Yet Another Peak Hour and Ontario Survived it Thanks to Gas Plants

Yesterday (August 23, 2021) Ontario experienced another warm day with the temperature reaching 31 C in Toronto but that was 10 degrees less than the record high of July 10, 1936 when it reached 41 C.  Nevertheless, we achieved another “peak hour” with electricity demand reaching 22,309 MW at hour 17 (ending) making it the # 2 peak hour so far in 2021.

Wind (424 MW) and solar (141 MW) at that hour provided us with 2.5% of total demand and those gas generators supplied 26.5% of our demand (5,912 MW) which we needed or ratepayers of both Class A and B would have experienced blackouts or rolling brownouts.

Ratepayers of both Classes should press the 30 municipalities (telling the Ford Government to close those gas plants due to the OCAA’s [Ontario Clean Air Alliance] travelling minstrel show), to have second thoughts and rescind their council’s request to close those gas plants.

Ruminations on the Ontario Liberal Electricity Legacy and Premier Ford’s inactions to correct them

I was on the Marc Patrone Show at 960 AM March 23, 2021 to discuss the Ontario Liberal Party legacy in respect to the electricity sector in the province.  We pointed out the billions of dollars in costs of the OLP legacy and how they continue!  At the same time the discussion noted that after almost three years in power the Ford led Ontario Conservative Party has done hardly anything to change the system other than shifting billions of $$$ in costs from ratepayers to taxpayers.

You can listen to our conversation on Sauga 960 AM here on the March 23rd podcast starting at 46:1 ending at 1:02.

The Ontario Liberal Electricity Legacy is Complicated

The Cost of Subsidizing Green Energy Contracts for Industrial and Large Commercial Ratepayers came from the Financial Accountability Office (FAO) of Ontario in a report issued March 18, 2021!  What it states is the upcoming three years (2021-2023) will burden taxpayers with a cost of $2.8 billion.

My take on that “burden” was an estimate of $3.8 billion in an article posted November 9, 2020 just days after the Provincial budget was released announcing the subsidy. I did note, at that time, my estimate was a “back of the envelope” calculation and several events have occurred since then affecting the cost estimates.  The FAO’s forecast is the cost is 2.2 times what the budget estimated it was going to be whereas my estimate was 2.9 times the budget number.

The FAO report goes into further detail suggesting out to 2040 “the renewable generation subsidy program will cost the Province a net total of $15.2 billion.” The latter is referenced in the FAO report as the “Net cost to the Province” as the report stated; if the current subsidy program remained in effect through to 2040 for all segments of electricity consumers the total cost would have been $38.6 billion plus a loss of $1.3 billion in HST.  What the recent amendments to the Ontario Electricity Rebate (OER) program did was reduce the “OER discount provided to residential, farm and small business ratepayers”, which resulted in a reduction of $24.7 billion in estimated costs over the 20 years.

No doubt many Ontario ratepayers will recall Ontario’s Auditor General, Bonnie Lysyk, in 2015 issued a report castigating the Ontario Liberal Party stating; “From 2006 to 2014, the electricity portion of the hydro bills of residential and small-business consumers increased by 70%. In particular, the Global Adjustment fees, covering the excess payments to generators over the market price, cost consumers $37 billion during that period, and are projected to cost another $133 billion from 2015 to 2032.”

That report from the AG was the bedrock used by the Ford led Ontario Conservative Party to make it a major issue during the leadup to the last provincial election and at that time they promised to reduce electricity rates by 12%.  We ratepayers are still waiting for that to happen!  With the advent of the relief provided by the province as a result of the Covid-19 pandemic our rates were reduced but the announcement from the OEB (Ontario Energy Board) on February 22, 2021 stated; “residential and small business customers will resume paying Time-of-Use (TOU) and Tiered pricing under the Regulated Price Plan (RPP) at prices that were set by the Ontario Energy Board (OEB) on December 15, 2020.”  To put the foregoing in context a look at TOU rates before the Ford government were elected and comparing them to those announced by the OEB discloses the 12% promise is a distant memory as we see the percentage increases in all three categories has jumped by a large multiple of the inflation rate as the following depicts!

