The four-page report says: “Ontario is our nation’s leader in clean wind energy with an installed capacity of 5,076 MW, about 40 per cent of Canada’s total installed wind energy capacity. There are 2,577 wind turbines currently operating in Ontario at 96 separate facilities.” It goes on to say “Supplying 7.7 per cent of Ontario’s electricity demand today, wind energy helps to diversify Ontario’s electricity generation mix.”
What CanWEA’s report doesn’t say is that wind represents over 12% of grid-connected generation and that the 7.7% supply it adds to the grid is intermittent, unreliable and frequently (65% of the time it is actually generating power) out of sync with demand. As an example, on Friday September 14, 2018 at hour 18 (6 PM), when demand in Ontario was near or at its peak, the 4,400 MW of grid-connected wind generated a miserly 10 MWh.
That’s 0.23% of capacity.
To put the 10 MWh in context, that is enough to supply one average household with electricity for a year. At the same time as wind was probably consuming more electricity than the turbines were generating, gas plants (installed to back up wind capacity) were generating 3,862 MWh.
Total generation for hour 18 was 19,274 MWh, not including net imports (imports less exports) of 1,249 MWh, representing Ontario grid demand of 20,523 MWh.* That means the 12% of grid-connected wind generation contributed 0.05% of grid demand. For the full 24 hours of the 14th of September, wind generated just over 3,500 MWh which equates to 3.3% of their capacity. If that isn’t bad enough, 2,500 MWh of that generation occurred from 12 AM to 7 AM when demand is lowest. Needless to say, nuclear, hydro and gas supplied the bulk of Ontario demand for the day.
What this all means is that industrial wind capacity does nothing more than add to the costs of the generation of electricity in Ontario, and, actually, pretty well everywhere else in the world.
Ontario can’t and shouldn’t fall for the hyperbolic self-interested wind spin, so hopefully our politicians recognize it for what it does—drive up the cost of electricity while killing birds and bats and inflicting harm to humans in rural communities due to the audible and inaudible noise emitted.
*IESO’s Daily Market Summary indicates Ontario’s peak demand was 20,845 MWh on September 14, 2018.
A warm summer meant electricity use went up and costs went down. Is there a lesson here?
With Ontario experiencing a relatively warm summer, I thought it might be interesting to look at three recent months, starting with May 2018, to see if power consumption had increased compared to the same period in 2017.
As it turned out, May, June and July in 2018 versus the same three months in 2017 resulted in an increase in total demand (Ontario consumption plus net exports [exports less imports]) of 1,447,000 MWh or 3.9%. With “net exports” dropping by 1,120,000 MWh, Ontario consumption actually increased by 2,567,000 or 7%. This increase occurred despite the continued spending of approximately $400 million annually on conservation initiatives.
You might expect that an increase in power consumption by that much in Ontario would have resulted in a substantial increase in the cost of electricity, but as it happens, the amount was a meager $73 million for that extra 2,567,000 MWh. Based on the average cost (GA + HOEP) of electricity over those three months, the additional cost should have been around $313 million. The additional consumption cost only 2.8 cents per kWh (kilowatt hour).
The question is: why did that additional consumption (enough to power 1.1 million average households for the three months) cost so little?
There are several reasons why! First, curtailed wind (paid for but not added to the grid) in 2018 was 416,400 MWh* less than 2017. That means the savings from lower curtailment was approximately $50 million.
As well, Ontario’s net exports were thus lower by 1,120,000 MWh — that saved Ontario ratepayers the full cost of the GA (the GA averaged about $101/MWh in 2018) or approximately $113 million.
And, the 3.4 million MWh of net exports in 2017 generated only about $8/MWh versus $20/MWh in 2017 (the approximate GA for the three months in 2017 versus 2018) for the 2,280,000 MWh of net exports in 2018 for a net benefit in 2018 of about $18 million.
