New panel may be a shield for the government on power policy, hydro bills

Shortly after Glenn Thibeault was appointed Ontario Energy Minister, he was at an Ottawa press conference. When asked about electricity service “disconnections” he feigned ignorance saying, “I continue to drink from the firehose” suggesting he couldn’t answer the question due to the complexity of the portfolio.

One and a half years later, it now appears he knows more than the folks at the Ontario Energy Board (OEB).

Minister Thibeault recently announced he is “launching a review” of the OEB via a panel headed up by Richard Dicerni, a former acting CEO of Ontario Power Generation (appointed to that position by Dwight Duncan when he served as Minister of Energy under Premier McGuinty).

The press release announcing the panel review noted,  “The OEB is responsible for establishing energy rates and prices that are reasonable, setting rules for energy companies operating in Ontario, and making the energy system easier to navigate and understand for consumers.”

It also mentioned “The panel will have a broad mandate including reviewing how the OEB can continue to protect consumers amidst a rapidly changing sector, support innovation and new technologies, and how the OEB should be structured and resourced to deliver on its changing role. The panel will seek feedback from the public starting in spring 2018, examine best practices from other jurisdictions and report back to government by the end of 2018.”

OEB under government’s thumb

The OEB was stripped of its authority by Premier Wynne and Minister Thibeault when they decreed, under the Fair Hydro Act, that electricity rates for residential ratepayers would be reduced by 25%. That decree followed 18 directives and letters of instruction to the OEB by a variety of Ontario’s Energy Ministers since 2003.  Five of those directives/letters were issued by the current Minister.

So, the question today is, what is the panel likely to find and what are they likely to recommend?

More to the point, what won’t they find out?

Ontario ratepayers expecting the panel to find the OEB was responsible for the rate increases we have experienced will be disappointed.  If ratepayers expect the panel to recommend the OEB be given back their regulatory authority as one would hope, that  won’t happen either, or at least not before the 2018 election is over.  The panel, as noted above, has been instructed to report by the end of 2018 or about six months after the upcoming election in June 2018.

As an observer of the electricity portfolio, I think the objective of establishing this panel is it to give the Ontario government talking points to deflect mismanagement. Minister Thibeault’s quote in the press release carried this message: “Utilities and regulators need to respond by renewing their focus on efficiency, reliability, affordability and looking at new cutting-edge ways of keeping electricity consumers as their top priority.”

Never mind that the “focus” of utilities and regulators over the past decade has been to execute policies dictated by their masters—the various Energy Ministers who have arbitrarily decreed their views via directives, specific acts and regulatory changes on how the electricity sector should function.

Down a very long road

When Liberal candidates are questioned about the energy file by media and voters leading up to the election day in June next year, they will surely say we need to wait for the panel conclusions later in the year, and that the government expects the OEB to help us move to an equitable and “fair” price for electricity in the province. They will claim they have told the utilities and the regulators they need to focus on the electricity consumer and that they expect “fairness” will be the outcome!

The panel could become a very useful deflection tool ward off criticism and escape allegations of the harm caused to ratepayers and the Ontario economy.

It is clear the Minister of Energy has learned a lot since his appointment.

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Abracadabra! Now you see it, now you don’t on Hydro bills

No, wait: you’re never going to see it

[Getty images]
On December 12, 2017, Yvan Baker, Liberal MPP for Etobicoke Centre introduced Bill 190, An Act to amend the Consumer Protection Act, 2002. After the first reading he provided a short statement:

Mr. Yvan Baker: Speaker, we all know how terrible it feels when you expect to pay one price for something and end up paying a price that’s much higher than that. Consumers feel confused, misinformed and sometimes misled.  This bill, known as the What You See is What You Pay Act, amends the Consumer Protection Act by adding a new section that requires all suppliers of goods or services to ensure that any information provided to a consumer regarding the price of a good or service includes the all-inclusive price. The all-inclusive price is a total of all amounts that a consumer will have to pay for the good or service, including tax and other charges or fees.

This will ensure that consumers don’t have to worry about hidden taxes or fees and that they can make more informed choices. It will ensure that what you see is what you pay.”

So, a question: what will happen to our electricity bills in the future?

