Ford government floundering on Electricity portfolio

The IESO (Independent Electricity System Operator) just released the August 2019 Monthly Market Report and what it disclosed is that the GA (Global Adjustment) for the month set several records.

The records broken in August 2019 had nothing to do with higher consumption as it was actually down from August 2018. Total Ontario Demand for the month dropped by almost 864,000 MWh (megawatt hours) or 7.3% as average weekly temperatures were lower suggesting air conditioners were operating less.  As Ontario’s ratepayers have come to expect, lower consumption often means higher electricity costs and that expectation was borne out in a major way for August.

The records broken in August include:

  1. Highest GA costs for both Class A and Class B customers reaching $67.19/MWh for Class A and $126.07 for Class B ratepayers.
  2. The total GA for the month also set another record coming in at $1,327.7 million or $1.33 billion when rounded versus $876.4 million in August 2018! When the HOEP (hourly Ontario electricity price) is added in, the cost to “B” ratepayers becomes 14.2 cents/kWh not including, delivery and regulatory charges, which generally add another 30/35% to monthly bills.
  3. Another record broken in August was the monthly transfer to the “Variance Account” as it was up 75.3% from August 2018 and came in at $306.9 million versus $175.1 million in 2018.

Not to worry about the big jump in costs for August 2019 though, as the Ford government has limited “future” rate increases to the inflation rate. When the OEB (Ontario Energy Board) announces a rate increase next month a big chunk of the GA will suddenly disappear.  It will wind up in what IESO refer to as the “Variance Account” which was the Wynne government’s “Fair Hydro Plan” (FHP); simply a deferral of rate increases (25%) to the future.  According to page 129 of the 2019 Ontario Budget the Ford government on November 1, 2019 will move the costs of the FHP deferral to Ontario taxpayers.

Another interesting aspect of August 2019 versus August 2018 was the fact Ontario’s net exports (exports minus imports) in 2018 was small at only around 208,000 MWh versus just over 798,000 MWh in 2019.  The result was, the cost of losses on those “net exports” in 2018 was about $15.5 million versus over $100 million in 2019.   This month we can’t pin the blame on those intermittent industrial wind turbines for the big jump as their additional costs came in at about $9.6 million according to my friend Scott Luft’s tracking of them.

While IESO doesn’t publicize “records” of this type it is important to know when they are broken so that politicians are informed.

If informed, perhaps politicians will examine the reasons to determine what caused those increased costs.  At that juncture perhaps they will examine the reasons and actually do something to slow or reduce the future impacts.  We ratepayers certainly know that wasn’t the case for the McGuinty/Wynne governments but, I think most of us anticipated better results from the Ford led government!

Time for them to show some real action on the energy portfolio!

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Author: parkergallantenergyperspectivesblog

Retired international banker.

9 thoughts on “Ford government floundering on Electricity portfolio”

  1. Hi Parker,
    I’ve got too many cost estimation methods now, but all put wind in August around $90 million (including distributed generation). My most recent reporting is on the web and updates automatically most morning. I realize it may not be user friendly but it is very detailed. For instance, page 8, “Annaul Summary (Tx)” shows the annual history of each facility in IESO reporting, and can be filtered by month. For August it shows a “Value at HOEP” – which is market revenue – of $6.7 million plus an estimated $75.4 million global adjustment. That total of $82.1 million isn’t the complete cost as I estimate another $10.5 million in distributed wind (locations not in the IESO reporting).
    https://app.powerbi.com/view?r=eyJrIjoiM2Y4N2FjMzgtYTU0Yy00MzU3LThkZWYtYTRhYzBhNWIyNGE3IiwidCI6IjMxNGYyMDc3LTFjZjAtNGI2NS05OTdkLWFmYzYxN2ZjYzU0NiJ9&pageName=ReportSection&pageName=ReportSectiondf5ba3b3574140ed9067

    So.. closer to $92.6 million than the $9.2 million you show in the article.

    Nonetheless, I didn’t see wind driving the overall cost increase from last year, but nuclear. However, I also don’t know where the IESO got the reason for about $200 million of their total.
    Maybe my estimates are suddenly lacking.
    Maybe not.

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    1. Scott, The $9.2 million was the ADDITIONAL costs in 2019 for August wind in 2019 versus 2018 not the total cost. Total output (including curtailed) in 2019 was very close to 2018 so it really boiled down to the lower HOEP in 2019 time the output. Nothing wrong with your estimates but I suspect it takes IESO a while to get their numbers together hence the change in the lead in to the Monthly Market Report–it’s no longer by the middle of the month it’s 27 business days after the prior month.

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      1. sorry, my mistake.

        I was looking at that explanation about it being 27 business days after the month end.
        Here we are on the 26th of the month: It seems the folks at the IESO have been working every day – and more!

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    2. Fig. 23 in the monthly report indicates to me the major discrepancy in my estimates, and the IESO’s global adjustment charges, is in solar!
      I estimated the global adjustment charges for solar at $217 million, but they look to be closer to $375 million.
      Why the discrepancy?
      I have a hard time finding a mistake in my work: last year the IESO showed $217 million in August global adjustment charges, so $375 million will be a 73% increase.
      Output from the facilities in IESO reporting that were operating in August 2018 were up 6.6%, and there wasn’t a whole lot of new capacity.
      The IESO’s reliability outlook had this summary of the supply not in their individual generator reporting: “Embedded generation for August topped 557 GWh, representing a 6.7% increase over last August. Increases in wind (28.5%) and hydro (39.0%) output more than offset the decline in solar (-4.9%)…”

      In my opinion there’s three possibilities:
      1. somebody just got a huge rate increase (it’s happened before due to the courts), but that seems unlikely…
      2. the IESO had been shortchanging suppliers for some time and finally paid up, but that seems unlikely…
      3. it’s a mistake.

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  2. It just struck me that the increased amount of the GA in 2019 for August versus August 2018 was (rounded) $450 million and co-incidentally the Nation Rise industrial wind project in North Stormont (which the Ford led government could have cancelled) is forecast to generate gross revenue of the same amount over its life. It kind of shows if we keep adding intermittent renewable energy to the grid it will inevitably push up the cost of generating electricity. https://nationvalleynews.com/2019/02/06/the-political-web-of-edpr-and-the-nation-rise-wind-power-project-guest-column-parker-gallant/

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  3. Hi Parker:

    During the last election campaign the NDP promised to lower our electricity prices by some 30%, the Tories by 12%. Neither indicated how they were going to do that. It would be interesting now to ask the Ford government how, apart from the cost of getting rid of the $6 million man (former CEO of Hydro One) the government has made progress on this promised reduction.

    As well, we could use increases in transparency, such as disaggregating the global adjustment so that its components were listed separately and that item was less than 10% of the total bill, and show an income statement for each type of generation.

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    1. Thanks Andrew. I totally agree that transparency in the individual component costs would provide ratepayers and taxpayers with insight and one should assume the bureaucrats at IESO or the OEB should be up to that task but I’m not holding out any hope that will happen. I think we were all had our fingers crossed expecting something better but beyond the $6 million dollar man being put out to pasture not much has happened. They have shifted a few of the costs from ratepayers to taxpayers without recognizing that the former are also the latter. Me thinks we can all look forward to a future Debt Retirement Charge!

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