Our Neighbours in NY, Michigan and Quebec were Hit with Electricity Inflation in 2021

Well, IESO finally released their 2021 Year in Review data and they noted demand increased by 1.2% from 132.2 TWh (terawatt hours) in 2020 to 133.84 TWh. As an aside, demand in 2019 (prior to the pandemic) was 135.1 TWh!

Examining IESO’s information; one of the interesting things of note is the fact that generation declined by 4.85 TWh with both nuclear (-4.8 TWh) and hydro (-2.7 TWh) down whereas gas generation was up (+2.5 TWh). Nuclear refurbishment caused its drop and drought in the Northwest caused lower hydro generation.  As a result, the decrease in grid connected generation plus the slight increase in demand resulted in “net exports” (exports minus imports) dropping by 6.6 TWh from 15.1 TWh in 2020 to 8.5 TWh in 2021 despite wind generation being up marginally by 2 GWh (gigawatt hours) or 1.7%. We should suspect the 12 TWh generated from IWT (industrial wind turbines) presented itself principally when it was unneeded and gas generation was up because IWT generation was missing in action when demand was high!

Believe it or not the drop in net exports saved us ratepayers and taxpayers quite a bit of money due to lower surplus generation which caused the HOEP (hourly Ontario energy price) average to jump from 1.39 cents/kWh to 2.85 cents/kWh, an increase of 105%.  What that meant is net exports of 15.1 TWh we sold (basically gave away) in 2020 generated total revenue of $209.9 million as compared to $242.2 million for the much smaller 8.5 TWh sold in 2021.

Just because IESO sold our exports for a higher price in 2021 then 2020 doesn’t suggest we recovered the actual costs of the generation which was far north of the HOEP.  If one includes the GA (global adjustment) IESO reported in 2021 which averaged 7.26 cents/kWh; collectively (Class B ratepayers) costs were 10.11 cents/kWh suggesting we lost around $617 million just for the net exports of only 8.5 TWh.

I’m sure our neighbours in Michigan, Quebec and New York appreciated the kindness of us Ontario ratepayers providing the subsidy of that $617 million but missed the much larger benefit of the $1,785 million subsidy we picked up for the 2020 year.  We presumably have delivered higher costs for them in 2021 which may have caused a bump in their inflation rate. 

From the perspective of Ontario’s ratepayers, selling less for more is great but what would be even better is if we actually recovered more than 28% of the actual costs of what we sold.

Author: parkergallantenergyperspectivesblog

Retired international banker.

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