Time of Use    March 2018    March 2021    % Increase
Off-peak              6.5/kWh            8.5/kWh           30.7%
Mid-peak            9.5/kWh           11.9/kWh          25.2%   
On-peak             13.2/kWh          17.6/kWh           31.8%       

The difference between then and now is simply that back then the Wynne led government was using taxpayer monies to provide relief via the “Fair Hydro Plan” which subsidized rates by 29% (based on my bill) whereas the Ford government is now using taxpayer dollars to provide a subsidy of almost 98% (based on my bill).  It’s simply a case of incurring taxpayer debt to subsidize ratepayers.  Instead of taking money from our after-tax pocket they are incurring it for future taxpayers to pay.

In an interview back in March 2020 Premier Ford in response to the question about why he hadn’t achieved the 12% reduction in electricity rates went on and used the phrase “it’s extremely complicated”.  That phase is very similar to the phrases used by former energy ministers such as Bob Chiarelli and Glen Thibeault as well as the current leader of the Ontario Liberal Party, Steven Del Duca. 

What is obvious from the foregoing is the time has arrived for someone/anyone with basic common sense be appointed to the Ministry and make a serious effort to uncomplicate it!

Perhaps it’s simply a pipe dream!

This is what a kilowatt hour of electricity in Ontario REALLY costs

Our household just received the electricity bill from Hydro One and our consumption for the month dropped by 14% compared to the 2020 bill.  If one does the simple math on the latest bill, ie: total cost including taxes divided by consumption it suggests the cost per kWh (kilowatt hour) was 13.8 cents. Going through the same process for the 2020 bill produces a higher cost of 15.9 cents/kWh.

The foregoing year-over-year drop of 2.1 cents/kWh does not really represent a more efficient system, instead it is a reflection of the Ontario government’s move to “lock-down” all of us commencing December 26th due to an anticipated jump in Covid-19 cases.  Shortly after the “lock-down” the Ontario government instructed the electricity sector to only charge residential ratepayers 8.5 cents/kWh from January 1, 2021 for 28 days and subsequently extended that order for an additional 12 days.

The bills on page 1* from Hydro one in a separate little box in dollars and cents, provides what is referenced as “Total Ontario support”. For our household it worked out to 13.6 cents/kWh meaning collectively, the all-in cost per kWh consumed was 27.4 cents with 98.2% of that allocated to taxpayers.

Examining our bill for March 2011 indicated the full all-in cost at that time, was 12.5 cents/kWh. Compared to the recent bill with an all-in cost of 27.4 cents/kWh it represented an increase in 10 years of 119%.

To put the above in context, the OEB in their “Yearbook of Electricity Distributors” for 2019 indicated Ontario had almost 4.8 million residential ratepayers who, on average, consume 750 kWh monthly! In 2021 the all-in costs of one month’s consumption by those residential ratepayers was approximately $1,315.2 million whereas in 2011 it was about $600 million.  Over 12 months residential ratepayer all-in costs for 2011 were $7.2 billion. For 2021 all-in costs could amount to $15.8 billion shared by residential ratepayers and taxpayers.

What the increase of approximately $8.5 billion all-in costs to residential ratepayers/taxpayers over those 10 years represents are principally; the effects of the GEA. Those costs were added as industrial wind turbines and solar panels received 20 year contracts at above market prices over the first few years and then were built and added to the grid.  Lots of other spending under the GEA also increased costs with spending on; conservation, energy storage, rate class establishment containing cross subsidies, gas plant additions to back up the intermittent and unreliable nature of wind and solar etc etc. The gas plant costs include $1 billion of expenses to move two of them. A major scandal eventually evolved from the disclosure on the reason for the moves and the costs.

The Justin Trudeau led government seem to view the recent and very visible history of what happened in Ontario as one he and his party favour.  The outcome in Ontario should serve as a warning to the rest of Canada what happens when the government sees CO 2 reduction as the thermostat to control the climate!

Going green for electricity generation is very costly so get ready to pay up to charge your Tesla!

*Page 2 is the actual bill containing individual costs for kWh consumed, distribution costs, regulations costs, etc.

