What did we get for billions spent on electricity in Ontario?

It’s not over: Ontario taxpayers and ratepayers will be paying for the past government’s mismanagement for years to come. Here’s how… and how much.

Ontario wind turbines at Belle River project

The last in a series on the IESO

August 2, 2018

The two earlier articles about Ontario Independent Electricity System Operator or IESO revealed the fact that it could be “gamed” — and in fact, it was! To the tune of $100 million, by just one generator.

Needless to say, any gaming by a local distribution company (LDC) also may be happening. Why would I suggest that?  When I asked the IESO why the Fair Hydro Plan “Variance” amount was so high for May 2018, they said this:

“Please note that settlement data submitted to the IESO by the LDCs is not audited by the IESO (audit responsibilities reside with the OEB) and is processed as submitted.”

The May “Variance” amount was $309.9 million. More disturbing is that the first six months of the current year has rung up $1.180 billion in the “Variance” which could represent $2.360 billion for 2018 if the last six months are similar.

The results to date of the FHP “Variance” amount is well in excess of the calculations presented by the Ontario Financial Accountability Office (FAO) in their review, which had the following note:

“Figure 3-3 summarizes the FAO’s estimate of the annual cost of the FHP through to 2045-46. The FAO estimates the cost of the FHP to the Province will peak at $1.8 billion in 2020-21, after which the FAO assumes that the electricity relief programs will no longer be funded by the Province. The HST rebate is forecast to cost $0.9 billion in 2021-22, rising rapidly to $1.6 billion by 2028-29”.

The average suggested by the FAO per year was $1.750 billion, so, at the current rate of accrual, future Ontario ratepayers may be looking at total of almost $9.5 billion (without including interest costs) added to our electricity bills.

Taxpayers will be affected too: They’ll have to bear the costs of lost revenue of about $4.1 billion (plus interest costs) associated with the HST rebate and another $3 billion associated with “Adjusting Electricity Relief Programs”. The latter includes the RRRP (Regulated and Remote Rate Program) the OESP (Ontario Electricity Support Program) and a new First Nations On-Reserve Delivery Credit and Affordability Fund.

So, the 17-percent reduction on our electricity bills, coupled with the HST foregone tax revenue plus the cost of those “Relief Programs” represents $16.6 billion of spending, without interest costs.

What are we getting for $16B?

What are we getting for that $16.6 billion? No new power generation. No new transmission lines or upgrades to LDC infrastructure. Simply more wasted money, lots of it, as a result of the Green Energy Act.

Questions put to the IESO about the May Variance amount got the following response from them:

“Hi Parker– the increase in GA deferral in May is mainly due to most LDCs submitting settlement data to the IESO based on the second GA estimate which was unusually high (i.e., 13.2 cent/KWh) in May. LDCs submit May settlement data to IESO during the first four business days of June at which time the actual GA rate would not have been calculated yet as per IESO’s settlement schedule. Each month there is a true up when LDCs submit their data to the IESO for the previous month plus an estimate of the current month they are submitting for.”

Read that and you have to ask, Why? Why not settle the Variance account once IESO has determined “the actual GA rate” rather than go through a series of wasted financial maneuvers? Logic doesn’t seem to be a formula used or followed within the electricity sector.

Are the ratepayers and taxpayers being “gamed” or can we trust IESO with our hard-earned money and believe that each and every action by them is truly being “audited” by the OEB?

I will leave the foregoing question to be answered by an “Electricity Audit” that will hopefully be conducted by Ontario’s new government.

PARKER GALLANT

 

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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

Numbers don’t lie: intermittent wind and solar surplus to Ontario’s energy needs

The IESO (Independent Electricity System Operator) released 2017 data for grid-connected* generation and consumption and, surprise! The data reveal that power from wind and solar is surplus to Ontario’s  energy needs.

IESO reported Ontario’s consumption/demand fell 4.9 TWh (terawatt hours) in 2017 to 132.1 TWh. That’s a drop equivalent to 3.6% from the prior year.