If one totes up the additional costs of $73 million plus the wind curtailed savings of $50 million, the $113 million saved due to reduced net exports, and the $18 million extra earned on export sales due to a higher GA in 2018, it comes to $254 million or $59 million short of the $313 million noted above.
I suspect the unexplained $59 million is related to: spilled hydro, steamed-off nuclear, and a reduction in the Class B to Class A subsidy resulting from the higher average GA. Most of those latter details are not yet publicly available.
Interestingly, wind power — generated and curtailed — was equal to 80% of net exports in 2017 and 112% of net exports in 2018. That suggests wind power was surplus to demand in both years.
It time to acknowledge again that wind, as an intermittent and unreliable source of power, tends to present itself when not needed. That, along with the multiple millions spent by the previous government encouraging electricity consumers to conserve has a simple effect!
Together, they simply drive up the cost of electricity. Perhaps we should increase consumption to drive costs down.
A recent posting by Robert Hornung, President of the Canadian Wind Energy Association (CanWEA), occurred shortly after the Ontario government passed an Act to terminate the White Pines wind power project.
Mr. Hornung’s post on the CanWEA website contained these statements.
“Maintaining investor confidence in the Ontario marketplace is important for Ontario’s short- and long-term economic prosperity. The Canadian Wind Energy Association (CanWEA) shares the Ontario Government’s commitment to an affordable and reliable electricity system that benefits Ontarians. CanWEA notes that wind energy projects in Ontario are an important source of sustained revenue for municipal and Indigenous partners. Ontario’s wind energy projects are providing long-term, stable pricing for Ontario ratepayers. Wind energy is now the lowest-cost option for new electricity supply in Ontario, across Canada, and throughout much of the world.”
It is ironic that Mr. Hornung, on behalf of CanWEA’s members, would claim they share the “commitment to an affordable and reliable electricity system” while suggesting “Maintaining investor confidence in the Ontario marketplace is important”.
Is he unaware Ontario has lost many good manufacturing and processing jobs due to the high cost of electricity, or has he simply chosen to continue to spin the fallacious claim that wind power projects have not played a role in driving up the operating costs (electricity rates) of the numerous large and small manufacturing and processing plants that have either closed or moved to other jurisdictions?
CanWEA, leaving behind its effect on Ontario’s economic well-being, appears to be moving on to greener pastures, promoting the same spin to politicians who buy into their claims. Now that they have sucked Ontario dry, they are headed to Alberta where Premier Notley has signaled her plan to close the 6,300 MW of coal plants and replace two-thirds of them with 5,000 MW of renewable energy, including 4,500 MW of industrial wind turbines (IWT).
CanWEA in yet another post on its website seems excited at the new prospects and boasts: “Wind energy developments are making positive and lasting social and economic contributions in communities across Alberta.”
With that in mind, it is ironic that at 11 AM on August 20, 2018, the 1,491 MW of wind turbines in Alberta delivered just 5 MWh* of power to the grid — that’s about 0.33% of their capacity.
Needless to say, similar occurrences have been seen in Ontario and many other places around the world where wind turbines have been constructed. This clearly demonstrates power generation from wind is both intermittent and unreliable, and must be backed up with reliable generation in the form of hydro or fossil fuel generation.
CanWEA buttresses their claims with promises of jobs and prosperity in yet another recent posting on their website. “Wind energy will also generate jobs and other benefits for Albertans, as a recent Delphi Group report demonstrates. And it can be an important part of a broader economic diversification strategy for the province, with the total potential for local project development and construction spending alone reaching $3.6 billion by 2030.”
If you actually read that report, you’ll find it suggests most of the estimated $8.3 billion spending ($1.8 million per MW) will actually occur elsewhere. Alberta produces very little of the materials required to erect wind turbines so the local jobs created will be temporary, in the planning and construction phase. In fact, the report suggests only 15,000 person-years of employment will be created for the $3.6 billion planned to be spent on planning and construction. The report also suggests 714 jobs may be permanent during the O&M (operations and maintenance) phase; however, even that seems optimistic as that would suggest one permanent job for every six MW which at a 2-MW average would represent only three turbines. In fact,the standard is one technician per ten turbines.
