP and Hydro One earn the same return on equity and are subject to the same regulations and oversight of the OEB.  Rather, if the goal is to maximize the long-term return then it is also to maximize the long-term level of equity on which the OEB set return on equity is earned.  This is accomplished by a variety of decisions that have a cumulative effect.  For instance, NOTL Hydro may sometime make decisions that do not create a return for NOTL Hydro but do for NOTL Hydro ratepayers.  Our actions to reduce the impact of double peak transmission billing are an example of this.  Similarly, if a decision is between investing in assets, which increase fixed assets and therefore equity for rate setting purposes, and incurring operating costs then the differing long-term objectives may lead to different decisions.  Individually, these decisions are not significant but, as stated, over time they accumulate.

Around 20 years ago, Thorold made the decision to sell their LDC while NOTL opted to keep theirs.  The difference between the Hydro One Urban rates used in Thorold and the NOTL Hydro rates is $3 million a year.  This is the annual incremental cost that NOTL Hydro customers would have to pay if they were instead supplied by Hydro One.  This difference would be even higher if Hydro One’s rural rates were to be applied in NOTL which would likely be the case.

The conclusion is that if you are fortunate to be in a municipality that owns their LDC, you want to keep it that way.  A municipally-owned LDC with proper governance, and that is the key, should over time lead to lower rates like has been the case in Welland, Grimsby and NOTL.

Like most companies, the nature of their operations and what they consider most important can be divined from their staffing organization.  The staffing at NOTL Hydro is similar to most local distribution companies (LDCs).  However, as in most industries, as LDCs get bigger they not only have more staff but have more specialized staff.  This can be taken to an extreme.  I remember talking to a tax professional at one multi-national company who did not even know his company’s products.

With a total staff of 20, NOTL Hydro is not very big.  As a result, most members of staff have multiple roles.  For those that like variety and change, this is a benefit.  For those that want to become specialists with a deep knowledge in a given field, this would not be a good fit.

The following is the staffing organization at NOTL Hydro:

Administration

This is the same as any company and consists of the senior management team as well as support functions like finance, IT and HR.  A strong finance department is a requirement for any LDC due to its regulatory reporting requirements and its customer billing function.  NOTL Hydro outsources most of its IT requirements due to its size and the level of sophistication required due to both the nature of its operations and the growing cybersecurity threats.  NOTL Hydro does not have any HR staff but has access to an HR expert as a member of the CHEC group; an association of smaller LDCs.

Regulatory

Unlike most companies, NOTL Hydro does not have a sales and marketing department.  As a monopoly and a utility, NOTL Hydro does not need to seek sales or customers; they come to NOTL Hydro naturally.  Instead, NOTL Hydro is subject to a high level of regulations overseen by a regulator specific to the industry: the Ontario Energy Board.  Most LDCs will therefore have a regulatory department.  NOTL Hydro is not big enough to have its own regulatory department so this is a big part of the workload of the senior management team.

Lines

Every LDC has linemen or powerline technicians (PLT) as they are now called.  PLTs are skilled trades similar to electricians (not the same thing), plumbers or welders.  Becoming a PLT involves an apprenticeship program just like the other trades.  PLTs are required to work on the hydro distribution lines whether they be installing new services, making repairs or engaging in regular maintenance.  Hydro lines have high voltages so nobody should be making any contact with these lines other than PLTs.

There is also a vibrant industry of companies providing lines services on a contract basis.  These are used by both LDCs and by private industry who may need a power line built on private property.  LDCs will use contractors for projects they cannot manage internally, to assist at peak times and to avoid overstaffing internally.  NOTL Hydro uses contractors for larger underground jobs where we do not have the inhouse expertise and for some large overhead jobs that require a larger crew.

Other Outside Services

There are a variety of other outside services required in addition to line crews.  These include locators and civil work on underground jobs such as borers, vacuum truck operators and excavators.  These services will either be contracted or staffed depending on the situation of the LDC.  While LDC size is obviously a big factor it is not the only one; LDCs in more remote parts of the province will not always have access to many contractors so may need to bring certain skills in-house.  NOTL Hydro has hired a locator, an excavator and a labourer in the past few years as the contractor situation changed and the volume of work made this a viable alternative.

