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.
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!
*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.