Nuclear (90.6 TWh) and hydro (37.7 TWh) power generation was 128.3 TWh, making up 97.1% of Ontario’s total demand (without including dispatched power from either nuclear or hydro). The cost to Ontario ratepayers for the 128.3 TWh was approximately $7.6 billion or 5.9 cents/kWh.

Spilled hydro (paid for by Ontario’s ratepayers but not used) reported by Ontario Power Generation or OPG was 4.5 TWh for the first nine months of 2017. Out that together with 511 nuclear manoeuvres and the number is 959.2 GWh (gigawatt hours) wasted but paid for by Ontario’s ratepayers. Add in three nuclear shutdowns and it means Ontario’s nuclear and hydro generation alone could have easily supplied more than 136 TWh of power or over 103% of demand.

That doesn’t include spilled hydro in the last quarter of 2017 which will probably exceed at least one TWh.

Nuclear and hydro does it all

Nuclear and hydro could also have supplied a large portion of net exports (exports less imports) had all the generation potential actually been delivered to the grid. Net exports totaled 12.5 TWh in 2017.  Grid connected wind (9.2 TWh) and solar (0.5 TWh) in 2017 supplied 9.7 TWh and their back-up generation: from gas plants, supplied 5.9 TWh.  In all, the latter three sources delivered 15.6 TWh or 124.8% of net exports.  Net exports were sold well below the average cost of generation. Exports brought in revenue of about $400 million, but here’s the kicker: that surplus power cost Ontario’s ratepayers $1.4 billion, which is really a loss of $1 billion.

Grid-connected wind, solar and gas generation collectively cost approximately $3.5 billion for the 15.6 TWh they delivered to the grid, included curtailed (paid for but not used) wind power generation of 3.3 TWh. The cost of the wind power was more than $220 million per TWh, or 22 cents/kWh. That’s almost double the Class B average rate of 11.55 cents/kWh cited in IESO’s 2017 year-end results.

The 9.7 TWh generated by wind and solar was unneeded. If it had been required, it could have been replaced by gas power generation at a cost of only around two cents per kWh. Why? Gas generators are guaranteed payment of  about $10K per MW (average) of their capacity per month to be at the ready and if called on to generate power are paid fuel costs plus a small markup.

Price tag: $2 billion

In other words, if no grid-connected wind or solar generation existed in Ontario in 2017 the bill to ratepayers would have been about $2 billion** less! Grid-connected wind generation (including curtailed) cost ratepayers in excess of $1.7 billion and grid-connected solar added another $250 million!

That $2 billion, coincidentally, is about the same cost estimate of the annual amount to be deferred, and paid by future rate increases via the Fair Hydro Plan! In other words the current government could have easily saved future generations the estimated $40 billion plus cost of the Fair Hydro Plan by having never contracted for wind and solar generation!

The IESO results for 2017 sure makes me wonder: why hasn’t the Ontario Ministry of Energy canceled all the wind power projects that have not yet broken ground?

 

*   Distributor connected solar (2,200 MW) and wind (600 MW) added over $1.4 billion to the GA.

** The first 6 months of the variance account under the Fair Hydro Plan in 2017 was $1,378.4 million.

 

Wind waste should worry Ontario ratepayers

Ontario’s electricity ratepayers paid more than $500 million in 2017 for nothing

With only one month left in the current year, the bad news on the electricity sector keeps getting worse.

Well before the official sources such as IESO report on how much power industrial wind turbines generated and how much was curtailed (constrained, or paid for but not added to the power grid), my friend Scott Luft has published his estimates for both the former and the latter for the month of November.

As he reports (conservatively), curtailed wind in November was over 422,000 megawatt hours (MWh)  that could have supplied 562,000 average Ontario households with free power for the month.

