May power cost stats a harbinger of worse to come

If May is any indication, the Wynne government’s “Fair Hydro” plan costs will be considerable

The “Fair Hydro” plan ushered in by the Wynne government is setting up ratepayers for higher bills as soon as 2021 arrives. When the hiatus ends, limiting increases to ratepayer bills to no more than the “cost of living” (COL) over the next four years, the cumulative debt acquired by OPG to “refinance” the reported $50 billion of electricity assets will have to be repaid.

Early indications suggest the costs will be higher than the $2.5 billion being set aside for the next three years by Premier Wynne and Energy Minister, Glenn Thibeault.

Evidence? A look at May 2017 compared to May 2016 indicates the increase in the Global Adjustment (GA) costs for Class B ratepayers was 7.9% higher than 2016 and well above the May COL index of 1.4%.  Any increase in costs above the inflation rate will be added to the $2.5 billion being refinanced and become the responsibility of ratepayers to pay when the hiatus ends.

Demand drops but the cost goes UP

The IESO May 2017 Monthly Market Report indicates Ontario Class B ratepayers consumed 344,000 megawatt hours (MWh) less than they did in May 2016, which represents a 4% drop. That’s about the same as 460,000 average households would consume for the month. The Global Adjustment (GA) costs on the reduced amount of electricity consumed, however, increased by $82.7 million from $931.2 million in 2016 to $1,013.9 million in 2017.  Many will recall in May 2016, lower consumption during the prior six months caused the OEB to raise rates!

So, what caused the 7.9% spike ($82.7 million) in GA costs?   It appears there were two principal causes with one of them related to Ontario’s “Net Exports”.*

In 2017, net exports averaged 600 MW per hour higher than 2016, meaning they increased by 446,400 MWh (600MWh X 24 hours X 31 days) in May 2017 (enough to power almost 600,000 average households for the month). The buyers in New York, Michigan, Quebec, etc., paid only the Hourly Ontario Electricity Price (HOEP) of $3.17/MWh, while Ontario’s ratepayers were required to pay the GA costs of $54.8 million or $122.89/MWh.

The other major cause of the GA spike appears related to power generation from wind and its record curtailment in May 2017. My friend Scott Luft posts both the generation from TX (transmission connected) and DX (distributor connected) industrial wind turbines (IWT), and also conservatively estimates “curtailment”.  In May 2016 TX and DX connected IWT generated 699,371 MWh, not including 130,000 MWh of curtailed generation.

Combined: wind power in May 2016 cost ratepayers about $113 million or $162/MWh.  May 2017 saw 669,011 MWh of wind power delivered either to the grid (TX) or to local distribution companies (DX). Curtailed wind in May 2017 was a record as Scott estimated almost 524,000 MWh (enough to power almost 700,000 average households for the month) were curtailed.   The cost for generated and curtailed wind increased to slightly more than $158 million for the month, which raised the cost of accepted wind generation to $236/MWh.

$100 million added … for just one month

What this means is, wind-generated and curtailed costs in May 2017 were $45 million higher. Coupled with the increase in net exports of surplus generation and related costs, $100 million was added to the GA … for just one month.  If May 2017 is in any way representative of the four years of the rate freeze (tied to the COL index), the costs of refinancing those assets will be much more than the March 2, 2017 press release suggested it would be:  “These new measures will cost the government up to $2.5 billion over the next three years.”

Based on past forecasts by the Ontario’s Liberal government, keeping the costs at $2.5 billion over the next three years may be a “stretch goal”!

Parker Gallant

*“Net Exports” are total exports less total imports.

 

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9 thoughts on “May power cost stats a harbinger of worse to come”

  1. WOW! – Very good on the bad news Parker.
    Perhaps the public would like to know how much the average home owner would have paid due to the corruption in the Liberal government.
    Best wishes
    Ed

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  2. You can’t really argue that now can you…… unless you’re the lieberal party of Ontario!!!!
    Again like other fact based science this report will be filed under Glenny Glen Glen
    Thibeaults ministry as …….
    Anecdotal information….. thank you OSPE but you folks don’t understand how to run the grid…. you best stick to engineering other things you understand..

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  3. Can you imagine what a pickle we will be in when 60 million governments clients’ clients need more and more cheap power!!! We will be locked into a guaranteed contract and rolling blackouts will become a reality… again…. the amount of debt we will / are accumulate and we will basically become power slaves to the lieberals clients’ clients….

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  4. ‘I hope Canadians take away two things today: Our rights are not subject to the whims of the government of the day, and there are serious costs when the government violates the rights of its citizens’- Justice Minister Jody Wilson-Raybould

    Hmmmmmm……

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  5. http://live.gridwatch.ca/home-page.html

    How is this gonna work in Ontario when we have negative power right now…
    Demand exceeds production ….
    We are importing 1300 MW
    We are exporting 781 MW
    Negative 531MW

    With contracts to 13 states and 60 million people will we be included in the distribution or will the very people who pay for the energy exported be left… in the dark….
    Things to think about kids….

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  6. Question here is ….
    Why are we exporting power right at this moment….. our grid is in negative power right now…. how come we are still guaranteeing…. sorry I mean exporting power OUT of the province ????

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