Tracking Ontario’s Ruinous Green Energy Experiment

Ontarians will no doubt recall the 2008 Great Recession and how Canada emerged from it better off than most of the G7 and G20 countries. In Ontario we faired pretty well to the point where the McGuinty led Liberal government decided to usher in the Green Energy and Green Economy Act (GEA) in 2009 under the guidance of the then Minister of Energy, George Smitherman. Smitherman promised us electricity rates would only increase 1%!  He suggested wind and solar contracts under the GEA were the way to reduce emissions while keeping electricity price increases low!

From the foregoing perspective it is interesting to look back at the electricity sector in the province to see what has emerged since enactment of the GEA to see how we ratepayers/taxpayers have been affected and how Smitherman’s forecast worked out.  My friend, Scott Luft, makes the foregoing task relatively easy by downloading data from IESO on a regular basis.  His update to the end of 2020 below can also be found on his twitter page!

What is initially evident (adjusted for exports/imports) is consumption was down 1.6 TW (terawatts) in 2020 compared to 2019. The Covid-19 pandemic presumably was the cause however, costs increased by $381 million meaning the average cost of generation per kWh went up from 10.6 cents/kWh to 11.7 cents/kWh. In Ontario using less electricity somehow always costs more!

Eleven years after the GEA clicked in

It has now been over eleven years since the GEA received third reading in Ontario’s legislature and most of the 20-year large wind and solar contracts to (mainly foreign) companies were signed shortly after it was passed.  Scott Luft’s chart provides an opportunity to look at the figures at the end of 2009 and compare them to 2020 to see the effect on our electricity costs.

The chart indicates the cost of electricity delivered to both the TX (transmission grid) and the DX (distribution grid) in 2009 cost us $8.965 billion and in 2020 it was $15.459 billion, an increase of $6.494 billion or 72.4%.  The increase in consumption (adjusted for imports/exports) was 3.2 TWh more as Ontario’s population increased 1.6 million from 2009.  The result was, the average generation cost of a kWh went from 6.34 cents/kWh to 11.07 cents/kWh or 74.6%.

The burden of those increased costs played out differently depending on rate class, with those labelled Class A paying less and Class B ratepayers (residential and small/medium businesses) paying more.  Needless to say; “energy poverty” has increased.

Cost increase drivers

So, after noting the huge increase in annual costs of $6.5 billion since 2009 it is worth examining why those costs jumped:

First wind and solar generation in 2020 was 17.5 TWh (2.9 TWh less than our gross exports) with an additional 2.4 TWh curtailed and together their combined costs were $215.9 million per grid accepted TWh (21.6 cents/kWh) adding about $3.8 billion in costs. In 2009 it was 2.5 TWh at a cost of $246 million.

 Secondly hydro costs shot up by $800 million** and while accepted generation indicated a decrease of 0.62 TWh it doesn’t include the 4 TWh OPG was forced to spill in 2020.  Hydro’s grid accepted cost came in at 5.38 cents/kWh in 2020 with inclusion of the spilled hydro and 3.7 cents/kWh in 2009. 

Finally, nuclear generation costs were also up considerably by $2.9 billion*** as both generation and per kWh costs increased.  In 2009 nuclear generation supplied 55.28% of all generation (including net exports) * and that increased to 56.71% in 2020. The per TWh cost in 2009 was $58.2 million (5.82 cents/kWh) and $87.5 million per TWh (8.75 cents/kWh) in 2020. 

The above three costs total $7.5 billion. If one deducts the cost of coal generation in 2009 of $750 million the net increase becomes $6.75 billion which is close to the increase noted above of $6.5 billion.

Reviewing Scott Luft’s chart highlights the fact wind and solar were the principal culprits in driving up Ontario’s electricity costs.  The McGunity/Wynne led governing Ontario Liberal Party handed out the contracts at above market rates with “first to the grid” rights despite the unreliable and intermittent nature of wind and solar generation.  The combined per kilowatt cost (21.6 cents/kWh) of those two sources of generation is two to three times the cost of non-emitting clean energy such as nuclear or hydro which together have the ability to supply Ontario with well over 95% of its electricity needs.