With the recent negative Superior Court ruling on the Trans Mountain pipeline build, and Premier Notley’s plea for action by the federal government, it is obvious her government will soon experience a lack of anticipated revenue to execute both her social programs and the provincial climate plan. The slowdown in royalty revenues will push Alberta into further debt. For that reason, it is not enough that she has pulled out of the federal climate plan and should, if logic prevailed, also cancel the provincial climate plan.
I found it stupefying that Premier Notley said “The time for Canadian niceties is over. We are letting other countries control our economic destiny. We can’t stand for it.” Is she suggesting the National Energy Board and the Superior Court are controlled by “other countries”?
Premier Notley should have cancelled the provincial climate plan including replacing coal generation plants with unreliable wind and solar power generation if she really wants to make her point, instead of blaming others.
The time has come, alright: time for Canada’s politicians to stop believing the spin from lobbyist CanWEA, and instead act in the best interests of Canada’s ratepayers/taxpayers. Politicians need to show us they aren’t controlled by those foreign-controlled entities granted contracts to erect symbolic industrial wind turbines.
Who gained the most under the Fair Hydro Plan? Not you. Hydro One comes out the winner
In the section titled ”Other Regulatory Developments” in the “Management’s Discussion and Analysis” chapter of Hydro One’s financials for the year ended December 31, 2017, is this interesting note. (The emphasis is mine.)
“In March 2017, Ontario’s Minister of Energy announced the Fair Hydro Plan, which included changes to the Global Adjustment, the Rural or Remote Electricity Rate Protection (RRRP) Program, the introduction of the First Nations rate assistance program, and improving the allocation of delivery charges across the rural and urban geographies of the province. Hydro One worked collaboratively with the OEB on the First Nations rate assistance program, and was a key stakeholder in providing solutions that address both the Global Adjustment and RRRP elements. The Fair Hydro Plan came into effect on July 1, 2017 and resulted in a reduction of approximately 25% on electricity bills for typical Ontario residential customers. The Province also launched a new Affordability Fund aimed at assisting electricity customers who cannot qualify for low-income conservation programs. Additional enhancements were also made to the existing Ontario Electricity Support Program (OESP).
Hydro One customers saw the full benefits of the Fair Hydro Plan for all electricity consumed after July 1, 2017. A typical rural residential customer using 750 kWh per month will see savings on their monthly bills of 31% on average, or approximately $600 annually. These changes did not have an impact on the net income of the Company.”
Now, fast-forward to the release of Hydro One’s 2018 2nd Quarter results and there is no mention of the Fair Hydro Plan, the Global Adjustment, the RRRP or the First Nations rate assistance program!
In the recent report, Hydro One simply brags about the big jump in its net income. That jump was supposedly due to approval of a substantial transmission rate increase and favourable weather noted as “higher energy consumption resulting from colder weather in April 2018”!*
The actual growth in revenue for the six months was only $24 million; however, after-tax net income** year over year increased from $284 million to $422 million, showing an increase of $138 million or 48.6% for the comparable six months.
Dreams come true … for Hydro One
If one looks at gross revenue less the cost of “purchased power,” Hydro One’s RoR (Return on Revenue) for the six months was 25.6% (after-tax). Any other service provider or retailer could only dream about growth like that!
So, was the $138 million improvement in net profit a reflection on the now retired, six-million-dollar man’s achievements or other factors?
Let’s look at a few aspects of the results.
As it turns out, the “substantial transmission rate increase” generated additional revenue of $123 million. The transmission revenue is paid for by all local distribution companies (LDC) and included in the “delivery” line on electricity bills. The result of the $123-million increase collected by Hydro One (and all LDC) in delivery costs should have increased that line on the bills, but for Hydro One customers, it didn’t! The “delivery” costs for Hydro One customers is estimated to have decreased from about 8.2 cents/kWh to 5.4 cents/kWh and “distribution” revenue fell by $96 million despite increased demand of 5.4% (697,000 MWh) in the comparable six months.