Instead, no one got free power; the cost of the 422,000 MWh of undelivered wind power to Ontario ratepayers was $120/MWh.  That $50.7-million cost for the month was simply added to the costs of the electricity bills ratepayers will be obliged to pay, while some of it will deferred to the future as part of the Fair Hydro Plan.

Somebody’s enjoying cheap power — not you  

No doubt the wasted wind power presented itself when it wasn’t needed; if it had been accepted into the grid, that extra power could have caused blackouts or brownouts, so it was curtailed.  At the same time, much of the grid-accepted wind was exported to our neighbours in New York, Michigan and elsewhere, at discount prices!  Curtailed wind for November 2017 compared to 2016 was almost 55% higher.

How bad is it? Let’s review the first 11 months of the current year, compared to 2016.

So far in 2017, curtailed wind is about 786,000 MWh higher (+33.8%) at just over 3.1million MWh.  The cost of all the curtailed wind so far in 2017 is approximately $373.6 million, or $94.3 million more than 2016 costs.

And wind wasn’t the only source of power generation constrained. When Ontario Power Group reported their third Quarter (September 30, 2017) results they said this:

“Baseload generation supply surplus in Ontario continued to be prevalent in 2017, resulting in forgone hydroelectric generation for OPG of 1.1 TWh*: and 4.5 TWh in the three and nine month periods ended September 30, 2017, respectively, compared to 0.5 TWh and 3.9 TWh during the corresponding periods in 2016.”  

Translation: ratepayers will pick up the approximately $165 million cost of that waste via their electricity bills.

Not only are we curtailing wind and spilling hydro, but we also steamed off nuclear power generated by Bruce Nuclear at the same time we pay for idling gas plants to back up intermittent wind and solar power generation.

Intermittent wind and solar cost us

The cost of “greening” Ontario with unreliable and intermittent wind and solar keeps climbing, no matter what their proponents or politicians say.  As ratepayers and taxpayers we should reflect on why 25% of the waste of the noted 7.6 TWh of undelivered power and its cost of $539 million (so far this year) is being deferred via the Fair Hydro Plan.  And at the same time, we should recognize that we have experienced the worst possible planning in the Energy Ministry in the history of the province.

The energy sector in Ontario needs real planning by experts that will provide real value for money and save ratepayers from paying more than $500 million a year … for nothing!

~

*  1 (one) terawatt is equivalent to 1 billion kWh

Boldface type on hydro bills doesn’t make statements true

 

The baby’s not smiling… he can see the future

If you just received your monthly electricity bill from Hydro One (presumably all local distribution companies will have the same message), you will be drawn to the boldface type declaring:  “Ontario’s Fair Hydro Plan saved you $XX.XX on your bill. This amount includes the 8% Provincial Rebate.”

The next paragraph elaborates on that message by telling you “Ontario’s Fair Hydro Plan substantially lowers electricity bills for typical residential consumers.  This includes the eight percent rebate introduced in January 2017 and builds on previous initiatives to deliver broad-based relief on all electricity bills.” (“Previous initiatives”? Huh?)

Also included with your bill is a leaflet (English on one side and French on the other) expanding on the wonders of the Fair Hydro Plan with a picture of a happy smiling family (mom and dad but not the one-year-old in mom’s lap) viewing a laptop computer. Right above the picture is a white on black square with the words “Ontario’s Fair Hydro Plan Bringing electricity bills down”.

The baby is right not to smile: the information on the bill and insert contain only selective facts.*

What’s missing: 

Missing on the bill and the brochure was an explanation on why our cost of electricity climbed well over 100% due to the Green Energy and Green Economy Act which handed out long-term, above market contracts for intermittent and unreliable wind and solar generation.

Missing was information about the cost of moving two gas plants to save Liberal seats in Oakville and Mississauga.

Missing was any information about why we pay gas plant generators hundreds of millions of dollars to sit idle to back up intermittent and unreliable wind and solar generation.

Missing was any mention about the Global Adjustment Mechanism (GA) forcing Ontario to export surplus generation to NY and Michigan for pennies on the dollar causing ratepayers to pick up hundreds of millions of missing dollars to cover the cost of surplus generation.

