May power cost stats a harbinger of worse to come

If May is any indication, the Wynne government’s “Fair Hydro” plan costs will be considerable

The “Fair Hydro” plan ushered in by the Wynne government is setting up ratepayers for higher bills as soon as 2021 arrives. When the hiatus ends, limiting increases to ratepayer bills to no more than the “cost of living” (COL) over the next four years, the cumulative debt acquired by OPG to “refinance” the reported $50 billion of electricity assets will have to be repaid.

Early indications suggest the costs will be higher than the $2.5 billion being set aside for the next three years by Premier Wynne and Energy Minister, Glenn Thibeault.

Evidence? A look at May 2017 compared to May 2016 indicates the increase in the Global Adjustment (GA) costs for Class B ratepayers was 7.9% higher than 2016 and well above the May COL index of 1.4%.  Any increase in costs above the inflation rate will be added to the $2.5 billion being refinanced and become the responsibility of ratepayers to pay when the hiatus ends.

Demand drops but the cost goes UP

The IESO May 2017 Monthly Market Report indicates Ontario Class B ratepayers consumed 344,000 megawatt hours (MWh) less than they did in May 2016, which represents a 4% drop. That’s about the same as 460,000 average households would consume for the month. The Global Adjustment (GA) costs on the reduced amount of electricity consumed, however, increased by $82.7 million from $931.2 million in 2016 to $1,013.9 million in 2017.  Many will recall in May 2016, lower consumption during the prior six months caused the OEB to raise rates!

So, what caused the 7.9% spike ($82.7 million) in GA costs?   It appears there were two principal causes with one of them related to Ontario’s “Net Exports”.*

In 2017, net exports averaged 600 MW per hour higher than 2016, meaning they increased by 446,400 MWh (600MWh X 24 hours X 31 days) in May 2017 (enough to power almost 600,000 average households for the month). The buyers in New York, Michigan, Quebec, etc., paid only the Hourly Ontario Electricity Price (HOEP) of $3.17/MWh, while Ontario’s ratepayers were required to pay the GA costs of $54.8 million or $122.89/MWh.

The other major cause of the GA spike appears related to power generation from wind and its record curtailment in May 2017. My friend Scott Luft posts both the generation from TX (transmission connected) and DX (distributor connected) industrial wind turbines (IWT), and also conservatively estimates “curtailment”.  In May 2016 TX and DX connected IWT generated 699,371 MWh, not including 130,000 MWh of curtailed generation.

Combined: wind power in May 2016 cost ratepayers about $113 million or $162/MWh.  May 2017 saw 669,011 MWh of wind power delivered either to the grid (TX) or to local distribution companies (DX). Curtailed wind in May 2017 was a record as Scott estimated almost 524,000 MWh (enough to power almost 700,000 average households for the month) were curtailed.   The cost for generated and curtailed wind increased to slightly more than $158 million for the month, which raised the cost of accepted wind generation to $236/MWh.

$100 million added … for just one month

What this means is, wind-generated and curtailed costs in May 2017 were $45 million higher. Coupled with the increase in net exports of surplus generation and related costs, $100 million was added to the GA … for just one month.  If May 2017 is in any way representative of the four years of the rate freeze (tied to the COL index), the costs of refinancing those assets will be much more than the March 2, 2017 press release suggested it would be:  “These new measures will cost the government up to $2.5 billion over the next three years.”

Based on past forecasts by the Ontario’s Liberal government, keeping the costs at $2.5 billion over the next three years may be a “stretch goal”!

Parker Gallant

*“Net Exports” are total exports less total imports.

 

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Where did the $50 billion go, Premier Wynne?

He said, she said: we say, where did the money GO? [Photo: Toronto Star]
Last September 13, Minister of Energy Glenn Thibeault issued a press release announcing the  Ontario Liberal government would reduce electricity bills for five million families, farms and small businesses.  The relief granted was equivalent to the 8% provincial portion of the HST. The press release also claimed Ontario had “invested more than $35 billion” in new and refurbished generation.

Fast forward to March 2, 2017 and that $35 billion jumped to $50 billion in a press conference the Premier jointly held with Minister Thibeault. An increase of $15 billion in six months!

The press conference was to inform us the 8% relief announced by Minister Thibeault would be added to, with a further 17% reduction. A Toronto Star op-ed Premier Wynne wrote March 7, 2017 reaffirmed the $50 billion investment claim made the previous week, and further claimed: “By delivering the biggest rate cut in Ontario’s history and holding rate increases to inflation for at least four years, this plan provides an overdue solution.”