Another significant item affecting the positive results is related to what Hydro One paid for the cost of power which fell (despite increased demand) by $113 million from $1.538 billion to $1.425 billion and also fell for “delivery” line items previously included on hydro bills.
The kickbacks, under the Fair Hydro Plan, resulted from moving the “purchased power” costs to future ratepayers and by moving costs of issues such as the OESP*** and “conservation” spending to current taxpayers.
Those cost shifts naturally had a positive effect on Hydro One’s earnings.
In addition, and as noted in an article in the Ottawa Citizen Hydro One is responsible for monitoring “the energy production and pay thousands of FIT and MicroFit producers across the province, it is no longer able to share any information about those contracts publicly.”
Worthy of our trust?
Hydro is simply required to submit a bill to the IESO for the generation produced for all the MicroFIT contracted parties on their distribution network. Those bills are submitted monthly without scrutiny by the OEB or IESO, and IESO simply writes them a cheque the cost of which is billed to all of Ontario’s ratepayers.
Should we trust Hydro One’s billing process for those thousands of FIT and MicroFIT producers, knowing that back in 2015 Ontario’s Ombudsman reported they issued more than 100,000 faulty bills to their customers? Privatization by the former Ontario Liberal government has resulted in a monopoly, now operating without oversight.
The Ottawa Citizen article about this issue had a fitting comment from Steve Aplin, an energy environment data specialist (website Emmissiontrak): “That’s what happens when you break up this system. Now, nobody is minding the store. It’s outrageous that the IESO, they send the cheques. You don’t just blindly send a cheque off to somebody. There must be some fiduciary responsibility.”
The results of Hydro One working “collaboratively” with the OEB reduced revenue in a positive way for them, as they shifted costs to future ratepayers and current taxpayers, generating higher profits.
Additionally, despite ratepayers picking up the billions in costs for “smart meters” and the “smart grid” neither the OEB or the IESO seem able to execute their fiduciary responsibility!
From all appearances, improving results for shareholders is more important now than containing costs for ratepayers and taxpayers for Hydro One, IESO and the OEB.
It’s not over: Ontario taxpayers and ratepayers will be paying for the past government’s mismanagement for years to come. Here’s how… and how much.
The last in a series on the IESO
August 2, 2018
The two earlier articles about Ontario Independent Electricity System Operator or IESO revealed the fact that it could be “gamed” — and in fact, it was! To the tune of $100 million, by just one generator.
Needless to say, any gaming by a local distribution company (LDC) also may be happening. Why would I suggest that? When I asked the IESO why the Fair Hydro Plan “Variance” amount was so high for May 2018, they said this:
“Please note that settlement data submitted to the IESO by the LDCs is not audited by the IESO (audit responsibilities reside with the OEB) and is processed as submitted.”
The May “Variance” amount was $309.9 million. More disturbing is that the first six months of the current year has rung up $1.180 billion in the “Variance” which could represent $2.360 billion for 2018 if the last six months are similar.
The results to date of the FHP “Variance” amount is well in excess of the calculations presented by the Ontario Financial Accountability Office (FAO) in their review, which had the following note:
“Figure 3-3 summarizes the FAO’s estimate of the annual cost of the FHP through to 2045-46. The FAO estimates the cost of the FHP to the Province will peak at $1.8 billion in 2020-21, after which the FAO assumes that the electricity relief programs will no longer be funded by the Province. The HST rebate is forecast to cost $0.9 billion in 2021-22, rising rapidly to $1.6 billion by 2028-29”.
The average suggested by the FAO per year was $1.750 billion, so, at the current rate of accrual, future Ontario ratepayers may be looking at total of almost $9.5 billion (without including interest costs) added to our electricity bills.