The Green Energy Experiment has cost Ontarians dearly!

* Net exports is total exports minus total imports.

**OPG spent $1.5 billion on two large hydro projects which were Big Becky and another $2.6 billion on expansion of the hydro available from the Mattagami River which collectively added about 500 MW of additional capacity

***Nuclear cost increases were mainly related to refurbishments of Bruce (two units), Darlington (one unit) and extension costs associated with maintenance upgrades at Pickering.

Ontario’s 2020 budget and action on the electricity file

Action on the electricity file—Sort of!

The Ontario Minister of Finance, Rod Phillips, finally released Ontario’s 240 page 2020 budget on November 5, 2020.  Amongst other spending the budget contained actions focused specifically on Ontario’s small and medium sized private sector employers ignored by the prior government and ignored by the current government to this point! Those companies have suffered from huge increases in their electricity costs since implementation of the Green Energy and Green Economy Act (GEA) instituted by the former McGuinty/Wynne led Liberal Governments. The current Ford government and the prior government have been lobbied extensively as those costs continued to rise. The budget specifically referenced the climb in costs experienced by both large industrial customers and those classified as “commercial employers” by noting:

As demonstrated in Chart 1.6*, the price of electricity for industrial employers increased by 37 per cent from 2008 to 2019, while commercial employers have seen their electricity commodity costs increase by about 118 per cent over the same time period. These increases far outpaced the overall rate of consumer price inflation (21.4 per cent) over the same period. That means the increase for commercial employers was about five times higher than the rate of inflation.”

The foregoing clearly demonstrates “commercial employers” bore the brunt of the rate increases as “industrial employers” were much more successful in their lobbying efforts as rates climbed due to the GEA.  The large industrial ratepayers played a role by getting the previous government under the leadership of Premier Dalton McGuinty in 2011 to create their “Class A” status allowing them to considerably reduce their costs. They did this by picking five (5) hours at, or close to, the peak demand hours out of the 8,760 hours in the year. They reduced demand by firing up their gas generators behind the meter (BtM) at the anticipated peaks.The reduction in “peak demand” was labelled as “conservation”! The requirement to reduce demand during those “peak demand” hours was recently suspended by the Ford led government as noted in their announcement of June 26, 2020.

The budget announcement contained the following verbiage related to how they were to bring relief to both the large “industrial” and the “commercial” employers:  “Bringing more jobs to Ontario with a comprehensive plan to address the job-killing high costs of electricity, saving medium size and larger industrial and commercial employers about 14 and 16 per cent respectively, on average, on their electricity bills (at an additional expense of $1.3 billion over three years);”. 

The budget projected a $1.3 billion cost (over three years) which is simply a transfer to taxpayers. From a simple “back of the envelope” calculation the cost estimate contained in the budget appears to be incorrect and should be well over the amount suggested. 

To wit:  In 2019 the GA allocated to Class A customers was approximately $2.4 billion and to “commercial employers” almost $5 billion.  The 14% reduction for the Class A “industrial employers” would therefore cost approximately $320 million annually and the 16% reduction for “commercial employers” would add about $950 million. Together the two would annually cost $1,270 million or almost what the budget suggests would be over three (3) years.  The cost to taxpayers would therefore come to over $3.8 billion or almost triple what the budget claims.

While it is commendable the Provincial Government has finally listened to Jocelyn Bamford Chair of the CCMBC (Coalition of Concerned Manufacturers & Businesses) it is disappointing they appear to have bungled the estimated costs of the reduction in the electricity bills. The $3.8 billion in costs will be added to the $5.5 billion in annual costs the taxpayers are now footing for the relief given to residential users referenced as the “Ontario Electricity Rebate” on our monthly bills.

It is also disappointing the Ford led government has been unable to deal with the intermittent and unreliable renewable energy contracts signed by the McGuinty/Wynne led Liberal Government.  It is those contracts which were responsible for driving up the costs of electricity in the Province. Ontario’s costs of electricity were once a major benefit of the Province used to attract jobs not scare them away!