Technical and Engineering

All work must be planned and designed before it can be performed.  This is definitely the case for any work done on the hydro distribution lines.  Given the volume of this work, almost all LDCs have a technical engineering department.  This staff deals with planning for both internal jobs (line replacements, voltage conversions, expansions) and jobs done on behalf of customers.  The latter will involve working with the professional representatives (electricians, engineers) of the customers.  NOTL Hydro has a technical engineering department so as much of this work as possible is done in-house.  For very large jobs or for jobs with more complicated features, such as smart grid equipment that is linked to our SCADA system, NOTL Hydro uses an external engineering firm with which it has a long-standing relationship.

Customer Service and Billing

These two services are often two separate departments but at NOTL Hydro they are combined into one.  All LDCs have customer service and billing staff as that is a core competency,

The revenues from LDC bills fund the entire industry and around 80% of the funds collected by LDCs go to pay generators, transmitters, regulators and various other organizations beyond the LDC.  LDCs do not mark-up the cost of electricity generation and these other costs.  Instead, 100% of these costs flow through.  LDCs have their own separate charges that they keep for the delivery of power.  However, LDCs are 100% responsible for the entire amount of any billing errors or any bills not collected.  The billing function is thus very important; especially as billing is getting more and more complicated with all the different options.

The customer service department is necessary to manage the LDCs relationship with its thousands of customers.  This relationship will be a mix of online and personal service.  NOTL Hydro believes the personal service touch remains a very important part of what we deliver which is why our doors are still open to the public.  With the recent postal strike, we have never had more foot traffic.

Other Departments

As mentioned, the larger a company then the more departments they will have as roles become more and more specialized.  Some examples of departments that are commonly found in larger LDCs are metering, safety and property management.  As its name implies, metering takes care of all the customer meters.  At NOTL Hydro this is managed by the Technical and Engineering Department with services related to the larger meters outsourced.  NOTL Hydro does not have a safety department but that does not diminish the importance of this service.  An outside consultant provides support to the Administration that is responsible for this.  LDCs tend to have a fair bit of property.  At NOTL Hydro this is also managed by Administration.

All of these departments work together to keep the lights on and the rates low.

There are three bodies that oversee the regulation of electricity in Ontario: the Ontario Energy Board (OEB), the Independent Electricity System Operator (IESO) and the Ministry of Energy (MOE) itself.   This blog will be a quick look at their operations.

Ontario Energy Board

The OEB is responsible for regulating much of the electricity industry in Ontario.  This includes electricity distributors and transmitters.  It also includes, to a significantly lower degree, sub-distributors, retailers, the IESO and Ontario Power Generation (OPG).  As these are all monopoly service providers this regulatory oversight is appropriate and was created through legislation by the Government of Ontario.

There are two parts to the OEB: the adjudicative and the administrative.  The adjudicative part, formerly called Board members and now called Commissioners, hear the actual rate cases and other hearings and make the final decisions.  The administrative part manages the relationships with all the organizations they regulate and enforce the rules.  They may also participate in the hearings before the adjudicative branch.

The OEB is the most customer-facing part of the government oversight.  Their website has valuable information for customers, they try to support customers with their outreach and there is an ombudsman that tries to deal with customer issues.

Over time the role of the OEB has evolved.  Initially, the focus was on the core regulatory requirement which is approving rates.  As the OEB gained more experience they gravitated to also reviewing the strategic direction of the transmitters and local distribution companies (LDCs). 

There has been some good in this.  By requiring long-term asset plans, by ensuring cybersecurity awareness and by publishing reliability statistics they have helped focus LDCs on customer needs beyond rates.  Other initiatives, such as benchmarks that are statistically irrelevant due to the sample size, and some customer surveys, have missed the mark and not been as effective.

Lately, the OEB has been trying to more directly dictate how LDCs manage their business.  Examples include bill presentation (this is not so recent), disconnection procedures, customer communication requirements and, most recently, capacity management.  This is problematic for four reasons.  First, as a regulator, the OEB does not have the knowledge base to be making some of these decisions. Second, by dictating certain processes the flexibility to respond to some situations is lost which can be to the detriment of some customers.  Third, in a related manner the benefits of potential innovation is lost.  For instance, I am sure LDCs could come up with a better bill presentation if allowed.  Finally, and most importantly, all these mandates add costs which are ultimately borne by the customer.