Taxpayers will be affected too: They’ll have to bear the costs of lost revenue of about $4.1 billion (plus interest costs) associated with the HST rebate and another $3 billion associated with “Adjusting Electricity Relief Programs”. The latter includes the RRRP (Regulated and Remote Rate Program) the OESP (Ontario Electricity Support Program) and a new First Nations On-Reserve Delivery Credit and Affordability Fund.
So, the 17-percent reduction on our electricity bills, coupled with the HST foregone tax revenue plus the cost of those “Relief Programs” represents $16.6 billion of spending, without interest costs.
What are we getting for $16B?
What are we getting for that $16.6 billion? No new power generation. No new transmission lines or upgrades to LDC infrastructure. Simply more wasted money, lots of it, as a result of the Green Energy Act.
Questions put to the IESO about the May Variance amount got the following response from them:
“Hi Parker– the increase in GA deferral in May is mainly due to most LDCs submitting settlement data to the IESO based on the second GA estimate which was unusually high (i.e., 13.2 cent/KWh) in May. LDCs submit May settlement data to IESO during the first four business days of June at which time the actual GA rate would not have been calculated yet as per IESO’s settlement schedule. Each month there is a true up when LDCs submit their data to the IESO for the previous month plus an estimate of the current month they are submitting for.”
Read that and you have to ask, Why? Why not settle the Variance account once IESO has determined “the actual GA rate” rather than go through a series of wasted financial maneuvers? Logic doesn’t seem to be a formula used or followed within the electricity sector.
Are the ratepayers and taxpayers being “gamed” or can we trust IESO with our hard-earned money and believe that each and every action by them is truly being “audited” by the OEB?
I will leave the foregoing question to be answered by an “Electricity Audit” that will hopefully be conducted by Ontario’s new government.
Yesterday, I examined IESO’s responsibility in respect to the “financial settlement” associated with the various public and private electricity generation sources in the province, and their ability to execute those, considering all the variables connected with the GA (Global Adjustment) and the HOEP (hourly Ontario energy price).
I contemplated not only their ability to handle that responsibility, but also to deal effectively with the FHP (Fair Hydro Plan) and the HST rebate the prior Ontario government created.
Soon, the IESO will be further burdened with the financial aspects of the additional 12% reduction in residential electricity bills that the newly elected Premier Ford government has promised. IESO denies responsibility for any audit-associated issues and simply pays money to the LDC (local distribution companies), based on the data associated with the billing submitted.
The question today is this: is it possible possibility the IESO can be “gamed” as they already were by one of the gas generators for $100 million, as reported in December 2017?
IESO deals directly with all grid connected (TX) generators, plus approximately 70 LDCs in Ontario. Those 70 LDCs in turn deal with well over 26,000 generators under the various MicroFIT programs, carrying a variety of contracted payment amounts. So, “gaming” IESO under their unaudited procedures should not be seen to be difficult.
Additionally, those LDCs are responsible for implementing campaigns associated with the numerous conservation programs, which annually dole out more than $400 million. For example, Hydro One uses their five-year allotment of $338 million to basically do whatever they wish with the money, as long as they report back to IESO that they have reduced consumption via conservation programs. Toronto Hydro’s allocation is even higher than Hydro One’s at $396 million. Strong “gaming” possibilities.
Now if you bother to look at past predictions of both data development and spending on that development, you would find aspirations speaking to “smart meters” and a “smart grid” as a means to take data and configure it in such a way to allow all of us to experience utopia! Presumably that “utopia” would make life easy for IESO to handle the financial aspects of managing day to day activities associated with generating power and bringing it to our households or businesses along with the many variables included in the Global Adjustment!
The facts, since the advent of both smart meters and smart grids however, dispel those notions of a forward-looking “cars will fly” utopia. As the Auditor General reported, the “smart meters” cost Ontario $2 billion which, as it turned out was twice as much as planned. The “smart grid” was advocated by a 10-member Smart Grid Forum in February 2009 with objectives loosely defined as “It is necessary change; change from a one-way ‘dumb’ grid to an interactive, intelligent smart grid.” The Forum reached a consensus in respect to the costs of this “smart grid”: “The preliminary cost estimate by the Forum is that incremental capital spending over the initial five years would be $1.6 billion.”