*Page number 93

Jocelyn Bamford & Parker Gallant: Ford energy update if good but did he go far enough

Marc Patrone of SAUGA 960 had both Jocelyn Bamford and yours truly on his show on November 6, 2020 to chat about the Ontario budget and it’s effect on our small and medium sized companies in the province. If you would like to listen to our respective views you can find it on the podcast starting at 26.50 and ending at 41.40.

link is here:

If you are a subscriber to NEWSTALK CANADA you will find out discussion here:

Ontario’s electricity bills reconvene their climb

The OEB (Ontario Energy Board) recently advised us our electricity rates would once again rise but they tried to soften the blow by noting rates hadn’t increased since November 2019.  They said the average household (consumption of 700 kWh) would see an increase of $2.24 a month* on their hydro bills.  The latter applies only to the actual cost of power which is about 60/65% of most household bills.  The increase was principally blamed on lower demand in the province due to the Covid-19 pandemic impact as many businesses were forced to shut down or reduced their demand.  Lower demand did not occur in most households however as many employees and others were forced to work from home meaning household demand actually increased.  The impact of the $2.24 average monthly increase translates to about $27.00 annually so is probably close to inflation rates however incomes have fallen meaning more households may now, or in the near future, experience “energy poverty” meaning 10% or more of their income will be spent to keep the lights on and the house heated.

As the rate increase notice was announced by the OEB they also offered households and small businesses the opportunity to either choose to remain on TOU (time of use) rates or to convert to the RPP (regulated price plan).  The TOU plan affords you the opportunity to consume power at lower rates during certain times whereas the RPP is a constant price (12,6 cents/kWh) up to 1,000 kWh increasing to 14.6 cents/kWh for anything above the first 1,000 kWh.  The OEB has therefore amended their “bill calculator” to allow you to enter the information from your previous bill(s) to calculate which plan would afford you the lowest monthly cost.

I would encourage all to use the OEB calculator (link in foregoing) to determine the best one to use before making the choice to stay on TOU or convert to RPP by notifying your distributor.   

It is worth noting the OER (Ontario Electricity Rebate) which reduces electricity bills of households by 33.2% will remain in place and continue to labour Ontario’s taxpayers** with a cost of approximately $5.5 billion annually.

Another support program specifically aimed at low-income households either on the verge of, or experiencing, “energy poverty” is the OESP (Ontario Electricity Support Program) which provides a direct credit to your monthly bill.  The credit you may qualify for is dependent on the income level and number of people living in the home.  An application must be completed and submitted which should be done (via the link above in the full name of the program) for those who qualify.

There is also one other support program available to individuals who are in arrears or behind on either their electricity or natural gas bill. It is known as LEAP (Low-income Energy Support Program) but it must be accessed via an “intake agency” listed on the OEB (link via the full program name above).  The amount available is dependent on similar criteria to that of the OESP.

I would encourage those who are, or know of people, experiencing difficulties to access the programs applicable. Energy poverty in Ontario’s winter climate must not happen!

*My estimate of total annual costs to households associated with the monthly increase is $120 million.

**Don’t expect the Ford Government to ever deliver on their promise to further reduce your electricity bill by the 12% announced during his run-up to the Provincial election.

Catherine Swift talks with Parker Gallant about how to fix the green energy scam

As I alerted some of you earlier yesterday morning I was to be on SAUGA 960 AM to be interviewed by Catherine Swift who was hosting the Marc Patrone Show.

The podcast is now up and can be found here and our discussion starts at 15.30:

Wow! June 2020 Demonstrates Consuming More Electricity Decreases Costs

The IESO recently released their Monthly Market Summary for June 2020 and Ontario’s electricity consumption increased from June 2019 by 3.9% (434,000 MWh) or about what 500,000 average households would consume in a month. The consumption increase was driven by Class B ratepayers who in June 2020 consumed 758,000 MWh (up 10.2%) more than June 2019.

