Ontario Power Generation report: good news and bad news

Ontario Power Generation (OPG) just released its annual report for the year ended December 31, 2016.

It’s a mix of good and bad news.

For example, gross revenue (net of fuel expenses) increased by $137 million and $34 million of that increase found its way to the bottom line, for a $436 million profit.

Generation from 2015 increased slightly from 78 terawatt hours (TWh) to 78.2 TWh, with nuclear generation increasing by 1.1 TWh and hydro decreasing by .9 TWh, which was further exacerbated (see next paragraph) by spillage due to surplus base-load conditions.

The bad news was that 4.7 TWh of hydro was “spilled” or wasted in 2016, up from 3.7 TWh in 2015. Those wasted 4.7 TWh of power could have supplied more than 500,000 (approximately 11% of all residential ratepayers) average Ontario homes with electricity for the full year.

The spillage by OPG didn’t affect their revenue, however, as they are paid for spillage at an average of about $44/MWh or $44 million/TWh. That means they received $207 million for wasted power and paid the Ontario Ministry of Finance the “water rental” fee for the spillage (although the latter wasn’t disclosed in the report).

Other “good/bad” news indicates OPG sold their Head Office on University Avenue in Toronto with closing scheduled for the second quarter of 2017. They expect the sale will generate an after-tax profit of $200 million.  The bad news is, OPG is obligated to turn over the profit to the Consolidated Revenue Fund. The land, building and maintenance costs fell to the ratepayers of Ontario to pay for via the electricity rates, yet the profit generated on its sale will be tossed into the bottomless pit of the Finance Ministry, instead of going towards reducing OPG’s costs of generation which could have benefited ratepayers.  That $200 million won’t even pay the interest on Ontario’s debt for a week!

SOLD! But the money won’t help you ..

The previous Energy Minister Bob Chiarelli on June 9, 2016 (four days before he was replaced by Glenn Thibeault) also issued a “declaration” to OPG instructing them: “to transfer, sell, dispose of or divest all of the Corporation’s interest in the Lakeview Site, comprised of the Municipal Park Lands and the Uplands”.  The Lakeview site is 67 acres running along the Lake Ontario shoreline and the Municipal Park Lands are the remaining 110 acres of the Lakeview Site.  Any excess revenues associated with the sale is to be transferred to the Government (Consolidated Revenue Fund), again rather than going to reduce electricity rates.

Ontario’s ratepayers absorbed the impairment costs of closing the coal plants in 2003, absorbing a “loss of $576 million as a result of the termination of cash flows from these stations after 2007.” The ratepayers of the province deserve to benefit from any recovery resulting from the write-off of the plant closings!

All this is more evidence of the “shell game” being perpetrated on Ontario ratepayers and taxpayers and the continuing legacy of the McGuinty/Wynne-led governments.

More to come …

Definition of the Global Adjustment: confusing

February 20, 2017

Can it be that even the Minister of Energy (at the time) didn’t understand it?

The term “Global Adjustment” (GA) made its appearance on certain electricity bills on January 2011 and created confusion among those with a “retail” contract. (Previously, there had been a line item called the Provincial Benefit.)   The definition of “global” is “relating to the whole world” and “adjustment” is “alter slightly” — no wonder people are confused!

Brad Duguid was the Minister of Energy at the time of the name change which occurred the same time the Ontario Clean Energy Benefit (OCEB) began.  The OCEB followed the addition of the 8% provincial portion of the HST on hydro bills, along with start of the ICI (see below) and people were receiving bills with shocking increases.

At the same time as the name changed to GA from Provincial Benefit, the way billing occurred for ratepayers with peak capacity over 5 MW (large industrial companies) also started, providing a subsidy from other provincial ratepayers, and was called the Industrial Conservation Initiative (ICI).

In 2016 the GA represented $12.333 billion. On its own the GA, if it were a Ministry, would rank as third highest in provincial expenditures.

The Wynne government seems to have noticed this expenditure and its effect on households and businesses. CTV News on February 14, 2017 reported: “Senior officials told CTV Toronto that the plan will likely target the global adjustment fee, which fluctuates based on per-kilowatt-hour cost, and makes up approximately 85 per cent of the cost of electricity.”

The news report went on to say, “The fee was introduced in 2005, to help the province pay for new power plants as well as for investments in new energy projects. Now the government is considering spreading out payment over a longer period.”

That statement is obviously incorrect: it is Ontario’s ratepayers who pay for investments in new power plants and new energy projects. Spreading payment over a longer period is unacceptable as “amortization” (estimating the life span of the plants and projects) is a predetermined factor and unlikely to be changed.  That is why the Darlington nuclear plants are being refurbished.

