Ontario Ratepayers and Taxpayers Won’t Welcome in 2021

Ontario Premier Ford on March 24, 2020 issued a press release advising, because of the Covid-19 pandemic, his government would cut daytime rates for residential consumers, farms and small businesses for 45 days starting April 1st at an estimated cost of $162 million.  On May 1, 2020 another press release added medium and large businesses to the equation stating it too would be effective as of April 1, 2020. This release said it would defer a portion of the Global Adjustment (GA) for anything over $115/MWh and possibly extend the deferral until June 30, 2020.

While the first press release suggested the cost, the second release didn’t!  The May 1, 2020 release stated in all probability; the “deferred” amount would be recouped starting in January 2021.  The foregoing has since been clarified and IESO noted the deferred amounts would be recovered from industrial and commercial* electricity customers only.  The reduction to those customers (Class A) appears to be about $19/MWh (based on the April 2020 GA and the wording in the May 1, 2020 release). Taxpayers will be allocated costs not recovered!

The second release raises the question: How much will this amount to? Determining the dollar amount would be a guess but IESO have disclosed Class A and B consumption and GA costs for April 2020 so we can estimate the possible costs.  Following is an estimate for this deferral et al, for April, May and June!

Class A customers consumed 2.764 TWh (terawatt hours) in April 2020 versus 3.301 in April 2019 so their consumption dropped by .537 TWh or 16.2%. Applying the $19/MWh suggested above indicates the April deferral will be about $53.5 million so if May and June’s consumption is around the same level the deferral will total about $160 million.

For Class B customers the cost will be considerably more. As noted above, it does not appear to be a deferral!  Class B customers in 2019 consumed 7.382 TWh versus 7.017 TWh in April 2020 so their consumption fell 265 GWh (gigawatt hours) or 3.6%.  The drop was small, even though residential consumers were “locked-down”. One should suspect closure of small/medium sized business caused the fall in consumption.

As noted, the original press release set the maximum GA at $115/MWh, so for April, when the GA was just over $150/MWh the relief was the difference of $35/MWh.  What that means is the 7.017 MWh consumed in April may result in $250 million allocated to the annual budget for taxpayers to pick up! (7.017 TWh X $35 million/TWh = $246 mllion).  May and June could bring that to $750 million.

Beyond the above, what is disarming is IESO’s first estimate for May’s 2020 GA is $179.10/MWh which could increase the monthly allocation by $210 million if the forecast is correct and consumption is similar! Over three months the amount allocated to taxpayers could therefore rise to $1.2 billion.

Just another burden on taxpayers and ratepayers.

Intermittent and unreliable wind and solar generation contracts add $3/4 billion of costs to electricity bills every year so without them this burden would be a minor occurrence!

*Clarity on the split between Class A and B commercial/industrial customers is not presented so for purposes of this exercise we have assumed those referenced by IESO are all Class A.

Author: parkergallantenergyperspectivesblog

Retired international banker.

2 thoughts on “Ontario Ratepayers and Taxpayers Won’t Welcome in 2021”

  1. We can run, but we most certainly can’t hide. This hydro file is going to haunt prosperity, current and future sustainability long beyond this generations time on earth.

    I can not think of a better time to come back from this plandemic with a cause and effect response. Wind and solar are intermittent, a financial burden and a direct cost without benefit, to consumers of all classes. The Ford PC’s should come out from behind the curtain ripping up contracts and sending the foreign industry packing saving rate and tax payers of today and tomorrow, an enormous financial burden.

    The cost and interest of these deferrals will carrying on long after the life of the installed wind and solar generation of today.

    Liked by 1 person

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