Michigan outperforms Ontario. And why not? They have our cheap power

Boating - St. Joseph. Courtesy of SW Michgan Tourist Council

Across the lake: cheap cheap power. [Photo Michigan Outdoors]

The state of Michigan is outperforming Ontario. That’s according to a recent study by the Fraser Institute. Since the end of the “’Great Recession” Michigan has out performed Ontario, increasing their GDP in 2013 by 2.8% versus Ontario’s growth of only 1.3%.  Unemployment levels in Michigan are currently at 4.6% versus Ontario’s 6.4%. Those are two very important  economic indicators.

That news plus the fact Ontario has become a “have not” province in Canada, it seems policies adopted by the Ontario Liberal government to “build Ontario up” is having the opposite effect.

One of those policies resulted in Ontario’s electricity sector focusing on acquisition of renewable energy from industrial-scale wind turbines, solar panels and biomass. The passing of the Green Energy Act (GEA) in 2009 resulted in adding intermittent and unreliable renewable energy that is unresponsive to demand (wind power is produced out-of-phase with demand in Ontario).   This had the effect of driving down the price of electricity.

The free market trading (HOEP) of electricity has resulted in Ontario exporting a rising percentage of our generation to buyers in Quebec, NY and Michigan, with the latter the biggest buyer.   In 2015 Michigan purchased 10,248 gigawatts (GWh) or enough to power1.1 million “average” Ontario residential households. We sold it at an average of 2.36 cents per kilowatt hour (kWh) and were paid $242 million, but it cost Ontario’s ratepayers just over $1 billion.

Michigan doesn’t have to pay the Global Adjustment. You do.

Michigan appears delighted to be able to purchase our cheap subsidized electricity. Now they are seeking further transmission links to Ontario with an eye on the grid out of Sault Ste Marie.  Hydro One earlier this year announced they “entered into a purchase agreement to acquire Great Lakes Power Transmission LP from Brookfield Infrastructure for $222 million in cash plus the assumption of approximately $151 million in outstanding indebtedness.” One has to wonder, did Hydro One know about this, and see it as an opportunity to increase transmission revenue? 

This new transmission line could send both cheap hydro and expensive bio-mass generation to Michigan.

Ontario Power Generation (OPG) operates 11 hydro stations with 680 MW of capacity and also two bio-mass facilities (Atikokan and Thunder Bay) converted from burning coal and now using wood pellets with a combined capacity of 358 MW in the region.   The latter two facilities were focused on by the Auditor General (AG) in her November 2015 report. In the case of Thunder Bay, the report indicated the cost of generation was “$1,600/MWh—25 times higher than the average cost at other biomass facilities in Ontario.”  For Atikokan the AG had this to say: “The plant is expected to generate 140,000 MWh for $74 million per year, putting the cost of electricity from this facility at $528/MWh—about eight times higher than the average cost of existing biomass from other facilities in Ontario.” Industrial wind turbines have also invaded the beautiful landscapes painted by the Group of Seven.

For the sake of Ontario ratepayers, one hopes Michigan will not access electricity from either of the two biomass plants as it will fall on us ratepayers to pick up the costs in excess of the HOEP price. In the case of Thunder Bay the cost to ratepayers could approach $1.60/kWh and for Atikokan it would be 55 cents/kWh.

Maybe the Ontario government staffers in communications should change their PR Slogan to “Building Michigan up”!

Parker Gallant

September 5, 2016

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Ontario’s present and future lashed by electricity bills

Building Ontario Up

“Building Ontario Up” — a PR slogan doomed to failure

August 21, 2016

On July 18th Premier Kathleen Wynne bragged about Ontario’s  2016 first quarter GDP growth outpacing Canada, the U.S. and all other G7 countries via news release.  The Premier said,  “Our economic plan is working, and we are building a strong and prosperous future for our province.”

Three weeks later, StatsCan announced Ontario suffered job losses in July of 36,100 — almost 19,000 of them were full-time jobs.  In fact, Ontario’s job losses exceeded total job losses in Canada of 31,200 net jobs.  Needless to say, that didn’t merit a news release from the Premier’s office or Finance Minister Sousa either, about how the Ontario Liberal government might not be “building Ontario up”.

The StatsCan announcement also didn’t signal a change in Ontario’s unemployment rate which is mired at 6.4%. Compare that to the U.S. unemployment rate (June 2016) of 4.9%, or New York’s at 4.7%, and Michigan’s at 4.6%.