Missing was any mention of the hundreds of millions of dollars the curtailment of wind generation, steaming-off of nuclear or spilling of hydro costs ratepayers.

Missing is any mention of the costs of hundreds of millions of dollars to annually pay for discounts for LED lights, an energy-efficient furnace or a new energy-efficient refrigerator, etc., etc.

Missing was any mention of the hundreds of thousands of families placed in “energy poverty” who have had to choose to either buy food or pay their hydro bills.

Missing is any claim to the harm caused to humans and nature by the thousands of unreliable, intermittent wind turbines erected or any mention about how their installation is now affecting water aquifers in certain parts of the province.

Fairness is in the eye of the beholder and the current claim that the government is “Bringing electricity bills down” should be expanded to state what most Ontarians know: “Bringing electricity bills down” today, will cause them to rocket upwards in the near future due to our complete mismanagement of the energy portfolio.

(C) Parker Gallant

November 18, 2017

 

* Selective facts are “true” facts that only tell us part of the story.

 

 

 

 

 

Hydro One: the Svengali behind the Fair Hydro Act?

If you are a Hydro One customer, when you get your bill this month it will include a letter addressed “To our valued customers” which describes the wonderful things Hydro One has supposedly done for you.  The letter, signed by CEO Mayo Schmidt, is filled with claims about actions taken and how they were all done to “serve you better.”

One of the paragraphs is particularly noteworthy. It declares:

“For our customers who are struggling with affordability, I want you to know that we are strongly advocating on your behalf. Earlier this year we urged government to make affordability a priority and we made several suggestions that resulted in the creation of the Fair Hydro Plan. The majority of our customers consuming 750 kWh a month have started to see an average reduction of 31 per cent on their monthly bill. For many of our customer, this represents a savings of $600 a year.”

So, the take-away from those words of sympathy from CEO Schmidt ($4.4 million* in compensation in 2016) suggests it was he — not Premier Wynne or Energy Minister Thibeault — who conceived the “kick the can down the road” concept that became the Fair Hydro Act!

Look back to a recent comment from Minister Thibeault in a CBC article, he said this about the Plan:  “ ‘This is like remortgaging our house,’ Energy Minister Glenn Thibeault told reporters Monday at Queen’s Park. “I’ve always said that the Fair Hydro Plan was a fair plan; it was the best plan we could come up with when we were talking with energy experts, accounting experts, the legal experts.”

When the Fair Hydro Plan was launched back on March 2, 2017 Premier Wynne said: “I have heard from people around the province who are worried about the price they are asked to pay for electricity and the impact it has on their household budget. Electricity is a necessity. By fixing problems in the system, we will be able to provide every residential customer in Ontario with an average 25 per cent off their bills now and make rates fairer in the future.”

So the question is, does the “we” include Hydro One’s CEO Schmidt, and is he classified as one of the “energy experts” Minister Thibeault claimed they talked with?  If so, I hope Schmidt told him about the rate increases Hydro One has applied for that will increase average customer’s bills by $141 a year in 2022 (based on current Hydro One rate applications under review by the OEB).

Those rate increases are needed by Hydro One to help pay for their upcoming purchase of Avista Corp. as it will represent a revenue gain to them of close to $500 million annually.

The LDC benefiting the most from the Fair Hydro Plan was Hydro One which still has the second highest distribution rates. Before privatization, they had the highest ratepayer arrears (past due accounts), the bulk of ratepayers accessing the Ontario Electricity Support Program (OESP) and the highest level of bad debts.  A part of the rate increase they currently seek would allow them to install “pre-paid smart meters” meaning if a ratepayer couldn’t afford top up their account they would be automatically disconnected.