Well, those five years have come and gone. To the best of my knowledge, there is no report indicating how far we are along in developing the “smart grid” or how much of the $1.6 billion has been spent, but what we do see on each and every electricity bill we get is a charge for its development.
So, “smart” meters, “smart” grids and all that data and the fact the IESO was “gamed.” It is still looking like a one-way “dump” on ratepayers.
Tomorrow, in Part 3 in this series, I look at what the Fair Hydro Plan has accomplished in the first year of its existence.
One of the IESO’s responsibilities is to ensure Ontario ratepayers are billed fairly. That’s been a challenge with more than 100 “directives” from the former Liberal government. First in a series
July 30, 2018
Ontario’s Independent Electricity System Operator (IESO) is responsible for monthly settlement (dollars in and dollars out) with all LDC (local distribution companies), transmission companies (Hydro One) and with thousands of generators of various stripes connected to the TX (transmission gird) and DX (distribution grid).
In order to capture the vagaries of what the monthly settlement encompasses, the IESO have a 164-page market manual entitled, “Settlements Part 5.5 Physical Markets Settlement Statements Issue 69”. Its effective date was March 7, 2018, the fifteenth update of the manual over the last three years!
I’m confident the 15 recent updates were a result of directives emanating from the desks of former Liberal Ministers of Energy, namely Messrs. Bob Chiarelli and his successor Glenn Thibeault, and include the actions related to the Fair Hydro Act and the rebate of the 8% Provincial portion of the HST.
The directives and the changes they entail indicate the IESO is trying to “get it right” in their responsibility in dealing with the variables. Those variables were created by the Liberal government as it toyed with the energy portfolio over the last 15 years in so many ways via those directives (117 to OPA/IESO alone). As an example, IESO in 2017 was responsible for settling about $16 billion related to the costs of generating electricity (what the public is charged for the combination of the HOEP (hourly Ontario electricity price) and the GA (Global Adjustment).
Ensuring ratepayers are correctly billed and generators are paid no more than they deserve places a lot of responsibility on IESO to ensure ratepayers are not being scammed!
On the latter point it is worth noting a CBC article from just seven months ago stated: “Hydro customers shelled out about $100 million in ‘inappropriate’ payments to a natural gas plant that exploited flaws in how Ontario manages its private electricity generators”. The article said “gaming” of the system was discovered by the Ontario Energy Board (OEB) and contained this statement about the IESO: “the investigation found IESO did little checking into the details of Goreway Power Station’s billings.
Data not audited
That is somewhat disconcerting. When I recently asked IESO about the Fair Hydro Plan’s “variance account” for the month of May 2018 being very high ($309.9 million), they answered “Please note that settlement data submitted to the IESO by the LDCs is not audited by the IESO (audit responsibilities reside with the OEB) and is processed as submitted.”
In viewing IESO’s December 31, 2017 financial statements, their independent auditors (KPMG) attempt to capture their responsibilities, listing 30 of them as if they were simply the Ten Commandments. The one directing the activities associated with the money movement related to the FHP (Fair Hydro Plan) says: “engaging in activities related to making payments to and receiving payments as contemplated under the FHP and related settlement activities”.
The disconcerting part of this is that the Fair Hydro Plan alone will (according to the Financial Accountability Office of Ontario) amount to approximately $1,750 million on an annual basis — the 8% HST provincial rebate will add another $1 billion annually. That certainly leaves the taxpayers and ratepayers of the future exposed to any one of the LDC “gaming” the system, or inadvertently submitting incorrect information.
Can we current and future ratepayers trust that Hydro One and all of the other LDC will submit correct “data” to IESO and that it will be properly audited by the Ontario Energy Board?