These changes have not been entirely of the OEBs own volition.  There has been a parallel trend with regards to the independence of the OEB from the Ministry of Energy.  Initially, the OEB operated largely independently.  This is how it should be.  Over time, the Ministry of Energy exerted more and more control through letters of direction.  These letters were initially sporadic and each focused on a specific new or change in responsibility for the OEB.  Now, the letters are issued annually, are many pages long and provide detailed direction to the OEB for the upcoming year.  The OEB has naturally responded by shifting their focus to meeting the directions set out in the letter and not necessarily acting in a manner that may be best for the overall long-term performance of the electricity industry. The increased involvement of the OEB and the lack of independence has had another consequence.  This can be seen in the chart below.  The cost of the OEB has taken off.  They are forecasting another big jump in 2025.  This is concerning and not just because it is another expanding government entity.  As our Chair puts it “regulators exist to create regulations”.  The biggest cost of the growth of the OEB will be with all the organizations they regulate who will have to respond to the increasing demands of the OEB.  These costs will inevitably end up with the customer.

Independent Electricity System Operator (IESO)

The IESO has a number of responsibilities but the primary ones are operating the electricity market in Ontario, ensuring that supply meets the demand for electricity at all moments and overseeing the safety and capacity of the transmission grid.  There are two other responsibilities which are funded separately and are discussed further below.

Most of the electricity sector revenues flow through the IESO.  This includes all revenues for transmitters, most generation and any other government programs.  The LDCs collect all their billings from customers and then remit over 80% of it each month to the IESO.

The IESO is not customer-facing unless you are a participant in the electricity market or a generator.  The closest they get to regular customers would be in dealing with those with MicroFIT contracts.  Even then, the month-to-month payments are handled by the LDCs and customers only deal with the IESO if they are moving or selling their contracts.

The problem with the electricity market in Ontario is that it has become largely irrelevant.  Some years the market covers less than 20% of the cost of electricity.  The rest is Global Adjustment (GA).  Given this it becomes difficult to assess if the IESO is doing a good job or not.  Unfortunately, this is out of the IESOs control as the Global Adjustment is the responsibility of the MOE.

The IESO gets a similarly detailed letter of direction as the OEB.  This is less a concern as the IESO is clearly a government agency with no expectation of independence.  The IESO is not showing the same level of increase in costs.

MOE

The MOE is currently called the Ministry of Energy and Electrification but the name seems to change every time there is a new Minister so I will stick to MOE for simplicity.

If there is a theme running through the comments above, it is clearly one of control of the industry by the MOE.  To some degree this is inevitable.  Electricity is a key industry for business development and for the standard of living Canadians expect.  If something goes wrong with electricity in Ontario it is the government that gets the blame.  It is also one largely owned by government players including most LDCs, OPG and a chunk of Hydro One.  This is not an American state where the majority of the assets are investor owned.

It is harder to get a handle of the costs of the MOE though someone with a better understanding than me of financial reporting by the Government of Ontario may be able to.  First, the ministry changes over time.  Under Minister Rickford it was the Ministry of Energy, Northern Development and Mines.  The costs thus included the Northern Development and Mines bureaucracy.  Second, the costs include the various subsidies and these are not always separated from the administrative costs.  Unfortunately, I suspect an analysis would reveal a growing government agency.

The Government of Ontario has been very transparent in its energy policies with its vision paper, its policy announcements and the opportunities for input on proposed regulations and legislation. 

The concern is not with these big picture decisions.  Those are policy decisions that rightfully belong with the government.  The concern is at the next layer which is the actual management of the industry.  With the top-down approach that is currently being displayed, the government is losing the benefits from independent decision-making by the agencies under their control.  Agencies which, for all their faults, are closer to the action. 

More importantly, the MOE is straying into trying to manage various aspects of the industry.  This never works well.  What sounds good in an office often does not work well in the field.  This is particularly the case when the decisions are about “guiding” the industry based on an often unrelated government objective (more housing, faster broadband) rather than just finding the most efficient course of action. 

Just like with the OEB, this level of micro-managing can be problematic with the same issues applying.  In addition is the concern with the “law of unintended consequences”.  Regulations intended to guide behavior in one direction can result in unforeseen behaviors.  For instance, the recent regulations intended to assist in housing developments will also allow those LDCs that are so driven to more quickly grow their rate-base and thus charge higher rates.

