July 2019 and Ontario’s cost of electricity keeps climbing

As noted in an earlier post IESO’s promise to deliver their Monthly Market Report by “mid-month” was missed, so, they have changed their promise to: “The monthly market report will be released approximately 27 business days after the end of the month.” It turned out the July 2019 report was posted September 6, 2019, (nine days after the revised delivery date) and it signaled that the cost of electricity keeps heading higher. It seems odd Scott Luft, on his twitter account, was able to post results for July on August 1st while it took IESO thirty-seven days to post similar information despite their having almost 800 employees. One should note Scott’s numbers were exceedingly close to what IESO eventually reported.

Consumption in July 2019 for both Class A and Class B ratepayers was up marginally by just over 1% but the overall cost for Class B ratepayers was up by almost 10% and 15% for Class B!  The total costs (HOEP included) for both Classes increased from $1.305 billion in 2018 to $1.428 billion in 2019 for an increase in costs of $123 million or 9.4% year over year.

The immediate question that comes to mind is why the big jump?   One reason was Ontario’s net exports (exports minus imports) in July 2019 were up by 621,000 MWh over July 2018 when net exports averaged only 343 MW hourly, versus 1,178 MW in 2019. The average hourly increase of 835 MW translates to an increase of 621,000 MWh (835MW X 24 hours X 31 days = 621,000 MWh). Ontario’s ratepayers absorb the Global Adjustment (GA) as exports are sold at the market price or HOEP (Hourly Ontario Energy Price). The GA in July 2019 averaged (Class A and Class B) $87.44/MWh so the additional exports cost Ontario ratepayers about $54 million.  The increased consumption of 184,000 MW by Class A and B ratepayers added $17 million. The major reason for the remaining substantial increase ($52 million) is probably related mainly to OPG and their increased revenue from OEB approved rate applications covered in an earlier post about OPG’s 6 month financial report.

Surprisingly the “Global Adjustment Modifier” also known as “Ontario’s Fair Hydro Plan” for Class B ratepayers was actually lower for this July dropping from $229.7 million in 2018 to $211.3 million. This is baffling but IESO is known to make adjustments so this may represent one of those?

Clearly Premier Ford and Greg Rickford, Minister of Energy, Northern Development and Mines have their work cut out for them if they hope to give ratepayers the promised further reduction of 12% in our hydro bills Minister Rickford postulated about in a press release a year ago.

Premier Ford and Minister Rickford mustn’t forget the main reason Premier Wynne and her party lost the election so badly was principally due to increased electricity rates! Burying the increases in the annual budget for the taxpayers to pick up is not the way to go!  They need to focus on getting the electricity file in order well beyond what little they have done up to this point.

Author: parkergallantenergyperspectivesblog

Retired international banker.

One thought on “July 2019 and Ontario’s cost of electricity keeps climbing”

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