A new decade starts with climbing electricity prices in Ontario

IESO just released their January 2020 Monthly Market Report and it brought ratepayers and taxpayers more bad news.  Consumption in the first month of 2020 was down by around 599,000 MWh (what 855,000 average Ontario household’s consume monthly) or 4.7% compared to January 2019.

Consuming less however, cost us more, thanks to the way the McGuinty/Wynne led governments ruled the Province granting renewable energy; “must-take”, contracts at high prices!

Costs were up even though wind generation in January 2020 was down from 2019 by about 216,000 MWh (including curtailed).  Unfortunately consuming so much less had a negative effect on market prices as IESO sold off more generation to our neighbours.  Net exports increased from 1,106,328 MWh to 1,605,552 year over year, up 45.1% and the HOEP average price received for those exports for 2020 was only $14.82 MWh versus $27.82 the prior year.  Wind was not needed either year as in 2019 it was 93.7% of Ontario’s gross exports (1,637,496 MWh) and in 2020 it was 68.7% (1,364,869 MWh).

The drop in the market price (HOEP) of $13/MWh was more than offset by the climb in the Global Adjustment (GA) which increased from $80.85/MWh in 2019 to $102.31/MWh in 2020.  The increase in the GA had a much higher negative effect on Class B ratepayers driving up that portion of costs to 10.24 cents/kWh in 2020 versus 8.08 cents/kWh in 2019.  The foregoing represents a 26.7% increase whereas Class A ratepayers were not as affected seeing their share of the GA climb from 5.32 cents/kWh to 5.66 cents/kWh, an increase of 6.4%.

What the foregoing means is the GA portion of electricity costs to Class B ratepayer, year over year, increased $139.7 million to $911.4 million for just the first month of the new decade despite a reduction in consumption of almost 600,000 MWh. Class A ratepayers saw increased costs of $11.9 million to $196.4 million on a consumption increase of only 3,000 MWh.

Let’s try reverse

Maybe the time has come to drop rates for Class B ratepayers so they would consume more and ironically cause the GA rate to decrease and the all-in price to drop!  Failing that, drop the rate for those small and medium sized Class B businesses so they have competitive electricity prices that would allow them to increase their profits, hire additional staff and in the process consume more electricity!

Time to turn the McGuinty/Wynne Ontario axiom “consuming less, costs more” upside down!

PS: Thanks to Scott Luft of Cold Air for his wind data.

Author: parkergallantenergyperspectivesblog

Retired international banker.

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