How Ontario’s “little” electricity customers help out the big ones (with billions)

Class B Ontario ratepayers support Class A ratepayers–$6.2 billion and growing

It was almost six months ago when the Ontario Energy Board’s (OEB) Marker Surveillance Panel (MSP) released a review of the Industrial Conservation Initiative (ICI). The review looked at the impact it had on pricing since its launch in September 2011.

The ICI came into being after extensive lobbying for a reduction in electricity pricing by the Association of Major Power Consumers of Ontario (AMPCO) when Brad Duguid held the position of Minister of Energy.

The ICI model simply requires the “A” Class user to pick five “peak demand” hours over a year in order to gain a sizable discount to the price they pay.

An article written by yours truly, appeared shortly after the review’s release and pointed out the cost to Class B ratepayers, namely, residential and small/medium sized businesses. The article noted the failure by the OEB to act on its role which is: “The OEB supports and guides the continuing evolution of the Ontario energy sector by promoting outcomes and innovation that deliver value for all Ontario energy consumers.” The article noted it took the OEB seven (7) years to realize “the ICI as presently structured is a complicated and non-transparent means of recovering costs, with limited efficiency benefits.”

One should wonder if the recognition was a reflection of a change in government or, a realization the “value” didn’t apply to “all” of Ontario’s ratepayers the OEB is supposed to consider in its innocuous decisions!
The support of Class B to Class A ratepayers as of the end of 2017 “has shifted nearly $5 billion in electricity costs from larger consumers to smaller ones. In 2017, the ICI shifted $1.2 billion in electricity costs to households and small businesses—nearly four times greater than the amount in 2011.”

Almost six months have transpired since issuance of the MSP review and nothing has changed. Another year has gone by (the review reflected cost transfers to the end of 2017) and 2018 duplicated the shift of 2017 so add another $1.2 billion and push the total transfer to $6.2 billion since mid-September 2011.

What that represents is an average subsidy to Class A ratepayers of over $1,200 for each of the approximately 5.1 million Class B ratepayers over the 7 ½ years since the ICI came into existence.

The Market Surveillance Panel made several observations on how the ICI could be made more efficient and/or enhanced to make it fairer. The Panel’s first two observations would help to reduce the burden on Class B ratepayers so perhaps its time the OEB and/or the Ministry enable those changes which are:
*Costs that are not related to the fixed capacity costs of needed generation are removed from the Global Adjustment and recovered by other means.
*Only the cost of peaking generation is recovered based on consumption during peak demand hours; the cost of non-peaking generation should be allocated such that all consumers that benefit from that capacity pay for that capacity.”

Almost a year ago, many in Ontario voted for the Ontario Progressive Conservative Party, handing them a majority government. One of the chief reasons the Liberals were defeated was their mishandling of the energy file. Based on the foregoing, most voters anticipated the new Ford-led government would have tackled the file with all the might one would expect with the election promise that “help is on the way” followed by the declaration of Premier Ford in his victory speech stating; “My friends, help is here.”

The opportunities to demonstrate the “help” are there for all to see such as those recommended by the MSP.

The government could also use regulations to enforce noise controls (audible and inaudible) on industrial wind turbines, they should insist the UNIFOR wind turbine in Saugeen Shores be removed, they could cancel the 100 MW Nation Rise project to save future ratepayers hundreds of millions, and they could insist the OEB reflect its “vision” which claims it is responsible for: “promoting outcomes and innovation that deliver value for all Ontario energy consumers.”

Ontario’s Class B ratepayers are waiting for “help” to arrive and see the OEB deliver actual value!

Oh, and a thank you from the Class A ratepayers would be nice too!

PARKER GALLANT

Author: parkergallantenergyperspectivesblog

Retired international banker.

2 thoughts on “How Ontario’s “little” electricity customers help out the big ones (with billions)”

  1. Well done, Parker. Your comments are completely valid and a useful reminder that governments of any stripe respond most to the squeaky wheels, and electricity ratepayers have not made themselves squeaky enough to influence the Ford Government. The OEB’s abandonment of its mandate to protect all customer classes and to assure equity in the allocation of costs is quite reprehensible.

    It is also worth recalling the sequence of events that led us to this juncture. The government of the day decided to phase out coal generation and phase in unneeded and expensive wind and solar generation,. The resulting higher costs caused the rates to rise for firms that were exposed to competitive pressures. The government, ignoring the fact that higher electricity rates were the natural consequence of higher generation costs and indeed were a way to encourage firms to invest in “energy efficiency”, shifted the costs away from firms and onto residential and small business ratepayers.

    What happens when carbon taxes and the output-based fee system that accompany them raise costs for firms in future? Will the federal and provincial governments change course and relieve the burden of carbon fees on large businesses? Are “energy efficiency”investments something only residential and small business ratepayers will be expected to pay for?

    Liked by 1 person

    1. Thanks Robert. Your last paragraph reminded me of the $12 grant/handout to Loblaws by the Feds to reduce their refrigerant costs at the expense of taxpayers. As you will no doubt recall Loblaws were aggressive at getting lots of those rooftop solar contracts from the Ontario Provincial Government under the FIT program. Should we keep going in this direction we will have pricing similar to Germany and Denmark where residential ratepayers pay three times what industrial clients do.

      Like

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