Are the executives in Ontario’s electricity sector befuddled?

The light still comes on when we flick the switch, most of the time, but perhaps someone needs to flick the switch in respect to some of the people in charge of the system.

I say that after recent observations of Ontario government bureaucrats. I do not, however, mean to slight  the engineers and power workers who are keeping the lights on.

A few examples…

IESO, its strange contract awards and accounting for surplus generation – Recently, Terry Young, VP of IESO, (“responsibilities include stakeholder and community engagement, communications, regulatory affairs, Indigenous relations, conservation, and other programs necessary for the implementation of effective energy policy”) was called upon by the council for a southwestern Ontario municipality to explain why a huge multi-million-dollar wind power contract had been awarded. The local newspaper, the Chronicle, had an interesting article about his presentation and Q & A session with Dutton-Dunwich council. The municipality of Dutton-Dunwich had held a referendum on wind turbines and 84% of the residents opposed them.

Despite that, Invenergy of Chicago was awarded a contract by IESO; the company had enlisted the support of four First Nations communities from hundreds of kilometers away to boost them in the bid process. Mr. Young was asked why three local First Nations were not approached by Invenergy. When questioned by council on this contract award all Mr. Young would say was, “I’m not here specifically to talk about the project, but I do understand the concerns that you have had”. He did say he would try and get an answer to the question.

In his presentation he noted generating more electricity than needed “has garnered a lot of attention and mostly for the price that is being paid that we export it at less than what’s being paid in Ontario.” He said exporting electricity is one way to “recoup costs.” What he didn’t say was exporting a product that costs ratepayers $135 and receiving say $35 is simply a dumb exercise, but that is basically what IESO does by contracting for industrial wind generation that offers power out of phase with demand 65% of the time, according to a peer-reviewed study doneby Marc Brouillette for the Canadian Coalition for Renewable Energy.

So, the question is: Why hand out additional contracts for intermittent and unreliable power when Ontario is in surplus?

Mr. Young’s answer, as reported: “As of March 2018, the system has an installed capacity to generate 36,945 megawatts. Yet consumption on a normal day runs closer to 29,000 megawatts, Young said. This over-capacity is further complicated because Ontario doesn’t have an efficient way to store power.”

Ontario’s power use in an average day in Ontario and can be easily supplied by a combination of our existing nuclear and hydro capacity (21,481 MW), without any need for wind or solar generation.

Hydro One hands out rate credits in four U.S. states but tell Ontario farmers to conserve –   The planned acquisition of Avista Corporation has senior executives travelling to the western U.S. states speaking to regulators and promising electricity rate credits extending out 10 years. At the same time in Ontario, they are telling local farmers to conserve or get hit with higher rates according to the Farms.com Newsletter.

In the former case, when the acquisition was announced Hydro One’s CEO, Mayo Schmidt claimed the transaction “will be accretive to earnings per share in the mid-single digits in the first full year of operation.” The rate credits offered in Washington State, alone, to Avista’s ratepayers* amounts to $31 million and 3.1% of Avista’s annual revenue. That was obviously put on the table to persuade state regulators to allow the acquisition. (One has to wonder if the “accretive to earnings” claim made by Schmidt was the reason he was given the large increase in his compensation in 2017 by Hydro One’s Board of Directors.)

Meanwhile, were Hydro One staff attempting to reduce Hydro One’s revenue in Ontario? Why else would they contact farmers, telling one of them he had “one year to lower my usage or they will be raising my hydro rates by 35-40%. They were calling me to ‘warn me’ .” Two other farmers advised the Farms Newsletter they received similar calls.

To be clear, any rate increase would require approval by the Ontario Energy Board (OEB) and while Hydro One have several rate increase applications before the OEB, it is doubtful they would seek that kind of an increase, or that the OEB would approve it. The nature of the report resulted in an inquiry by the writer with Hydro One to determine the extent of their tactics to reduce consumption and if this was a pattern!   No response has been forthcoming as yet.

There is also the issue of differing reports on how big Hydro One’s service area is, from its executives, which I previously documented.

Confusion seems to be a current event within Hydro One and transparency has become a forgotten term since they have become a publicly traded company.

We should be concerned at what the executive of both IESO and Hydro One are saying, and doing.

Parker Gallant

April 23, 2018

 

*Jan 2018 all-in us state prices show Washington as 7th lowest with all-i rates at 9.51cents/kwh. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

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5 thoughts on “Are the executives in Ontario’s electricity sector befuddled?”

  1. I received the following response from Hydro One after the above article was posted. It would appear they are hanging their hat on losing their “license” if they don’t make the threats. The fourth point suggests IESO has lots of money they hand out to help reduce demand but fail to acknowledge the $400 million spent each year on those efforts is all paid for by ratepayers–ie; its one of the costs included in the charge for each kWh of power billed. The response also doesn’t acknowledge the fact that those “licensed distributors” will turn around and apply for a rate increase if their ratepaying customers conserve. Me thinks it would be very hard to find those Hydro One customers who “save millions each year”!

    “The response to your question is this:

    o Each year, every local electricity distribution company is required to review the electricity usage of their commercial customers to ensure they are in the correct rate class as it is a requirement of their distribution license.

    o Over the past few weeks we have been in the process of contacting those customers that are on the threshold of potentially needing to be reclassified based on their usage over the past 12 months.

    o As part of that outreach, our highly trained agents are offering customers a free energy audit in order to identify what conservation and demand programs may best suit the customer’s needs which would ultimately reduce their electricity consumption and their bill.

    o Through the available conservation and demand management programs funded through the Independent Electricity System Operator, participating Hydro One customers save millions each year.

    o Here is a link to all of the available programs for commercial customers – https://www.hydroone.com/saving-money-and-energy/business

    Like

  2. “….what he didn’t say was exporting a product that costs ratepayers $135 and receiving say $35 is simply a dumb exercise…”
    I wonder what Hydro One would say if they were directly asked about this?
    Parker, I’m beyond “concerned” about all of this. A Royal Commission investigation is long overdue.
    Why this government is not listening to our professional engineers and power workers must be exposed.

    Like

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