Conclusion

There is a need for all three of these government organizations and the roles that they play.  However, just like every other organization in the industry, it would be best if they were kept as lean as possible, worked with rather than through the other industry participants over which they have authority, and kept the focus on the long-term best interests of the customer. 

In October the Ontario Government released what they are calling their vision for the energy (really electricity) future.  No new initiatives were announced but this is a good summary of general policy trends and recent announcements. 

https://www.ontario.ca/page/ontarios-affordable-energy-future-pressing-case-more-power

The following is my summary of the highlights:

Increased Demand

The IESO and most prognosticators are forecasting a huge growth in electricity demand due to electrification and data centre power needs.  A 75% increase by 2050 is the figure quoted.  Preparing for this now, with the danger of overspending, is better politically than not preparing and risking being short of power.  This report is primarily about how this will be achieved without the cost of power skyrocketing.

Subsidies to Continue

The report highlighted the existing Ontario Electricity Rebate (OER) and Comprehensive Electricity Plan (CEP).  We can expect these to continue with their annual cost of $6-7 billion a year.  The CEP makes sense as it offsets the costs of the Green Energy Act.  The OER is just a subsidy paid for by tax revenue.

Nuclear Power

Nuclear power represents the best path for meeting this demand.  Ontario does not have a competitive environment to be relying on solar and wind.  With nuclear, Ontario has the experience, expertise and talented workforce to be competitive.  With the small modular reactors, a new build at Bruce Power and refurbishments at Darlington, Pickering and Bruce, Ontario is relying on nuclear power to meet its growth needs.

Hydroelectric

The current hydroelectric generation will be maintained and refurbished; but there is little opportunity for growth.

Renewable Energy

Investments in renewable energy will continue but they will be limited and will all be sourced through competitive procurements.  I believe there are opportunities with solar and wind that are being missed due to regulatory constraints.  Wind and solar will not provide the growth in electricity needed but they can be used to provide cheaper electricity at the right times.  The current ban on community solar is an example.

Energy Efficiency

The new name for the old Conservation and Demand Management (CDM) programs.  These will be expanded.  The achievements of these programs have usually been overstated but remain beneficial. 

Transmission

New investments have been approved particularly in Southwest Ontario and up around the Ring of Fire.  I expect these investments to continue as growth shows up constraints in the system.  There is recognition that the current processes for new transmission and for customers to connect to the transmission grid are too slow and cumbersome.  Hopefully, this will result in some changes. 

Natural Gas

Natural gas will continue to be a source of electricity.  This is appropriate.  The report highlights the need for natural gas to manage changes in demand while nuclear and hydroelectric handle the baseload.  The danger is that the declining price of natural gas makes its marginal costs quite low so that it becomes attractive to use as baseload energy to keep rates low.  This could put to the test the Governments boasts about how clean its electricity system is.

Electrification and Energy Transition Panel

This report was released in February 2024.  It was referred to in passing.  I suspect it will be largely ignored except where it suits the Government’s needs.  Not a loss.

Electrification of Transport and Heating

The Government recognizes that if Ontario and Canada are to meet the carbon reduction goals, much of the current energy used for transportation and heating will need to become electric.  This will only happen if consumers voluntarily make these choices.  The new terminology is Beneficial Electrification and plans for subsidies to help this happen are being developed.

Municipal Energy Planning

The report recognizes the benefit of this and integrating these with the regional planning by the IESO.  The Niagara Region has started work on an energy plan for all of Niagara.  Much of local energy planning is largely superfluous but it can become a venue for real decision-making when needed.

IESO and OEB

Better information for business and quicker decision-making by both the IESO and OEB are mentioned.  Hopefully, some action is taken on this.

Carbon Tax

The Government is strongly opposed to the carbon tax but does not offer any real alternatives.  No mention of the rebates households are currently receiving.

Electric Vehicles

The vision calls for supporting EV adoption and supporting the growth of the EV charging infrastructure.  The government has put and continues to put significant efforts into developing an EV infrastructure. 

Local Distribution Company – LDCs

Unfortunately, the report promotes further consolidation of LDCs.  This despite the clear evidence that the smaller LDCs are more efficient, provide better service and have lower rates.  I continue to believe that this is driven not by the mentioned efficiencies, which are not real, but by the desire of the government to have only a handful of LDCs to manage.  This is how bureaucracies like to work and why they allowed Enbridge and Union Gas to combine creating one gas company serving almost the entire province.