Clarifying the GA

Now if one is looking for a simple explanation of what the GA is, Steve Aplin of Canadian Energy Issues defines it:  “It is simply a price recovery mechanism. It is the difference between the price the government promised any particular electricity generating company and the “market” price of electricity.”

The IESO (Independent Electricity System Operator) describes it as “This charge accounts for the differences between the market price and the rates paid to regulated and contracted generators and for conservation and demand management programs.”

On the surface the “GA”sounds simple unless you get the definition from some politicians or even some bureaucrats within the Ontario Ministry of Energy.  Following are a couple of excerpts from the “Standing Committee on Estimates, Energy Ministry on October 6, 2015”.   Then Minister Bob Chiarelli and his Deputy Minister, Mr. Serge Imbrogno were asked about the GA.

Hon. Bob Chiarelli: “—independently verified by the Ontario Energy Board, and it’s part of the all-in electricity price. Without the global adjustment, generators across Ontario would be unable to produce power. My understanding is that the global adjustment actually was initiated by the Conservative government when they were in office. I’ll turn it over—”

Mr. Serge Imbrogno: “I’ll be quick. The regulation price plan is calculated by the OEB. The OEB hires—I think they’ve had Navigant, in the past, to do the calculation. Partly it’s what’s in the global adjustment; partly it’s that they have a variance account, depending on if they collected too much or too little during the year. So it’s a calculation that the OEB makes. We don’t have that information to share with you at this point.”

Could it be that the two most senior people in the Ministry of Energy— where the GA was conceived — were unable to provide even a simple response? And the Minister himself was unaware it was his government that created the GA?

Premier thoughts

The September 2016 Speech from the Throne declared: “Since 2011, the Industrial Conservation Initiative has encouraged large electricity users — primarily large industrial customers — to take on-site steps to shift consumption away from peak periods and lower their electricity costs by up to one third. To benefit more businesses, your government will expand eligibility for the Industrial Conservation Initiative by lowering the threshold for participation and broadening participation to all sectors.”

What that means for Ontario’s households and the many small and medium sized businesses is pretty simple: the cost of subsidizing larger businesses will go up, meaning that benefit you may have received from the 8% reduction to your electricity bill will be wiped out.

Metro News Toronto, on December 19, 2016 quoted Premier Wynne about the issue of putting the GA on hydro bills. “I think being as transparent on bills as possible is a really good objective, but my challenge is greater than that,” she said in a year-end interview with The Canadian Press. “It’s not just about breaking out the number on the bill, it’s actually figuring out how to reduce that number.”

Perhaps the Premier should concentrate on getting herself and her cabinet to understand what the composition of the $12.333 billion that constitutes the Global Adjustment is before she tries to figure out how to reduce it!

NEXT: a calculation of the partial makeup of the $12.333 billion in the 2016 GA.

Hard to see through the fog of Wynne government energy promises

On October 21, 2013 Premier Wynne wrote a letter “To the people of Ontario” with a few promises.

“We must also unlock public data so that you can help us solve problems and find new ways of doing things. I believe that government data belongs to the people of Ontario and so we will make government data open by default.”

and

“Our Open Government initiative will help create the transparent, accessible government that the people of Ontario deserve. Over the months and years to come, we’ll be bringing forward additional initiatives that will improve transparency, accountability, and connectivity.”

Almost a year later, possibly in an effort to augment her promise of “transparency” she wrote “mandate letters” to her Ministers. To her Minister of Energy, Bob Chiarelli she said, “We want to be the most open and transparent government in the country. We want to be a government that works for the people of this province — and with them. It is of the utmost importance that we lead responsibly, act with integrity, manage spending wisely and are accountable for every action we take.” [Italics mine]

Premier Wynne’s “mandate letter” to the current energy Minister, Glenn Thibeault, September 23, 2016 said nothing about transparency but does say:  “At this halfway mark of this government’s mandate, I encourage you to build on the momentum that we have successfully achieved over the past two years, to work in tandem with your fellow ministers to advance our economic plan”.

After almost three and a half years since Wynne’s letter to the people, perhaps it’s time to look at the promise to “unlock public data” and how the “Open Government” promise has delivered on  “transparency”!

• Two months after Wynne’s letter to her Energy Minister Bob Chiarelli, in an appearance on TVO he claimed, “since 2008, the province of Ontario – and you can verify it with the IESO — has made a $6 billion profit on the trading of electricity.”
• Current Energy Minister, Glenn Thibeault when asked in an interview with Global TV for information on how many ratepayers were behind in their hydro bills and how many had been disconnected, he had no idea! Neither did the OEB, or Ministry of Energy staff. Thibeault wouldn’t admit there was a crisis.
• Less than two months after Thibeault refused to agree there was a crisis, Premier Wynne admitted rising hydro bills were “an urgent issue”. Loss of a critical byelection finally opened her eyes.