GA for Class A and Class B  ratepayers:     

As a result of the increased consumption, the GA for “B” Class ratepayers year-over-year decreased from $142.11/MWh to $129.14/MWh and the HOEP increased from $4.84/MWh to $11.22/MWh. Class B costs (some costs are partially allocated to taxpayers) dropped from $146.94/MWh to $140.36/MWh whereas Class A consumption dropped (308,000 MWh) but their GA costs increased from $76.67/MWh to $84.89MWh.

Surplus Exports Cost  Less:

The result of increased consumption produced a higher HOEP and that meant we ratepayers and taxpayers lost less money in 2020 exporting our surplus generation than 2019. This past June we exported 181,000 MW less to our neighbours but because the HOEP (market price) was higher we increased our revenue from $8.2 million to $17 million which helped to lower costs even though the 1.5 million MWh we exported were sold, on average, for only $11.22/MWh or 1.1 cents/kWh.

Industrial Wind Turbines (IWT) Generation and costs:

IWT overall (grid and distributor accepted plus curtailed) were basically flat comparing 2019 with 2020 but the curtailed generation was higher in 2019 (138% higher) so we didn’t have to pay for as much wasted power.  Our costs for IWT in June 2020 was about $114.6 million versus a cost of $125.1 million in 2019. Accepted generation for IWT was approximately 17% of their rated capacity in 2020 versus less than 15% in 2019 but in 2020 represented 46% of our export volume ie: it was surplus to our needs!

OEB’s Market Surveillance Panel Monitoring Report  32 

Almost as a coincidence and just a couple of weeks before IESO issued their MMS, the OEB on July 16, 2020 released their 32nd Market Surveillance Report and it has some interesting observations. One that stood out was: “the Panel concludes that much of the long-term investment over the last decade has not been very competitive, imposed unnecessarily high costs on Ontario consumers and removed the transparency of price signals that lead to economic-based decision making.”   One must assume the panel was referencing the McGuinty/Wynne governments creation of the Green Energy Act and the handing out of those lucrative contracts for wind and solar generation to mainly foreign companies at rates well in excess of the market. Most Ontarians believe the GEA was conceived by the Gerald Butts/Ben Chin team as senior advisors and both wound up, coincidently, with the Justin Trudeau led Federal Liberal Party serving in senior staff roles.

Another observation in the OEB report stated: “The Demand Response (DR) Auction also continues to annually procure capacity that is not required to maintain reliability. To date, the IESO has not activated any DR resources in the real-time energy market, although consumers have paid more than $200 million for this capacity.”  Coincidently my friend, Scott Luft of the Cold Air website who monitors IESO’s activities advised me of a tweet saying:  “Last week during Ontario’s heat wave, the IESO declared an Energy Emergency Alert Level 1 on multiple days and twice activated [Demand Response (DR)] resources to meet capacity needs.” So the question becomes, did IESO declare an “Alert Level 1” for the first time ever to justify the $200 million cost paid by us ratepayers?  Scott went on in his e-mail to note: “The average cost of DR capacity for this summer was around $59,725 per megawatt, which is roughly 1/10th of the rate the ICI program costs Class B consumers. As a class B consumer, I’ll take the DR – even with the requisite level 1 “Emergency.

Following on that remark from Scott, yet another observation related to the ICI (Industrial Conservation Initiative) is where the Panel stated: “Finally, the Panel reiterates that the current design of the Industrial Conservation Initiative (ICI) program – in combination with a low-price environment and high Global Adjustment (GA) charges – creates an uneconomic and inefficient incentive to reduce demand when there is ample supply and capacity. The Panel remains of the view that only the cost of peak generation should be recovered through peak demand charges, while non-peak costs should be allocated such that all consumers who benefit from that capacity pay for it.”

The Panel’s recent report reiterates what was contained in their 2018 report in respect to the ICI program which I wrote about in a recent article.  It is surprising the current Minister of Energy, Northern Development and Mines, Greg Rickford has basically done nothing to recognize and change the ICI program and stop the spending on “conservation” initiatives related to reducing consumption by both ratepayer classes.

As June 2020 results demonstrate, consuming more electricity reduced costs for Class B ratepayers as we may not be forced to either export surplus generation caused by wind and solar or pay to curtail them which simply increases the GA and drives down the HOEP market price!