The Independent Electricity System Operator (IESO) is trying to become “transparent” as they now disclose consumption by the two classes* of Ontario ratepayers. Along with consumption data they also disclose what each class, “A” and “B,” pay for the Global Adjustment (GA) component by month.
The Class A ratepayers were formerly customers with a peak demand greater than 5 MW, but that changed in June 2014 as noted in an IESO document: “The change to the ICI expands Class A eligibility to customers with a peak demand greater than 3 MW and less than or equal to 5 MW.” (Class “B” is, basically, you.)
IESO disclosed that in the first six months of 2016, total Ontario consumption was 69.284 terawatts (TWh) with Class A consumption of 13.834 TWh (19.96%) and Class B consumption of 55.450 TWh (80,04%). The total GA was $6.401 billion, and Class A customers paid 12.2% ($781.8 million) and Class B customers 87.8% ($5.619.4 billion).
What that means: Class B customers subsidized Class A customers in the first six months of 2016 by picking up $496 million of the GA costs.
For the comparable period in 2015, total Ontario consumption was 70.823 TWh. In that six month period Class A consumption was 12.477 TWh (17.6%) and Class B was 58.346 TWh (82.4%). The GA was $4.604 billion with Class A paying $441 million (9.58%) and Class B $4.163 billion (90.42%). So, the Class B subsidy to support Class A industrials in 2015 was $369 million.
Use goes down, rates go up
It’s obvious: Class A consumption increased year over year by 1.357 TWh, whereas Class B consumption declined by 2.896 TWh. One would assume the almost 5% decline in consumption by Class B ratepayers would mean an upcoming decrease in the electricity rates come November 1, 2016. Alas, a decrease does not appear to be on the horizon!
IESO also just released the June 2016 “Monthly Market Report” and on page 26 of the report they provide a six-month weighted average of the GA, hourly Ontario energy price (HOEP), transmission costs, etc., for the January 1st to June 30th period for Class B ratepayers. The “weighted average” (removing the DRC or Debt Retirement Charge) per megawatt hour (MWh) is $127.79/MWH versus a weighted average for the first six months of 2015 of $111.92/MWh — resulting in an increase of $15.87 per MWh or 1.6 cents per kWh. Not included in the above is any additional delivery costs as a result of rate increases for your local distribution company, including Hydro One who are currently seeking another increase, even though they received one in 2015 increasing their delivery rates.
A 14% jump year over year
The Class B increase is a 14.2% year over year jump in costs (for the electricity line only) paying for: contracted generation, conservation programs, curtailed generation, spilled hydro, export sales losses1.: etc. etc. If the increase prevails for the next few months it will reflect itself in the OEB’s consistent and semi-annual announcments of rate increases (mid October). The anticipated increase will be paid by Class “B” ratepayers at an annual cost of $144.00 (plus HST) for the “average” ratepayer consuming 750 kWh per month and will start on November 1, 2016.
Effectively what the Ontario Liberal government has done is to create a subsidy for Class A ratepayers by picking the pockets of Class B ratepayers in order to protect jobs that might disappear if those large industrial companies decide to pack their bags and move elsewhere.
To sum up: Class B ratepayers are picking up “employment insurance” costs that might embarrass the Liberal government just like when Xstrada moved their refinery operations to Quebec back in 2010 due principally to high electricity costs. That caused the loss of 670 direct jobs and as many as 4,000 jobs, according to union groups.
The misguided focus of the Wynne government on unreliable and intermittent wind and solar generation has hit Class B ratepayers particularly hard, and calls on Ontario’s low and middle income taxpayers to pick up the subsidy cost to retain jobs while simultaneously creating more energy poverty.
It’s time to stop the train before Ontario goes over the cliff!
© Parker Gallant,
August 1, 2016
* Effective January 1, 2011, an amendment to Ontario Regulation 429/04 established two classes of consumers: Class A consumers, with average monthly demand greater than 5 MW, and Class B consumers.
- Net exports for June 2016 were 1,054,080 MWh and generated revenue of $19.7 million at the average HOEP of $18.69/MWh but cost ratepayers $140.36/MWh meaning the cost to ratepayers for those net exports was $148.3 million creating a loss of $128.2 million for the month.