The IESO (Independent Electricity System Operators) website dazzles with the amount of data available. Search using the terms “transparency” or “transparent” you get 2,800 hits. Impressive, but as the saying goes, actions speak louder than words!

IESO fail to provide data on:

• How much wind is curtailed or
• How much water is spilled by hydro electric generators or
• How much nuclear is “steamed off” by Bruce Nuclear or
• How much wind or solar distributor connection energy was produced or
• How much money was generated from sales of surplus exported power to our neighbours and
• How much that exported power cost Ontario’s ratepayers

IESO is responsible for the financial aspects of settling (contracted and/or regulated) with each and every generator in the province either directly or via local distribution companies, and also must settle with the buyers and sellers of both our exported and imported energy. In effect they play a major role in determining the final cost of what each and every ratepayer are charged for the line on their bills reading either “electricity” and “GA” or Global Adjustment.

They should be the purveyors of all the “public data” from the energy sector Premier Wynne referenced in her letter to us in September 2013 but as noted, they are falling short.

A recent event made that obvious.

On January 18, 2017, IESO issued a News Release, “ Ontario’s Independent Electricity System Operator Releases 2016 Electricity Data”. The release had a table summarizing Ontario’s transmission connected generator output by fuel type, listing the outputs as: Nuclear 91.4 TWh (terawatt hours), Hydro 35.6 TWh, and Wind 9.0 TWh respectively.   Two days later, those three “outputs” were suddenly different with Nuclear at 91.7 TWh, Hydro at 35.7 and Wind at 9.3 TWh.

No apologies, no explanations or even a mention they altered the original News Release. The .7 TWh added to the output represents a cost of about $70 million ratepayers will pay, yet no explanation was posted about the change.

In Ontario today, transparency is shrouded in fog, and “spending wisely” has been forsaken by this government, in the badly managed electricity sector.

No natural gas, more natural gas: what is the Wynne government’s game?

February 6, 2017

In April 2015 Brad Duguid, then Minister of Economic Development, Employment and Infrastructure issued a press release stating: “Increased natural gas access, through the $200 million Natural Gas Access Loan and $30 million Natural Gas Economic Development Grant, will attract new industry, make commercial transportation and agriculture more affordable, help to create jobs, provide more energy choices and will lower electricity prices for businesses and consumers across Ontario.”

The focus was expansion in rural communities and the money offered would do wonderful things including lowering “electricity prices.”  The Duguid statement appears to have flowed from the 2013 Long-Term Energy Plan (LTEP) released by Bob Chiarelli when he held the Energy Minister’s portfolio as noted in the OEB’s 2014-2017 Business Plan.

Just days ago, another press release was issued on the same issue by Bob Chiarelli, Minister of Infrastructure:  “Ontario is expanding access to natural gas for communities that do not currently have service, including those in rural and Northern Ontario and First Nations communities.”  It gave a “Quick Fact”: “Natural gas is the dominant heating source in Ontario and continues to be consistently less expensive than alternative sources such as electricity, heating oil and propane.” The Chiarelli announcement increased the “grant” amount to $100 million.

The recent announcement indicates the Duguid offer fell flat so perhaps Chiarelli’s announcement is an effort to see the claim he endorsed in the 2013 LTEP as one he is determined to follow through on, even if it raises Ontario’s debt by $100 million!

It is also ironic that Chiarelli is pushing expansion of natural gas consumption while our current Energy Minister, Glenn Thibeault is heading in the opposite direction. He recently instructed IESO (Independent Electricity System Operator) to basically shut several of the NUG (non-utility generators) gas plants down. Minister Thibeault’s recent directive to IESO notes:  “Ontario has put in place legislation for its new cap and trade program to limit greenhouse gas pollution while moving to a low-carbon economy.”   Most NUG contracts are gas generation units whose original contracts (executed in the Peterson Liberal government days) are close to expiry, and are “take or pay” contracts.  With the  surplus of power today, Minister Thibeault considers them expendable.  As a result the directive instructed IESO to renew contracts but only: “if the IESO is able to negotiate replacement contracts (IESO Contracts) with OEFC NUGs that incentivize them to operate in a manner that is better aligned with the integrated power system’s needs.”