That made history alright, but not the way she meant. What the Premier forgot to say was that her government had brought us the biggest rate increases in Ontario’s history.  In March 2011 the Ontario Energy Board (OEB) website shows the average electricity rate was 6.84 cents per kilowatt hour (kWh) and on May 1, 2016 it had increased to 11.1cents/kWh.  In just over five years, the price of the commodity — electricity — increased 62%, a multiple of the inflation rate during that five years, which added about $400 to the average consumer bill.

Electricity price goes down, your bills go UP

From 2010 to 2015 Ontario demand fell by 5 TWh (terawatt hours) to 137 TWh.* That is enough to provide electricity to 550,000 “average” Ontario households for a year, yet the price for residential consumers increased 62%.   The increase was not driven by the trading value via the hourly Ontario electricity price (HOEP) market.  In fact, the market treated Ontario generated electricity badly as it fell from an average of 3.79 cents/kWh in 2010 to 1.66 cents/kWh in value for 2016 —  a 56.2% drop.

As to how they were achieving this “relief,” Wynne and Thibeault told us they were pushing the payback period for the 20-year contracts (wind and solar) out another 10 years. Those generation sources are the principal cause of the increase in electricity prices.  (For further proof of that, read  Scott Luft’s recent analysis on the costs of “other” generation in 2016 which confirms its effect on our rising electricity rates.)

Where did the money go?

What the Wynne/Thibeault announcement means is, ratepayers will pay for the intermittent and unreliable power for their 20-year contracted term(s), and continue to pay for the same contracts which, by that time use equipment that will be heading for, or already in the scrap yard.

It is time for Minister Thibeault to disclose what is behind his claim of $35 billion invested and for Premier Wynne to disclose the details of the $50 billion she says went to “necessary renovations” to rebuild “the system.”

Time to come clean.

* Ontario consumption remained at 137 TWh in 2016.

Where did our $50 billion go? Or, how Ontario citizens lost $18 mil in just 2 days

Premier Wynne making her announcement: no accounting for costs [Photo: PostMedia]
Almost a week after Premier Wynne announced her plan to reduce our electricity bills by 25%, the wind was blowing!  On March 8, six days after the cost shifting  announcement (from ratepayer to taxpayer), potential power generation from wind was forecast by IESO to produce at levels of 80/95% of their capacity, for many hours of the day.  IESO was concerned about grid stability and as a consequence, curtailed much of the forecasted generation.

When the Premier made her announcement about reducing hydro bills, she also claimed “Decades of under-investment in the electricity system by governments of all stripes resulted in the need to invest more than $50 billion in generation, transmission and distribution assets to ensure the system is clean and reliable.”

It is worth noting that much of that $50 billion was spent acquiring wind and solar generation and its associated spending on transmission, plus gas plants (to back them up because the power is intermittent), and distribution assets to hook them into the grid or embed them with the local distribution companies. It would have been informative if Premier Wynne had had Energy Minister Glen Thibeault provide an accounting of exactly what the $50 billion was spent on.

As it turned out the amount of curtailed wind generated on March 8 was 37,044 megawatt hours (MWh) was just short of the record of 38,018 MWh set almost a year ago on March 16, 2016 (estimated by my friend Scott Luft).  The curtailed wind on March 8, 2017 cost Ontario’s ratepayers $120/MWh or $4,445,280.

The cost on March 16, 2016 was $4,562,160.

What does it mean? Curtailing or restricting power output but paying for it anyway means a portion of the $50 billion spent was simply wasted money. It went to the corporate power developers that rushed to sign those above-market contracts for renewable power.

The other interesting aspect of the surplus power generation on March 16, 2016 and March 8, 2017 is revealed in IESO’s Daily Market Summaries: the hourly Ontario energy price (HOEP)  March 16, 2016 was negative at -$1.25/MWh and on March 8th, 2017 was also negative at -.49 cents/MWh. This meant ratepayers paid for surplus exports sold to our neighbours in New York and Michigan, etc. Net exports (exports minus imports) on March 16, 2016 were 52,368 MWh, and on March 8, 2017 were 37,944 MWh. Total costs of their generation (HOEP + GA) fell to Ontario’s ratepayers along with the cost of any spilled hydro, steamed off nuclear and idling gas plants.

Millions here, millions there = a whole lot of wasted money

So, bear with me here, if we price the cost of the net exports at $110/MWh for those two days, ratepayer costs were approximately $9.8 million with $5.7 million for March 16, 2016 net exports and $4.1 million for March 8, 2017 net exports, not including the $84,000 we paid our neighbours to take our power.