Affordability Programs

Programs like the OESP will continue. 

The Ontario Energy Board (OEB) recently released the Regulated Price Plan (RPP) rates for 2025.  The rates declined, which is good news.  However, the amount of the subsidy under the Ontario Electricity Rebate (OER) also declined from 19.3% to 13.1%.  To see if there is a net benefit, I performed the following analysis using the NOTL Hydro 2024 rates and the time of use (TOU) rates.

As can be seen there is a drop in the cost of power of 10% or $8.52.  The delivery charge also drops slightly due to the drop in the cost of line losses as the cost of power has fallen.  However, this is more than offset by the $9.69 reduction in the OER subsidy.

This net impact is intended.  The goal of the subsidy is to moderate the increase in the price of electricity from year to year.  Also, there will be changes to the other non-cost of power rates.  Transmission charges are expected to increase by 11%, NOTL Hydro’s net charges will be flat but only because we had some large one-time charges in 2024 and we do not yet know if there will be any changes to regulatory rates for 2025.

Even though the benefit of the lower cost of power is being kept by the Government of Ontario, that is not necessarily a bad thing.  The OER is a subsidy so is being paid for out of tax revenues.  The lower the subsidy the lower the impact on the provincial deficit.

The OEB report gave two reasons for the drop in the cost of power, a $259 million surplus collected in 2024 and a decrease in global adjustment payments to nuclear and natural gas generators. 

The 2024 surplus is nice and not unusual.  The setting of RPP rates is always an estimate so there will always be a surplus or shortfall.  In 2023 there was a deficit of $342 million.  Given the uncertainties the estimates are usually quite good.  The swing from a deficit to a surplus has a combined impact of 9% of the cost of power of $6.8 billion so is the cause of most of the rate reduction. The other cause of the rate decline is more interesting and has nothing to do with global adjustment.

This table shows the expected cost and contribution to electricity supply in 2024 and 2025 as used to estimate the RPP rates.  Of note is the contribution of natural gas.  The cost is expected to fall 25% from $114 to $85 per MWh while its use is expected to climb to 17% of all sources of generation.  This has helped reduce the total cost of power on a per unit basis even though the cost of nuclear and hydro, the dominant sources of supply, are both rising.  This has contributed a further 0.6% to the decline in the cost of power.

A declining cost of power is always a good thing and a comparatively low cost of electricity is necessary for electrification.  However, the growing use of natural gas in Ontario’s electricity supply mix, as shown in the chart, creates a few concerns:

1. The Province has consistently touted its “green energy” as a benefit when attracting industry.  This was mentioned in a presentation I recently saw by one of the new electric battery manufacturers that is building a new plant.  This claim becomes problematic as the use of natural gas grows.
2. The carbon benefits of electrification rely on switching from carbon-based fuels to greener electricity.  These benefits decline as the amount of carbon fuels used to generate electricity grows.

The Province has claimed that the increase in the use of natural gas is temporary and needed until the new nuclear generation comes into operation.  While I do not dispute this, it feels there is a little more the Province could be doing to encourage more renewable energy.  This would not be by overpaying like the Green Energy Act but by adjusting regulations to make the use of some renewable energy more competitive.  Some examples include:

• Allowing community solar.  These are large solar projects that are collectively owned by community members who can use their share of the solar output for net metering.  This provides solar to consumers for whom it would not otherwise be possible (condo and apartment dwellers) and large solar installations have a lower cost per kW.
• Allowing wind farms in the Great Lakes.  Obviously, there is much more to this example that would need to be examined but the growing success of off-shore wind farms around the world make this look attractive.
• Make net metering simpler and more understandable for customers to encourage more to make this investment.

We held an open house the other day (October 9, 2024) with presentations on Heat Pumps and Electric Vehicles.  Over 40 customers turned up to hear the presentations and engage with the presenters and NOTL Hydro staff.  Thank you to those customers for their interest and participation. 

The idea is to provide information so as to make informed decisions.  Everybody should still do what is right for them and this will depend on personal circumstances. 

Copies of the presentations can be downloaded at:  https://www.notlhydro.com/open_house/ .