On October 17, 2017 ratepayers got further bad news from Bonnie Lysyk, Ontario’s Auditor General reported due to the way in which the Fair Hydro Plan is being financed, ratepayers will be required to pay an extra $4 billion in interest costs.  That $4 billion increases estimated borrowing costs by 19% to $21 billion to cover the forecast $18.4 billion cost of the Plan. The latter costs represent the bulk of the 25% reduction (16%**), bringing total estimated costs for this portion to $39.4 billion.

The shell game of the Ontario Liberal government in Ontario’s energy portfolio continues, aided and abetted by Hydro One. If Hydro One’s rate applications are approved, their distribution rates will jump bringing more misery to their ratepayers!

 

* The CEO’s compensation is more than the total amount available annually under the LEAP (Low-income Energy Assistance Program) from the 73 local distribution companies in the province.

** The other 9% comes from removing the provincial portion of the HST (8%) and putting the OESP and RRRP (1%) as a taxpayer responsibility.

 

The Fair Hydro Act: Ontario’s unfair future

Wynne government’s “Fair Hydro” plan: another $3 billion a year. Fair?

The Fair Hydro Act kicked in July 1, 2017: we can now look at the first month of the 25% reduction Premier Wynne and her Minister of Energy Glenn Thibeault, gave us, and determine if the projected costs look reasonable.

The cost forecast for the Act according to the Financial Accountability Office (FAO) of Ontario, was: “the Province is proposing to borrow an estimated average of $2.5 billion per year through 2027 to pay a portion of electricity costs, thereby temporarily reducing the amount paid by eligible ratepayers. The Province would recover the borrowed funds, including interest, from ratepayers over an estimated 18-year period starting in 2028.” 

The FAO’s estimate includes: the 8% provincial portion of the HST, the reduction of 17% in electricity costs and the additional 6% promised to 800,000 rural customers (principally Hydro One ratepayers) who will pay less. The latter is related to taxpayers picking up the costs of the RRRP (rural and remote rate protection plan) and the OESP (Ontario Electricity Support Program) under the Fair Hydro Act.

While the estimate by the FAO for the deferral appears significant at $189 million per month* (plus interest), it may turn out to be much higher, based on what we see in the very first month.

The first month’s deferral has been reported by IESO as $394.7 million. According to IESO it includes adjustments for May ($110.2 million) and June ($136.6 million) that represent the “partial reduction” granted by the OEB to “eligible customers.”  That puts the monthly costs for July 2017 at $147.9 million.

The IESO spokesperson also noted due to billing cycles of the various local distribution companies (LDC), the full monthly cost will not become evident until August submissions are made by the LDC.

The $147.9 million will obviously be higher in the months and years ahead and well exceed the FAO’s estimates. For example, the July deferred GA amount would not include monies related to the different billing cycles, or include the 8% provincial portion of the HST.   Making a calculated guess, these would add another $100 million, meaning the monthly cost will be approximately $250 million or $3 billion annually.  As well, the OEB April 30, 2017 RPP (regulated price plan) report noted rates would have increased 3.1% May 1st had the Fair Hydro Act not altered normal procedures.

The 3.1% increase mentioned in the OEB report becomes clearer from this report excerpt: “After taking into account the reduction in the forecast amount of the Global Adjustment of approximately $1B, the average supply cost drops by $13.79/MWh relative to May 2016 prices, or $17.28/MWh relative to what RPP consumers otherwise would have paid starting on May 1, 2017.”

That 3.1% increase we avoided (deferred) and other rate increases approved by the OEB over the next several years will also be deferred, but accrued to appear on our future electricity bills.

Hydro One alone has nine rate applications either before the OEB or in the hopper, so we should expect a future whiplash from rate increases that will make the recent past look good!

And to think we thought the gas plant moves were costly!

Parker Gallant,

August 27, 2017

 

* The FAO chart 6-1 estimates a monthly impact of $41.00 per “average” residential ratepayer per month so the math equation is: $41.00 X 4,612,551 residential ratepayers (OEB Yearbook of Distributors for 2016) = $189,114.591 or $2.3 billion annually plus interest.