How much did it cost you? Two days out of 729 (2016 was a leap year) cost Ontario ratepayers about $18.1 million for power not delivered (curtailed wind) or needed (net exports).

I hope this helps Minister Thibeault in his calculations for a long overdue accounting to Ontario citizens as to where the other $49.982 billion went.

 

What’s in your hydro bill? November-December dates

Since the Premier of Ontario has admitted her government has made a “mistake” and she is now concerned about rising electricity bills in Ontario, there is a lot of attention being paid to these bills.

I have been invited to speak at two Town Hall events coming up in the next few weeks.

• Saturday, Dec. 3: 10 a.m. to noon at the Kinburn Community Centre, 3045 Kinburn Side Rd., Kinburn.

• Saturday, Dec. 3: 2 to 4 p.m. at the Intercultural Dialogue Institute, 335 Michael Cowpland Dr. unit 112, Kanata.

Here is a news story about last week’s event.

parkergallanttownhall-metrolandpic

The waste of power in Ontario is a scandal

The Wynne government is selling off surplus power at bargain rates … and yet, has contracted for more power produced out-of-phase with demand. Time to reverse engines.

LRP I contracts awarded this year, the LRP II, and contracts for any unbuilt wind power projects should get the axe
LRP I contracts awarded this year, the LRP II, and contracts for any unbuilt wind power projects should get the axe

November 14, 2016

Ontario’s Independent Electricity System Operator (IESO) has responsibility for running the “market” referred to as the HOEP (Hourly Ontario Electricity Price). That is defined as “the average of the twelve market clearing prices in each hour.” IESO also says the HOEP is  “a real-time market, meaning purchases of electricity are made as they are needed. There are occasions, when the best-priced energy may not be available due to limitations on the transmission lines. In this case, that generator’s offer is still used to help set the price, but another generator may be asked to provide the electricity.”

Since the beginning of 2016, the “real-time market” has valued a traded megawatt (MWh) at an average of about $16.00 or 1.6 cents a kilowatt (kWh). Compare that to what households and small businesses pay, an average price of 11.1 cents a kWh or almost seven times the market rate.

What the HOEP market is telling Ontario’s Minister of Energy Glenn Thibeault: the value you get ratepayers to pay for unreliable and intermittent renewable energy in the form of wind and solar generation has absolutely no relationship to its actual worth!

The data my friend Scott Luft posts highlights just how much the feed-in-tariff (FIT) program, with their above market rate contracts for intermittent wind and solar have distorted the HOEP.

Scott’s data source is the IESO although for reasons best known to them they don’t post DX (local distributed FIT and MicroFIT contracted generation) connected wind or solar generation. Scott estimates these in his spreadsheet and his estimates have so far proven to be conservative when the DX results are posted many months later.

Let’s examine the data. The TX (transmission connected) wind generation for the first 10 months of the current year (January 1st to October 31st) was (rounded) 6,966,000 MWh, and the DX connected are estimated at 1,079,000 MWh.  Curtailed wind generation is estimated at 1,804,000 MWh bringing total wind (generated and curtailed) to 9,849,000 MWh.. Those 9.8 TWh (terawatt hours) could have supplied approximately 1.3 million “average” households with electricity if it was delivered when needed.

It wasn’t.

So what that means is, 26% of the available energy from TX connected wind power developments was curtailed. Combining TX and DX curtailed wind MWh represents 18.3% of available energy from that source!

Power sold at a fraction of the contract price

At the same time as wind turbines were delivering or curtailing those megawatts of power, IESO was exporting surplus generation to our neighbours in New York, Michigan, Quebec, etc., selling it for a fraction of the FIT contracted price. Referring again to Scott Luft’s data it should be noted he actually includes the average HOEP price as of the hour(s) of generation or curtailment.   That price averaged about $9.50 per MWh for the 10 months using his data!   The sale price is a far cry from the FIT and MicroFIT contracted value for wind of $135.00/MWh plus as much as 20% for cost of living (COL) increases and an estimated $120.00/MWh for curtailed generation.

What we can calculate from the pricing information is that wind power generated and curtailed for the 10 months cost ratepayers almost $1.3 billion. If all the 9.8 TWh were included in the exported surpluses the net cost to ratepayers after recovering almost $100 million (9.8 TWh X $9.5 per TWh = $93.1 million) from its sale value is $1.2 billion. That’s about the same as moving two gas plants.