The heat pump presentation was provided by Mike Peddle of Environmental Heating & Cooling.  Some of the key takeaways in my mind were:

• There are different types of heat pumps for different weather environments.  Make sure what you get is a match.
• Heat pumps work by extracting the ambient hot (for heating) and cold (for cooling) air from outside and transferring it to your house.  They do not actually heat or cool the air.  This process makes them more efficient. 
• In Canada, you will most likely need a back up source of heating for the very cold days when the heat pumps will not be able to keep up.  This could be a legacy gas furnace if you have one or an electric heater for a new installation.
• Heat pumps are competitive with natural gas and less costly than other alternatives such as oil, electric heat and propane.  Heat pumps use electricity for all their energy.

The electric vehicle (EV) presentation was provided by Plug’n Drive.  They also had two vehicles (a Chevrolet Equinox and a Polestar 2) available for test drives.  Some of the takeaways from this presentation included:

• North America is moving to the Tesla charging connection as the standard.  Conversion kits will be available for those using the other current charging connection.
• The variety of EV models and their range continues to improve with all new EVs having a range over at least 300 km.
• There is a developing used car market for EVs.  An EV battery should last the lifetime of the car, is simpler to maintain as it has fewer moving parts and can get software updates during its life.
• EVs are currently 12-13% of new cars sold in Canada (this is lower in Ontario) and this is still growing.

One of the common themes with both EVs and heat pumps are the rebates that are available.  These are both federal and provincial and are constantly changing.  If you are thinking about either of these purchases, make sure you talk to the vendor about the rebates.  It should be in their best interest to provide these to you.

At the event, a few customers spoke to me about all the outages over the summer.  Most of them had seen the article in the Lake Report https://lakereport.ca/  on page 15 of the September 19, 2024 edition.

As per the article, the number of outages was the highest we have seen in a three-month span.  The charts below, which can be found on our website at https://www.notlhydro.com/outages/outage-statistics/ , show this.  SAIDI measures the average duration of outages while SAIFI measures their frequency.  On each chart the horizontal line is the five-year average.

As reliability is a key part of our service, we track our outages closely.  We have examined the summer results and there is no consistent pattern.  The outages are in different parts of the town and, as reported in the article, had different causes.  Either this is some manifestation of climate change or, more likely, just a string of bad luck.  We will continue to monitor the situation closely and implement the changes discussed in the article.

We get a number of calls every year about equipment that may have been damaged due to voltage fluctuations.  As part of our service, we try to keep the voltage of the electricity we deliver as consistent as possible.  The normally acceptable range is 110/220 to 125/250 volts and we try to keep it at the nominal value of 120/240 volts.  However, this is not always possible and there are a number of situations that could lead to higher voltages.

• Most outages are caused by contacts with our system (trees, branches, lightning) causing a fault.  When a fault occurs, a transient voltage waveform will likely be created.  There are devices in the system (fuses) designed to mitigate these voltage transients, providing the fault occurs upstream from the protective device.

• The NOTL Hydro electrical grid is designed so that we have multiple spots at which we can switch where the power flows.  This allows us to isolate certain sections for maintenance, repairs or customer work.  When we make these switches there can be minor voltage changes.

• There can be voltage disturbances from contacts even if there is no outage.

• Though rarer, there can be voltage fluctuations emanating from the transmission grid.

While we do our best to mitigate them, we cannot provide any guarantees against these voltage fluctuations.  We do recognize that the use of electronics continues to grow so that more and more equipment is exposed to potential issues with voltage fluctuations and that outages, even the very short ones, can require equipment to be reset and work potentially lost.

To protect your equipment and to mitigate the impact of outages, the following are some ideas ranging from the simplest to the more sophisticated solutions.  With all of these there is a trade-off between their cost and the benefit being provided.  The level of protection that makes sense will depend on your personal circumstances.  Someone who works from home will likely need more protection than someone who just uses a computer for personal reasons.