According to Hydro One they will have “A fresh new look to serve you better”.  Hydro One appears to be in the process of spending $15 million dollars to make that happen, as explained on page 2032 of one of the dozens of documents filed with the OEB seeking several rate increases. Those will cost $141 more per average ratepayer over the next four years.

Energy Minister Glenn Thibeault spoke to the billing issue in the Legislature December 12 stating:  “We have an LDC working group with the Electricity Distributors Association, which represents all local utilities across the province. They’re working with us, as part of the long-term energy plan, to create a bill redesign. They understand what needs to be done and how we need to ensure that we make it as clear as possible, for people to understand how our electricity system works and how our electricity bills work as well.”

A quick look at the sample “fresh” bill posted by Hydro One doesn’t show much difference from those currently used, although it promises we ratepayers will “Understand more about the electricity use, delivery and regulatory charges that make up your statement.”

I suspect there is much we won’t be told. The Yvan Baker bill will presumably bury the breakdown of what is in the key three lines “Electricity used,” “Delivery” and “Regulatory Changes” so we shouldn’t expect to be enlightened.

Here are several samples of what we won’t see as a breakdown on our bills:

  1. Cap and Trade costs—they are not allowed to appear on either our electricity or natural gas bills
  2. Fuel costs for water both running through turbines and being spilled when IESO instructs OPG to do the latter. Costs/fees paid to the province annually are in excess of $350 million.
  3. Costs for curtailed wind generation of over $400 million annually.
  4. Costs for spilled hydro of 4.5 TWh (terawatt hours) at a cost of about $200 million annually.
  5. Costs for various conservation programs estimated at $400 million annually.
  6. Costs for line losses of 5/6 TWh annually representing a cost of at least $500 million.
  7. Costs for steaming off Bruce Nuclear—annual costs unknown but believed to be $50/100 million annually.
  8. Costs for “gaming” the system by gas plant and coal plant operators estimated to be in excess of $350 million by the Auditor General of Ontario over a period of several years.
  9. Costs absorbed for exporting surplus generation annually in excess of $1 billion.
  10. Costs associated with the Class A to Class B transfer estimated to be around $1 billion annually.
  11. Interest costs (unknown) on borrowed funds related to the Fair Hydro Act’s 25% reduction.

Do the quick math on the above you will note the annual costs of what we won’t see itemized on our bill comes to $4 billion. Most of it represents no value to residential or small business ratepayers. The only value accrues to the Class A ratepayers and all the costs will be paid by residential and small business ratepayers.

A rough estimate of the costs of the above to the average residential ratepayer who consumes 9 MWh (megawatt hour) annually is approximately $27.00 per/MWh (2.7 cents/kWh) and represents $243.00 annually ($27,00 X 9 MWh) for no benefit!

For Ontario ratepayers “What You See is What You Pay” has been a fact of life under the current government. Hydro One’s $15-million spend to give us a bill without a proper breakdown will do nothing to “to ensure that we make it as clear as possible” despite Minister Thibeault’s claim!

Transparency will continue to elude the Energy Ministry and ratepayers will still feel misinformed.

Ontario’s fond hopes for wind power dashed by reality

Ontario’s energy minister will likely crow about the $146 million in revenue from selling surplus power recently … too bad it cost consumers $892 million

 If you visit the Canadian Wind Energy Association (CanWEA) website, the first page has the message:  “Wind is delivering clean, reliable and low-cost electricity”.  Anyone following my recent postings on how wind has either delivered almost no power or way too much, may have a different view.  You can also find this homily in the Energy Ministry’s just released 2017 Long-Term Electricity Plan, Delivering Fairness and Choice: “Wind power is also being produced more efficiently,” which distorts the truth!

Recent facts:

One day of wind power

Tuesday October 24, 2017 was a day when the wind was blowing strongly for 24 hours. IESO had forecast the approximately 4,220 MW of Tx (transmission-connected) capacity could have delivered 88,200 MWh of generation, meaning they would operate at over 86% of capacity.  Using that capacity value for the 580 MW of Dx (distributor-connected) turbines, another 12,080 MW were no doubt being generated at the same time — that meant almost 30% of Ontario’s total demand could have been supplied by wind.

As it stands, however, Ontario’s demand suggested we didn’t need all that power so IESO directed Tx connected turbine generators to curtail over 52,000 MWh. So, that same day, Ontario exported 40,300 MWh of free power to New York and Michigan, 11,700 MWh less than IESO curtailed.

