Just released 2018 electricity data: are things finally looking up in Ontario?

Why ‘down’ is actually ‘up’ in topsy-turvy Ontario

Last month, the Independent Electricity System Operator (IESO) released the grid-connected 2018 Electricity Data. Under the “Price” heading the IESO said this: “The total cost of power for Class B consumers, representing the combined effect of the HOEP [2.43 cents/kWh] and the GA [9.07cents/kWh] was 11.50 cents/kWh”.

In 2017, that combined price was 11.55 cents/kWh, so there has been a slight decline. That slight decline represents an annual savings to the average household consuming 9,000 kWh per annum of—wait for it—$5.00.

If Bob Chiarelli was still Minister of Energy, he would probably suggest you could now purchase two “Timmies” with that much money!

The price drop isn’t very much but, the question is, how or why did the average price drop?

Ontario’s overall consumption in 2018 increased from 2017 by 5.3 TWh (terawatt hours) or 4%.  In 2017 the IESO reported grid-connected consumption was 132.1 TWh and in 2017 it increased to 137.4 TWh.  This is increase is a “good thing.” Here’s why:

  • Curtailed (paid for but not used) wind power fell by 1.207 TWh, which saved around $145 million!
  • Nuclear maneuvers (steam-off) or shutdowns declined by 791 GWh (gigawatt hours) and saved approximately $60 million.
  • Net exports (exports less imports) also fell by 2.318 TWh and, combined with the higher HOEP average for the year, saved ratepayers approximately $320 million.
  • Foregone hydro generation was probably lower as the first three quarters reported by OPG show it dropped from 4.5 TWh to 2.4 TWh (down 2.1 TWh). That saved around $90 million.

Taken together, that $615 million ratepayers had to absorb in 2017 comes to much more than Class B residential ratepayers benefited in 2018. There are only 4,665,000 of them so total net savings was only about $25 million.* Other Class B ratepayers presumably received some very minor benefits, too.

The reason these benefits were not more is because additional costs were levied in 2018, absorbing most of the remaining $590 million. The Ontario Energy Board approved large rate increases for OPG for the regulated hydro and nuclear generation segments.  The rates for the latter rose substantially and will also increase further in 2019 and 2020 before falling back in 2021 as the OEB used their power to attempt to “smooth” the nuclear refurbishment costs over several years.

Despite the fact that increased consumption in 2018 helped to, ever so slightly, reduce costs, the IESO continued their efforts to get us to reduce consumption by spending upwards of $350 million on conservation programs.

Why?

The small price drop for Class B ratepayers turns the economic law of “supply and demand” which is: increased demand will increase prices.  Somehow that law works in reverse in Ontario’s electricity sector!

Enjoy your two extra “Timmies” this year!

PARKER GALLANT

*These savings have nothing to do with the 25% reduction under the Fair Hydro Act which eliminated the 8% provincial portion of the HST and provides a 17% reduction for residential ratepayers. The FHA amortized assets over a longer timeframe than normal in the rest of the electricity generation world.

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Smart meters, smart grids, conservation campaigns: how well does IESO watch your money?

More on Ontario’s IESO…

August 1, 2018

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.

PARKER GALLANT