1. Use power bars or power strips with surge protection for sensitive equipment.  These will prevent voltage fluctuations from damaging your equipment.  They also reduce the number of plugs at a single outlet.  At home, my computer is always plugged into a power bar rather than directly into the wall.  Each set of equipment will need their own power bar.  I recommend these for everyone.
2. Whole home surge protectors provide the same protection but for the entire house.  These are installed at the panel and should only be installed by a licensed electrical contractor.
3. A UPS (uninterrupted power supply) is a device that will provide power to cover temporary outages.  Depending on the UPS this could range anywhere from 5 seconds to 4 hours.  Typical, off the shelf, UPS’s have a short duration.  Naturally, the longer the back-up supply the more expensive the UPS.
4. Longer term UPS’s have batteries in them.  Batteries can also be used as a back-up power source.  These can also be used in a single device set or whole home fashion. Again, for whole home set-ups, use a qualified electrical contractor.
5. Solar panels are an alternate source of electricity.  The challenge is that unless they are matched with a battery, they are only helpful when the sun is shining.  The installation of solar panels is a significant investment so should be done as part of a comprehensive evaluation.  A net metering contract with NOTL Hydro is also recommended to get the full financial benefit from the solar power.
6. Finally, a back-up generator provides the most protection against loss of power.  It is also the most expensive solution.  We have a back-up generator hear at NOTL Hydro to ensure we can continue to serve our customers in the event of an outage.  I previously worked at a data management company that provided instant access services to thousands of corporate customers.  They had a back-up generator at both their main office and their computer back-up site.  Back-up generators are also more common up north where the power supply is less reliable.

As stated, we do recommend the basic power bar protection when using computers and any sensitive electronic equipment.  Beyond that, the need for anything else will depend on your circumstances.

NOTL Hydro has had a number of outages over the past three months and this has prompted a number of complaints from our customers.  We understand their frustration.  So much relies on electricity these days (internet, Point of Sale systems, air conditioning) that its loss is readily apparent and affects regular activities.

NOTL Hydro tracks all outages carefully including the length of the outage, the number of customers affected and the cause of the outage when it can be identified.  This chart, which measures the frequency of outages per customer on an annualized basis, shows the increase in outages in April and May.  June has only just ended but we know its outage stats will be high as well.  This recent spate of outages follows a period of 3 months (Jan-March) in which there were very few outages.  People, understandably, remember when their lives have been impacted by outages and not when there were few or no outages.  This chart is part of a detailed analysis provided to the NOTL Hydro Board on a monthly basis.

NOTL Hydro manages its system and invests where it can to try to minimize the impact of outages.  This is a key objective.  This chart measures NOTL Hydro against all the other electrical utilities in Ontario except Hydro One.  Hydro One is excluded as their service area includes most of rural Ontario which is not a fair comparison.  Including Hydro One would make NOTL Hydro look even better.

NOTL Hydro recently analyzed its outages over the past nine years to determine if there were any patterns that required attention or might indicate an opportunity for improvement.  The first thing we looked at was the timing of outages throughout the year.  Was there any seasonality that we should build into our planning?  The general answer is that outages can occur throughout the year and that there was no consistent peak time.  Looking at the nine-year average, the thicker gold line, there are more outages in the summer but not by a considerable amount.  This is likely due to tree growth and increased animal activity at this time of year.

The next thing we looked at is the cause of the outages and whether there were some unexpected patterns.  There are nine types of outages tracked.  These are defined by the Ontario Energy Board so that they can be compared across electricity utilities in Ontario.  How cause is attributed to an outage can be subjective so may not be consistent over time based on personnel.  We looked at causation both on a per customer basis, which accounts for how many customers are affected, and on a per incident basis.

Cause	Customers Impacted	Number of Incidents	Comments
Loss of supply	20,664	4	Loss of power from Hydro One.  Happens rarely but will result in half or all of NOTL losing power.
Adverse weather	16,390	40	Ice, freezing rains or high winds can all cause outages and these outages can be widespread.
Defective equipment	13,601	111	Pole fires, leaking transformers, failing sleeves are all examples.  Equipment can fail due to age, wear, weather conditions and other stresses.
Unknown	12,865	59	There are outages as evidenced by a blown fuse or other indicator but the reason for the outage is not evident.  This may often by due to animal contact where the evidence is no longer onsite.
Tree contacts	10,571	83	Falling trees or branches that hit power lines and stay in contact with the lines cause outages that can vary in size based on where the contact occurs.  If contact is not maintained then power will normally be immediately restored due to reclosures which reset the power.
Lightning	7,105	25	Lightning destroys equipment due to its immense power.  How widespread the resulting outage is will depend on the location of the strike.
Scheduled	4,316	119	The most common form of outage but the lease impactful.  Customers are given advance warning, the duration is usually relatively short and only a small number of customers are affected each time; usually less than 20.
Foreign Interference	3,251	98	Contact by animals or by human activities (driving into a pole).  These are common but their impact is usually limited to a smaller number of customers.
Human Element	2,481	7	These are outages caused by the activities of NOTL Hydro that are not planned.  These are limited.  The last one was in 2021.