As noted by Scott Luft some of those NUG contracts have been renegotiated, others ended, (the plants will be closed or mothballed) while some are in the process of  renegotiation.  One of those cancelled contracts offered to produce and sell power for 5.9 cents/kWh, but that offer was rejected even though it was way under prices paid for generation from industrial wind turbines and solar panels. Both those forms of power generation are unable to generate power when needed.

Is the objective of the Energy Minister to reduce emissions from gas plants so Premier Wynne can claim the “cap and trade” tax is working?

Meanwhile, if Minister Chiarelli is successful at handing out the $100 million tax dollars as grants to expand natural gas use, emissions will increase! Any increase will generate additional cap and trade revenue to help pay for the grants and the early shutdown of those gas plants.

Here’s the game: reduce emissions in the (already clean) electricity sector while pushing them up elsewhere and capture additional taxes along the way.

The topsy-turvy world of power policy in Ontario continues.

How did we get here? A review of ministerial remarks on electricity prices in Ontario

January 5, 2017

With Ontario’s lead in energy prices in Canada and the fastest rising consumer rates in North America, it is perhaps worth a review of a few of the ministerial comments that got us to this point.

Rates will rise 1% because of the GEA

George Smitherman, Minister of Energy and Infrastructure from June 2008 to November 2009 told the Standing Committee on General Government in April 2009: “We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years.”  In May 2009 the “average” rate was 6.07 cents per kilowatt hour (kWh) (not including delivery or HST). By May 2016, the “average” rate had increased to 11.1 cents/kWh, an increase of 82.9% in 7 years.  The comparable costs of generation from IESO’s Monthly Summaries for the May 2009 to May 2016 comparisons grew by 84.9%.  Looks like the forecast missed the mark by a bit.

Conservation will save you money

Back in July 2013 a press release from Minister Bob Chiarelli credits him with this quote: “By investing in conservation before new generation, where cost-effective, we can save ratepayers money”. At that point, average rates were 8.4 cents/kWh — in just three years they increased 32.1%. IESO’s monthly summaries indicate the cost of generation rose 26.4% in the same time-frame.  Since 2012, consumption has fallen by 4.3 terawatts (TWh) on enough to provide 475,000 average Ontario households with power for a full year.  Conservation hasn’t shown it will “save ratepayers money.”

Moving a gas plant is less than the price of a Tim Horton’s coffee                                                                                                          

Another from former Energy Minister Bob Chiarelli who, when asked about the Oakville gas plant move was quick to suggest, “It’s less than a cup of Tim Horton’s coffee a year.” for the average ratepayer over 20 years. He made this dismissive comment to the Legislature Justice Committee investigating the move. What it meant was the waste of $1.1 billion dollars of taxpayer/ratepayer money; the Minister’s comment is a reflection of the regard the Ontario Liberal government has for the average hardworking Ontarian.

It’s nothing, Chiarelli said of a $1.1B scandal

The Ontario Auditor General not informed?                                                                                                  

Bob Chiarelli again: when the Auditor General’s report in late 2014 on  smart meters was released suggesting the program was over-budget and under-effective  Minister Chiarelli said, “Why are my numbers more credible than hers?” He went on to say: “Electricity is very complex, is very difficult to understand. Some of our senior managers, in discussing these issues with some of the representatives from the auditor general’s office, had the feeling they didn’t understand some of the elements of it.”  As it turned out Auditor General, Bonnie Lysyk worked for Manitoba Hydro for 10 years so probably knew more about the electricity sector than the Minister.

Municipal authority is a non-starter                                                                                                                      Oh dear: Mr. Chiarelli, again. In May 2013 Bob Chiarelli said “Municipalities will be given a much bigger say in where or if renewable energy projects are located”.  His remarks were well received by many municipalities and in the case of Dutton Dunwich council a survey they engaged in allowed them to declare 84% of their residents were against industrial wind developments.  So what? The will of the people was ignored and a contract for a $250-million wind power project was granted anyway.  The minister’s comments appear to have been a pretense that rural Ontario had been given authority to accept or reject contracts.

Industrial Wind Turbines granted special realty tax status                                                              

When Dwight Duncan was Minister of Finance it appears he bowed to lobbying efforts by trade association Canadian Wind Energy Association or CanWEA members who may have been concerned they would be required to pay significant municipal taxes should MPAC assess IWT at actual value!  He accordingly issued a direction to MPAC (Municipal Property Assessment Corporation) to assess industrial wind turbines (IWT) at only $40,000 per megawatt (MW). That means, not only did municipal governments have no say in allowing IWT in their jurisdiction, but were also to receive nominal realty taxes from their presence.