Cost: $300 a year for each electricity customer

The monthly cost of $120 million adds over $300 annually to the average ratepayer’s bill — and that doesn’t include the additional costs of the wasted power from other sources such as spilled hydro, steamed-off nuclear or the idling gas plants.

While we can’t say for sure the exported surplus generation sold to our neighbours came from industrial wind power developments, it is worth noting exports to the end of October were about 18.2 TWh or almost twice the amount of generated and curtailed wind produced in the same time-frame. Was wind-generated electricity a large part of those exports or did it cause other, cheaper, power to be exported? It is extremely likely.

Energy Minister Thibeault needs to recognize he needs to permanently cancel LRP I and LRP II along with any remaining unbuilt wind and solar projects in order to stop the upward pressure on electricity rates.   As noted in the press release from the Ministry September 27, 2016, “Ontario will benefit from a robust supply of electricity over the coming decade to meet projected demand.”

It’s time for Energy Minister Thibeault to recognize the power to reduce upward pressure on electricity rates resides with him; he should use it to halt purchases of power we don’t need.

 

Ontario in Panic Mode: how Hydro One gets their money, cleans up their debt record, and you pay for it all

2. Ratepayer relief for Hydro One and its arrears

October 12, 2016

Yesterday, I dealt with the announcements from the Minister of Energy, Glenn Thibeault in September and the ways he promised would reduce our electricity bills. What the minister failed to explain was where the money is coming from.

Electricity ratepayers should be worried.

As Global TV began its coverage of the electricity sector in Ontario and how it affected people’s lives, many horror stories about “energy poverty” were showcased, particularly from Hydro One’s clients. We customers have become accustomed to bad news stories related to Hydro One’s “smart meters” and “over-billing” highlighted by former Ombudsman, Andre Marin.   The stories Global uncovered were even more remarkable as they were able to obtain data from the OEB that disclosed the number of ratepayers in arrears as of December 31, 2015.  As it turned out, Hydro One had almost 226,000 clients in arrears (20% of all their residential clients and 40% of all ratepayers in arrears in the province and 63% [$105.6 million] of the total dollar amount).  Additionally Hydro One Remote (a not-for-profit subsidiary serving remote communities) had 1,147 in arrears (33.7% of all [3,400] their residential ratepayers).

In the latter case, the rest of Ontario’s ratepayers supplement (read: subsidize) the 3,400 “remote” ratepayers at an average of $9,500 each (about $32 million annually) via the RRRP (Rural or Remote Electricity Rate Protection) fund.  The fund is set at $174 million annually which adds 0.13 cents/kWh  to each kilowatt hour consumed in the province.  The fund is also used to reduce the 329,000 Hydro One customers classified as “low-density” ratepayers.  The latter bills are reportedly reduced by $31.50 per month.  This eats up another $124 million of the fund.

It is my strong suspicion that it will be this fund that, using the words in Minister Thibeault’s press release of September 13th, result in:  “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”.

If just the 329,000 “low-density”1: Hydro One clients are the “eligible” rural ratepayers envisaged in Minister Thibeault’s press release, the cost will be an additional $150 million.  What that means is that “electricity” rates will increase by an additional 0.12 cents/kWh for all the remaining Ontario ratepayers, adding about $20/25 per year to the “average” residential bill.

This also means Hydro One will be handed a guarantee they will receive the $150 million whereas they now have to be concerned with arrears and non-payment from those same clients.  This in turn would favourably impact their writeoffs for bad debts which were reported as $66 million in 2014 and $61 million in 2014.  It would also put Hydro One in the enviable position of knowing they could deliver zero kilowatt hours but still bill their clients for over $725 million or about 53% of their 2015 gross (net of cost of power) distribution revenue.

Hydro One, despite their smart meter and billing mess, have been on a rampage to shame their paying clients. They do this by sending a “Home Energy Report,a printed paper report delivered to participating customers via the mail. These reports include a so-called comparison to “efficient” neighbours and other neighbours.

For shame!
For shame!

People living year-round in low-density rated areas are talking about these reports. The bills I have seen viewed belong to people living close to many “seasonal” residences used on weekends or for short summer periods. A couple of these homes were heated with electricity.  The unsolicited Energy Reports are specific in their language with a cover letter from the “Director, Customer Strategy & Conservation Officer.”  A recent letter falsely claimed “You’re among the first in Ontario to receive this innovative new report”.   I wrote an article about one of those reports almost two years ago so the recent letter provided to me was hardly “among the first.”  One recent letter admonished the recipient “you used 56% more electricity than your neighbours.” In fact this particular ratepayer for the January-June 2016 period used 800 kWh hours monthly which until the May 1, 2016  change announced by the OEB was an “average” ratepayer consuming 9.6 MWh annually.