We talk a lot about the importance of safety at NOTL Hydro.  Hopefully, our practices demonstrate that this is not just words but intent.  The following is a high-level summary of the various health and safety activities at NOTL Hydro.

Internal Responsibility System (IRS)

The IRS is a system, recommended by the Government of Ontario and by most health and safety practitioners, that recognizes that the responsibility for Health and Safety rests with all employees and not just management, Health and Safety staff or the JHSC.  NOTL Hydro practices IRS and tries to reinforce it through all its activities.

Joint Health and Safety Committee (JHSC)

NOTL Hydro has had an active JHSC for over ten years, even though for most of this time it was not a legal requirement as the workforce was less than 20 staff.  The JHSC meets regularly and is compliant with all its legislative requirements.  The members of the JHSC are two representatives from the management team and two representatives from the unionized staff.  The Health and Safety Consultant, also participates in the meetings.  Minutes of the JHSC meetings are saved on the company directory available to all staff.

Health and Safety Consultant

Since 2015, NOTL Hydro has had a part-time Health and Safety consultant on staff.  This consultant conducts regular (usually monthly) health and safety meetings, performs site visits and keeps NOTL Hydro abreast of industry health and safety developments.  The current Health and Safety Consultant is a former lineman and employee of the Infrastructure Health and Safety Association (ISHA) who now runs his own consulting business.

Monthly Operations Safety Meetings

Most months a Health and Safety meeting is held, attended by Operations staff and NOTL Hydro executives.  The meeting is rarely yet occasionally cancelled due to timing conflicts.  Typical agenda items include reviewing any recent incidents at NOTL Hydro, reviewing any significant incidents in the industry, reviewing Safe Work Practices (SWPs), reviewing sections of the Ontario Occupational Health & Safety Act and Regulations, reviewing related sections of the Electrical Utility Safety Rules and/or reviewing any equipment issues and developments.  In 2024, NOTL Hydro subscribed to Bolt Video.  Bolt Video is a company that has a catalogue of 57 electricity distribution related safety videos.  The videos are incorporated into safety meetings when paired with SWP or rule reviews.   NOTL Hydro operations staff participate in the creation of new videos with industry colleagues twice a year.

Health and Safety meeting for non-operational staff are held annually.

Safe Work Practices (SWPs)

NOTL Hydro has 40 SWPs that detail specific procedures that require this level of detail and are not sufficiently covered in the OSHA and IHSA rules and regulations.  The SWPs are available on the tablets that are carried on the bucket trucks and diggers.

Daily Procedures

Health and safety processes are part of the daily procedures of operational staff.  These processes include equipment inspections each morning and tailboard meetings at job sites prior to commencing work.  These processes are documented digitally, approved by the supervisor and maintained in a log.

The Operations Supervisor officiates the morning meeting with Lead Hands to review work progress from the previous day, deliver current workday assignments, discuss expectations, identify potential hazards and solicit feedback from the crews. 

At the beginning of every work shift, crew members congregate and stretch for twenty minutes prior to beginning field work.  Stretching brings crew members together simultaneously and helps mitigate potential injuries at work and life.

The Operations Supervisor visits crews daily and performs formal crew appraisals several times a month that are documented and logged electronically.  The safety consultant performs similar crew evaluations monthly as part of the safety meeting process.

Training

A training spreadsheet is maintained by the VP Finance that documents all the Health and Safety training staff have received.  This spreadsheet is reviewed regularly by the JHSC and Management to ensure training meets all regulatory and best practice requirements.

Health and Safety Board

A Health and Safety Board is maintained in the operations corridor that provides details on the IRS, the Environmental Health and Safety Policy, the JHSC and government regulations.

Annual Environmental Health and Safety Policy

The Environmental Health and Safety Policy is updated annually, signed by the President of NOTL Hydro and kept on display on the Health and Safety Board.

Key Performance Indicators (KPIs)

KPIs, relating to Health and Safety incidents, are tracked and reviewed by the Board of NOTL Hydro monthly.  While these only provide a snapshot of the results of the Health and Safety efforts, and not the process, they do stress the importance of Health and Safety to NOTL Hydro.