Why New York and Michigan love Ontario: cheap power

New York and Michigan are the two neighbours who are the major beneficiaries of Ontario’s management of its electricity system. In 2015, we exported 8,571 gigawatts (GWh) to New York and 10,248 GWh to Michigan at an average price of 2.36 cents per kilowatt hour (US $1.82 cents/kWh). Those sales generated revenue of $444 million but cost Ontario ratepayers $2.3 billion. The loss on those exports of almost $1.9 billion was included on our hydro bills.

That 18,819 GWh of power sold at huge costs to Ontario ratepayers. Here are the facts.

  • The power sold at a loss was enough to have supplied 2 million “average”1. residential ratepayers with power for a year
  • The losses on those exports could have paid the “Total dollar amount of arrears for eligible low income customer accounts in arrears at year end” December 31, 2015 for 146 years
  • The “total dollar amount ($172.6 million) of arrears for residential customer accounts in arrears at year end” could have been paid over 11 times
  • The “total dollar amount ($106 million) of arrears for Hydro One residential customer accounts in arrears at year end” could have been paid over 18 times
  • The power sold represented enough money2. to cover the full annual cost of 766,000 Hydro One, low-density “average” ratepayers

It is impossible to know what the generation sources were for the exported power, but with combined wind (10,765 GWh) and solar (3,026 GWh) generation representing 13,791 GWh in 2015, one must assume a lot of wind and solar power traveled to New York and Michigan. Evidence of that was highlighted in a recent study from the Canadian Nuclear Association: “Wind makes up 34% of the provincial night time surplus.”

Without those surplus exports, one could assume the Hourly Ontario Energy Price or HOEP would have been higher in that trading market, resulting in reduced costs to Ontario’s ratepayers.

Looking back to 2009 at the posted OEB average electricity price at the end of that year (6.07 cents/kWh) and comparing it with the average electricity price at the end of 2015 (10.70 cents/kWh), the annual increase was 12%.

It is worth noting that distribution rates have also increased as much (or more) for some distributors such as Hydro One.

If one examines U.S. residential electricity prices, we find the average all-inclusive (generation, transmission, delivery, state taxes) price in the U.S. at the end of 2009 was 9.82 cents/kWh and at the end of 2015 had increased to 12.67/kWh for residential clients. This suggests the average annual increase in the all-in price of electricity in the U.S. was 4.8% annually versus the Ontario 12% increase for just the “electricity” line.

Ontario has managed to raise the price of the raw commodity (electricity) almost three times faster than the U.S. has increased all-in rates.

It’s costing us a fortune, so —let’s buy more!

What does Ontario plan to do? The government continues to push ahead with their agenda to acquire more unreliable and intermittent wind and solar generation, with a new bid process beginning in 2017. That’s in spite of pricing Ontario out of the market to attract new industry, and creating “energy poverty” that now affects 12.4% (566,902 as reported by the OEB) of ratepayers. Many were in arrears on their electricity bills at the end of 2015.

 

Recently appointed Energy Minister Glenn Thibeault told Shirley Engel of Global TV News “I’m not using the word crisis” when asked about the massive response of emails and phone calls to Global following stories on painful electricity bills in Ontario.  Global was successful in getting the OEB to release the “arrears” statistics mentioned above.  In the “Backgrounder” to the release of those statistics, the OEB opened with this statement: “The Ontario Energy Board is the regulator responsible for protecting energy consumers in Ontario.”

Why has the OEB failed to protect energy consumers, in essence failing to do its job? You would be obliged to point the finger at the Ontario Liberal government for its their passing the Green Energy Act, and the more than 100 directives given to the Ontario Power Authority (merged with IESO January 1, 2015), IESO, Hydro One, OPG and the OEB by past and present Energy Ministers going back to Dwight Duncan.

Premier McGuinty and now Premier Wynne believe they know far more than the people running those organizations and have ensured their dictates are followed.

“Building Ontario up” is a PR slogan. Its realization is condemned to failure, mostly because of the damage done to a province that once could claim some of the cheapest electricity rates. With the most expensive electricity rates in North America now, the only thing the Ontario Liberal government can claim they are “building up” are the number of ratepayers living in energy poverty.

Parker Gallant

1.The OEB defines an average residential ratepayer as one consuming 750 kilowatt hours (kWh) per month.

2.The OEB’s “Bill Calculator” tells you the monthly cost is $206.64 so annually it is $2,479.68.