Transparently opaque                                                                                                                        Premier Wynne in early March 2014 introduced the Accountability Act and had this to say to the Legislature:  “I came into this office just over a year ago saying that I was going to do government differently, that we were going to open up and be more transparent.”  Now should you have the urge to seek specific information from the Energy Ministry, which this writer frequently does, what you receive back is a homily that starts out with “you have reached out to us” followed by the promise they will get back to you. If and when the response comes, it generally dodges the question(s) and simply repeats the spin in the press release you are inquiring about.

Electricity exports are profitable                                                                                                                We have consistently heard about how profitable our exports of electricity are from the various Energy Ministers in place over the past decade. Former Minister Chiarelli’s claim we made $6 billion was debunked, but the claims continue.  The profits were claimed by former Premier Dalton McGuinty, Brad Duguid when Minister of Energy, and even a senior officer with IESO.  The Auditor General noted the following in the 2015 report:  “Since power is exported at prices below what generators are paid, and curtailed generators are still paid even when they are not producing energy, both of these options are costly. From 2009 to 2014, Ontario had to pay generators $339 million for curtailing 11.9 million MWh of surplus electricity.”  This continues today, at a much higher rate!

High electricity prices a “mistake”                                                                                                            

When Premier Wynne spoke to the 850 members who attended the Ontario Liberal Convention on November 19, 2016 she told the delegates her “government made a mistake” by allowing rates to soar. Apparently Premier Wynne doesn’t pay her electricity bills and didn’t notice since she was elected leader of the Ontario Liberal Party January 26, 2013 to the date of her recent speech, rates charged to residential ratepayers increased 38%.  She also missed the fact that IESO in their monthly summary of December 2012 reported the cost of power generated was 8.89 cents/kWh and the October 31, 2016 summary reported it had climbed to 13.49 cents/kWh — an increase of almost 52%.

 

The last word is mine 

I challenge anyone to make the claim that “planning” or a “cost/benefit” analysis ever played a role in Ontario reaching our current state of claiming the title of “highest cost” electricity in Canada or “fastest rising” in North America!   The design pursued by the various energy ministers occupying the portfolio since the current government gained the reins of power in Ontario demonstrate clearly, they failed to consider the fate of Ontario households, along with the impact on jobs. Instead, they listened to the cadre of environmental NGOs and corporations that benefit from subsidies provided by the ratepayers.

                                               

Question for Minister Thibeault: how does buying power we don’t need save us $70 million?

OPEN LETTER to Minister of Energy Glenn Thibeault 

December 16, 2016

Dear Minister Thibeault:

As a concerned citizen of our wonderful province I do my best to stay up on current events.   In that regard I recently noted Ontario Premier Wynne and Quebec Premier Couillard attended the official signing of “the historic electricity trade agreement between Hydro-Québec and the Independent Electricity System Operator of Ontario (IESO).”

It appears you also attended the signing and had a quote recorded on the press release: “By importing 2 terawatt hours of clean electricity, enough to power the City of Kitchener for a year, Ontario will reduce carbon emissions and system costs by $70 million.”

I read that and wondered how importing 2 TWh of electricity from Hydro-Québec would save “system” costs by $70 million? It just didn’t ring true based on the math I was taught and have used throughout my lifetime. I pondered your comment for a while and then I wondered if statements of that standard are simply inherited with the portfolio.

Thinking back I recalled several which left me and many others scratching their heads. What if I give you a simple test by asking if you know which energy minister uttered the following. The answers can be found on page 2 but don’t peek until you have at least guessed.

Here they are in no particular order. From Energy ministers:

1. “Conservation is the cleanest and least costly energy resource, and offers consumers a means to reduce their electricity bills.”
2. “I think most in the industry would expect that the rates will likely go down, but we’re confident we’ll do that in a way that maintains confidence in the investment climate in Ontario”
3. The same energy minister in 2. above also said: “When you put in the new meter you find out the previous meter wasn’t billing and working properly. So the new meter is bringing bills up to date and is more accurate.”
4. We anticipate about 1% per year of additional rate increase associated with the bill’s implementation over the next 15 years.”
5. “if you change your behaviour, if you use less carbon emitting products you are actually going to see your bill reduced”

Now, reverting to your December 15, 2016 quote I hope you were aware that in 2015 Ontario exported 22.6 TWh of electricity to our neighbours because it was surplus to our needs!  According to the IESO (a signatory to the above agreement) and an earlier release from your ministry we have a “robust supply” of electricity that will last us for a decade.  I checked out current IESO data and determined that, up to the end of October 31, 2016, Ontario has exported 18.33 TWh of surplus electricity.  The average “sale price” of those 18.33 TWh was $16.04 million per TWh but it cost ratepayers $112.26 million per TWh according to IESO.