The ironic issue about these “shaming letters” is if the customer consumes less, Hydro One will submit an application to increase their rates to recover lost revenue.  So Hydro One not only bills us for the “shaming letter” costs (via the $400 million a year spent on conservation efforts) via the cost of the electricity we consume, but they then obtain a rate increase to recover lost distribution revenue.

Sweet deal.

Parker Gallant

NEXT: The third in this series will examine ratepayer subsidies related to another of Minister Thibeault’s announcements.
1. The following chart was provided to the writer by Hydro One who advised me that “Residential-High Density customers are now classified as “Residential-Medium Density”.

hydro-one-residential-customers-by-rate-class

Hydro One bills driving people into poverty

August 17, 2016

Thanks to the persistence of Global TV it appears the Ontario Energy Board (OEB) was obligated (transparency?) to release information on rising electricity bills and how people are being driven into energy poverty.

While the information contained in the PDF file shows a variety of arrears*-related information, and covers all of the local distribution companies (LDC) in the province, the Hydro One data is particularly striking. It is also in keeping with some of the 2015 Ombudsman’s report.

It is important to realize that Hydro One claimed 1,141,369 residential ratepaying customers as of December 31, 2015, representing exactly 25% of total Ontario residential ratepayers according to the Yearbook of Electricity Distributors on the OEB website.

So, focusing on Hydro One only, here are some of the interesting statistics gleaned from the OEB “arrears” report as of December 31, 2015:

  • Hydro One had 59,233 ratepayers in arrears which represented 7.1% of their residential customer base and 68.8% of all residential ratepayers in arrears (86,090) as of that date.
  • Hydro One claimed just over $97 million1. of billing arrears which represented 89% of the total billing arrears reported by all LDC (just over $109 million) as of December 31, 2015.
  • Hydro One’s arrears of $97 million represented 12.5% of their outstanding receivables as at the date of their year end.
  • Hydro One had 17,811 canceled “arrears payment agreements” due to non-payment out of 25,670 for all LDC and that represented 69.4% of all cancellations.
  • Hydro One wrote off $16,504,125.00 of receivables which represented 46.9% out of $35,172,817.00 in arrears written off by all LDC.
  • Hydro One had 7,570 eligible “low-income” households out of 19,914 households for all LDC which represented only 38% of those presumably eligible for the Ontario Electricity Support Program (OESP) which came into effect January 1, 2016

Why…?

Based on the above one would have to ask some pertinent questions such as:

Why did Hydro One have so many ratepayers in arrears when they identified only 7,570 customers as low-income and eligible for the OESP?

Why did Hydro One have such dominance of the number of ratepayers in arrears?

Why did Hydro One represent such a huge portion (89%) of the dollar value in arrears?

If you believe it is related to Hydro One’s excessive delivery rates you would be entirely correct. That was recently reported by writer Scott Luft.

A quick glance at the second Quarter results for Hydro One shows they distributed 6.2 terawatt hours (TWh) versus 6.7 TWh in the comparable 2015 Quarter — that’s a drop of 8% — yet their distribution revenue showed a slight increase of $2 million year over year. What we can determine from those results is in 2015 the “distribution” business of Hydro One generated $51.8 million per TWh and it increased to $56.3 million/TWh in 2016 for an increase of 8.7% per TWh.

The upside-down world of Ontario

In other words, for Hydro One declining demand results in increased revenue. Thanks to their monopoly and the unique cooperation of the OEB, Hydro One has turned the economic model of  “supply and demand” on its head.

One has to wonder now if the sale of shares in Hydro One was driven not only to help achieve a balanced budget in 2018, but also to rid the Ontario Liberal government of even more anticipated bad news about the electricity file and their ownership of Hydro One. Holding a minority interest at the date of the next election might have the Ontario Liberals pointing the finger at the OEB for constantly granting Hydro One’s distribution arm rate increases exceeding inflation by a wide margin.  With that in mind they might just pretend they would do something to right the wrong if re-elected.

Only time will tell if Hydro One is allowed to maintain their lofty position as the generator of the highest arrears levels amongst the ratepayers of the province and continue to be granted the rate increases applied for.

Parker Gallant

  • Average arrears level for Hydro One’s residential ratepayers as at December 31, 2015 was $1,638.59 and the OEB defines arrears as:  “ … an account that is 30 or more days past the 16-day minimum payment period .”