In simple math terms we were billed $2,057.7 million for the 18.33 TWh and sold it for $294 million — meaning it cost ratepayers $1,763.7 million or about $360.00 per ratepayer …  and we still have two months left in the year to account for.

Importing two (2) more TWh will simply add to our surplus generation meaning we will either have to export it at a big loss or; curtail wind, spill hydro or steam-off Bruce Nuclear. What we are looking at here is similar to “Dutch Disease” but in reverse.

I hope you understand the math better than your predecessor(s) and you are able to provide me, and many others with a plausible explanation as to exactly how importing 2 more TWh from Hydro Quebec will save $70 million in system costs?   Were you aware that in the past five years (2011-2015) Ontario has imported 18.9 TWh (per IESO) from Quebec or an average of 3.78 TWh annually.  That begs the question—what is so special about the additional 2 TWh we will be importing in the future?

OK, now is the time to let you know which Minister of Energy was behind the quotes on the first page.

1. The first one was a Minister Bob Chiarelli quote from his “Conservation first” Long-Term Energy Plan in 2013.
2. This was a Minister Brad Duguid quote from Reuters November 24, 2010 when he was telling them the rates for “green power” were going to go down.
3. This one was a Brad Duguid quote from the Toronto Star November 16, 2010 when he was attempting to explain why electricity rates went up again.
4. This particular quote was from George Smitherman when he sat in the Energy Minister’s chair and was ushering in the Green Energy and Green Economy Act.   He said this to the committee hearings members about the GEA.
5. I assume you guessed this one as it was you on December 9, 2016 as you were interviewed on Global TV and asked a question about how the “cap and trade” bill would affect heating bills. From my perspective your response was perhaps rushed or you were badly prepped by your staff in the ministry. The reason I would suggest the foregoing is if you look back in time you will note your predecessors all look pretty dumb!   When you review events that unfolded after their quotes they have been proven to be very wrong. History will undoubtedly prove you to be wrong like your predecessors.

Another issue for you is the query about why gas bills won’t disclose the “cap and trade” levy when it takes effect.   When questioned as to why the information would not appear on gas bills you stated that the OEB acts “independently” and your ministry doesn’t give them directions!Just to remind you, one of the first things you did when you took over the energy portfolio was to issue a directive (June 27, 2016) to the Ontario Energy Board which contained the following (emphasis mine): “I write in my capacity as the Minister of Energy in order to exercise the statutory power I have under section 35 of the Ontario Energy Board Act, 1998 (the “Act”) to require the Ontario Energy Board (the “Board”) to examine and report back to the Ministry of Energy (the “Ministry”) with advice on the questions outlined below.”

In looking over the letters and directives in the OEB files, it appears letters of directions and directives (“orders in council”) are commonplace and reflect the full power of the “minister” and the governing “caucus” over the OEB.

You have the power to instruct the OEB to tell natural gas distributors to disclose the amount the “cap and trade” act will add to their bills.

In a related issue, your predecessor Bob Chiarelli ensured electricity bills disclosed the amount of savings due to the cancellation of the debt retirement charge or “DRC” while (seemingly) intentionally failing to order disclosure of the cost of removal of the OCEB (Ontario Clean Energy Benefit).If you want your legacy as the Minister of Energy to reflect the bad traits of your predecessors then you can continue doing as you have been doing, but if you believe in transparency you have an opportunity to demonstrate those beliefs by coming clean.I certainly hope you will review your actions of the recent past and show the ratepayers of the province you have the ability and the intestinal fortitude to stand up and recognize the abuse we have suffered for the past decade and show us actions that stop the climb in electricity rates that are a necessity of life in this province.

Yours truly,

Parker Gallant 

A concerned citizen

PS: Looking forward to your response on how the imported TWh will save the system $70 million

Dancing in the streets when Ontario’s wind power “tyranny” ends?

My article in the Financial Post, December 15, 2016.

[Photo: Getty Images]

The editor of the magazine, North American Windpower, recently marked the demise of Ontario’s wind industry. His article was titled “Eulogizing Ontario’s Wind Industry.” Apparently the eulogy was a result of Ontario Energy Minister Glenn Thibeault’s announcement of Sept. 27 that he was “suspending” the acquisition of 1,000 MW (megawatts) of renewable energy under the previously announced LRP ll (Large Renewable Procurement).

Thibeault explained that “IESO (Independent Electricity System Operator) had advised that Ontario had a robust supply of electricity over the coming decade to meet projected demand.” Thibeault didn’t express surprise at this sudden turn of events or explain what led to the realization. To put some context around the suspension, only a few months earlier former Energy Minister Bob Chiarelli had issued the directive to acquire the 1,000 MW that Thibeault shortly after “suspended.”

The Windpower article opens with: “Ladies and gentlemen, we are gathered here today to pay our respects to Ontario’s utility-scale wind industry, which has passed away from unnatural causes (a lack of government support).”

If Ontario’s wind industry had truly passed away, the celebrations among hundreds of thousands of Ontario ratepayers would have rivaled the scale of celebrations exhibited in Florida by Cuban exiles after hearing that Castro died. As it is, Ontarians are hardly celebrating. We will be forced to live with and among industrial wind turbines for at least the next 20 years. The “government support” alluded to in the eulogy isn’t dead. It continues to get pulled from the pockets of all Ontario ratepayers and has caused undue suffering.

The wind industry rushed to Ontario to enjoy the largesse of government support via a government program that granted above-market payments for intermittent and unreliable power. Industrial wind turbines have so driven up electricity prices that Ontario now suffers the highest residential rates in Canada and the fastest growing rates in North America. The Ontario Association of Food Banks in its recent 2016 “Hunger Report” noted: “Since 2006, hydro rates have increased at a rate of 3.5 times inflation for peak hours, and at a rate of eight times inflation for off-peak hours. Households across Ontario are finding it hard to keep up with these expenses, as exemplified by the $172.5 million in outstanding hydro bills, or the 60,000 homes that were disconnected last year for failing to pay.”

Beyond that, the cost of energy affects businesses and, as noted by the Canadian Federation of Independent Businesses, “fuel, energy costs” ranks for their Ontario members as the second-highest “major cost constraint” behind “tax, regulatory costs.”

Until the day we actually see Ontario electricity consumers dancing in the streets one day, the eulogy for this province’s wind-power tyranny is unfortunately premature.

How much is wind power really costing Ontario?

For the cost to provide a small portion of Ontario’s power, wind is no bargain

Not a chance …

Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.

The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.

Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature.  The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim.  OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods.  On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity.  When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid.  When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.

Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?

As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1^st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.

Missing something important

Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA.  Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.

So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents above the average of 13.3 cents/kWh).  The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.

But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents.   If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.

So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.

22% of the costs for 5.9% of the power

 Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power.  Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer.  As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016),  the costs described here will grow and be billed to Ontario’s consumers.

CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.” 

There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. And we’re all paying for it.

Don’t expect visionary long-term energy planning in Ontario

November 7, 2016

The concept of “long term” for Ontario’s Liberal government and its energy ministers appears to be two or three years at best, or when a new minister is appointed.

Energy Minister Glenn Thibeault, who took over the reins last June, has now launched his version of “long-term” planning in the Long-Term Energy Plan (LTEP). Consultations on the new plan are being held throughout November in various locations.

Minister Thibeault’s vision differs widely from his predecessor’s. Chiarelli’s view in 2013 was: “Several factors are at play that are likely to put upward pressure on electricity prices over the next several years, including the costs of rebuilding and renewing the electricity system and the supply gap that is likely to emerge toward the end of the current decade.

Chiarelli added, “Although the global economic downturn of the past few years dampened electricity demand in Ontario and elsewhere, a shortfall in capacity may emerge as early as 2018.”

Chiarelli’s version was full of bad news like that about supply gaps, whereas Minister Thibeault’s preamble to the launch of a new plan suggests, three years later, everything is rosy: “We have a robust supply of all forms of energy for at least the next 10 years.”

Anyone looking at the two forecasts would wonder what happened in that three-year time frame to so dramatically alter the vision.  Let’s examine a few of the changes:

In 2012 we exported 14.6 terawatts (TWh) of surplus energy at an average price of $24.07 per MWh (megawatt). That cost Ontario’s ratepayers $73.30/MWh to generate, so exports added about $720 million to the commodity cost.

In 2015 we exported 22.6 TWh (up 54.8% from 2012 and 16.5% of Ontario’s demand) of surplus energy at an average price of $23.58/MWh. That cost Ontario ratepayers $101.38/MWh to generate, so exports added about $1.8 billion to the commodity cost.

Save on energy … and pay more anyway

It is worth noting Ontario ratepayers reduced consumption from 2013 to 2015 by 3% (4.3 TWh) but saw their cost of electricity soar by 32%, principally due to contracts for the addition of about 3,000 MW of intermittent and unreliable power from industrial wind turbines and solar panels. The average commodity cost in July 2013 at the launch of Minister Chiarelli’s “Conservation First” long-term plan was 8.4 cents per kilowatt (kWh); at the launch of Minister Thibeault’s planning document it is 11.1 cents/kWh.

At this point in time it is obvious former Energy Minister Bob Chiarelli’s “gap” perhaps lay in the ability of his ministry to recognize that one of his predecessors (Dwight Duncan) had agreed to Bruce Nuclear refurbishing as many as four of their nuclear units. The Auditor General in a “special report” for the Ministry noted: A Limited Partnership (Bruce A LP), was formed, to not only refurbish Units 1 and 2 but also take over Cameco’s interest in Units 3 and 4 and make future improvements to them. Bruce A LP would thus ulti­mately be operating and maintaining all four Bruce A units. Those four units represent about 3,200 MW of reliable baseload power!

It seems obvious there are serious flaws in the planning process if we can go from a “shortfall” to a “robust supply” in only three years, knowing major generation supply sources take years of planning, development and construction.

Look out Ontario: Premier Wynne is “helping” you again

Queen’s Park Hallowe’en announcement: trick or treat?

The morning after Wynne’s Hallowe’en message: promises don’t look so good

The press release issued by the Ontario government on October 31^st (Hallowe’en Night) carried this headline:   “Helping Homeowners Cut Energy Bills.” As soon as I read it I thought, haven’t we heard this before?

The release inferred the government was going to help around 37,000 homeowners obtain “home energy audits and retrofits”.  The committed dollar amount was $100 million over three years from the “Green Investment Fund” (GIF).  The $325 million GIF was announced in the “2015 Fall Economic Statement” and again in the 2016 Budget and will come from the “cap and trade” tax we will shortly experience.  The GIF is already committed to spend almost $300 million of the total fund.  The upcoming tax is forecast to generate $1.9 billion annually; the bulk of the tax will come from the 4.5 million households in the province who were told the cost will be $5.00 monthly per household if you heat by natural gas, and an additional monthly cost of $8.00 for transport included in the fuel price.  The $13.00 per month per household should generate annual revenue around $700 million (4.5 million [households] X $13.00 X 12 [months] = $702 million).

The promise made in the press release is: “Thanks to this investment, Ontario homeowners can upgrade their homes, improve their energy efficiency, reduce their carbon footprint and, importantly, save money.”  Really.

Let’s recall former Minister of Energy Bob Chiarelli’s and his July 2013 message in which he told us we would save money by conserving electricity use: “Ontario has saved billions of dollars through conservation, and we have a clear opportunity to do more. By investing in conservation before new generation, where cost-effective, we can save ratepayers money and give consumers new technology to track and control energy use.”

Chiarelli’s July 2013 forecast, when the average cost of a kilowatt hour (kWh) of electricity was 8.4 cents, was wrong. Very wrong.

Three years later, the average cost is 11.1 cents/kWh, up 38%, costing the average ratepayer $250 more a year, and yet we did conserve!   With that in mind, we should expect the same thing to happen in respect to the natural gas file. Energy ministers have consistently failed to complete a cost/benefit study and have actually lied to Ontarians about savings.

Current plans offering financing for natural gas expansion of $230 million to extend gas pipelines to rural areas will surely raise the distribution costs for existing and future homeowners heating with natural gas. Building transmission lines to carry intermittent unreliable wind and solar electricity generation to the grid did, so we should expect the same!  Coupled with the “cap and trade” tax to be levied on natural gas distributors, the expansion will push the cost of heating with gas higher.

In the meantime, the MOECC (Ministry of the Environment and Climate Change) also announced their plans to hand out the new “cap and trade” tax to individuals who purchase an electric vehicle as per a June press release: “Cash back: When you buy or lease a green plate eligible electric vehicle, you can receive an incentive of up to $14,000. You may also receive an incentive of up to $1,000 for the purchase and installation of a Level 2 home charging station. Ontario will also work with the federal government to explore ways to eliminate the HST from new and used EVs by 2018.”

And, “Great perks: You get a green licence plate that identifies you as an EV owner and allows you to drive in all provincial high occupancy vehicle (HOV) lanes, even with only one person in the vehicle, and will provide free access to high occupancy toll (HOT) toll lanes in the future. You’ll also get free fuel under Ontario’s overnight charging program between 2017 and 2020.”

The Ontario citizens who heat their homes with natural gas or electricity, but can’t afford to purchase an EV should bask in the warmth of knowing by paying the “cap and trade” tax (hidden in your natural gas heating bill and via gasoline purchases) you are helping the rich people purchase an EV and also making sure they don’t have to pay for their fuel, or even the upkeep of the roads they travel on.

Now, doesn’t that make you feel better, knowing that the next time you see a Tesla automobile you’re seeing your tax dollars are hard at work?

In the meantime sit back and enjoy all the money the Premier Wynne-led government has saved you —just like she did on your electricity bill.