The delivered and curtailed (paid for but not delivered) wind power on October 24th that wasn’t needed cost Ontario ratepayers $13.5 million or $280.60/MWh (28.1 cents/kWh).  If that happened every day the annual cost to Ontario’s ratepayers would be in excess of $5 billion.

Nine months of wind power

Let’s look at the nine months starting January 1, 2017 to the end of September and see what wind has contributed — and cost — Ontario ratepayers.  In the first nine months of 2017, industrial wind turbines could have produced about 9,820,000 megawatt hours (MWh) from Tx and Dx connected capacity — if curtailed generation was included! IESO however, forced curtailment of over 2,209,000* megawatt hours (MWh) or 22.5% of forecast generation to avoid compromising our grid and causing blackouts or brownouts.  Ontario ratepayers picked up the cost of curtailed power at $120 per/MWh costing them more than $265 million. The grid-accepted wind (7,620,395 MWh) cost; at $135/MWh added to the cost of curtailed wind brought the cost to ratepayers to almost $1.3 billion and more than $170/MWh (17cents/kWh). We would note when wind generation is high, IESO frequently instructs OPG to “spill water” and Bruce Nuclear to “steam off” power. Ratepayers also pick up those costs.

Nine months of (net) exports

From January 1, 2017 to September 30, 2017, Ontario’s net exports (exports minus imports) were 9,058,008 MWh. Those net exports were sold at somewhere close to the HOEP or hourly Ontario electricity price which to the end of September averaged $16.15MWh, so net exports sales generated about $146 million in revenue.  The sale price does not include the GA or Global Adjustment (the difference between contracted or regulated rates and the HOEP), meaning Ontario’s ratepayers picked up the average GA costs to the end of September.  The GA averaged $98.48/MWh for the first nine months of the current year, so the 9,058,008 MWh of net exports cost Ontario’s ratepayers just over $892 million dollars!   That is the equivalent of almost $200 per average residential ratepayer.

And the year isn’t over.

To put those net exports in context, Ontario’s net exports represented slightly over 92% of both the curtailed and delivered wind generation in the first nine months of the year, yet we were burdened with the cost of $892 million dollars for them, along with the costs of wind curtailment of $265 million.

The foregoing makes CanWEA’s claim of “low-cost electricity” and the Energy Ministry’s comments about wind power “being produced more efficiently” look to be simply fond hopes!

 

 

* My thanks to Scott Luft for his ability to generate reliable wind data using IESO’s files.

Open Letter to the Energy Minister: where is the “fairness”?

Open letter to: The Honourable Glenn Thibeault, Ontario Minister of Energy

October 30, 2017,

Minister Thibeault:

RE: Delivering Fairness and Choice

I have been sifting through your Long-Term Energy Plan 2017 (LTEP-2017) and found lots of really interesting claims in the 156 pages. Many of the claims don’t appear to be well researched or of real value to Ontario’s electricity system and will impact ratepayer bills to a factor well in excess of the forecast rate increases made in the Plan.  Here are a few I find that bear little resemblance to facts or reasonableness and accordingly I seek answers from your ministry.

About electric vehicles (EVs)

As a starter I note this remark in the LTEP: “If too many EVs in a neighbourhood charge at the same time, important parts of the distribution system could be strained. As EVs become more popular, pressures on our distribution networks will grow and utilities will need the tools to manage this change in a cost-effective way.”

  1. 1. My question is: are “the tools to manage this change” incorporated in your projections and who will pay the costs associated with acquiring “the tools”?

In another spot I note the LTEP states: “The outlook assumes the equivalent of approximately 2.4 million electric vehicles by 2035.” If you went back and looked at the 2010 LTEP you would see the then Energy Minister, Brad Duguid, forecast: “This scenario is consistent with the current government goal for electric vehicles: five per cent by 2020.” At that time 5% would have been about 420,000 vehicles but a report on the registered EVs on the road at the end of the 2017 first Quarter show only 5398 EVs are registered in Ontario so clearly that “goal” will be missed by the proverbial country mile. You are suggesting by 2035 registered EVs will be 2.4 million or 28% of all vehicles on the road. Seems like a stretch goal as Duguid’s forecast was! If you are confident in your projections I have a question:

  1. 2. Why continue the big fat grants of up to $14,000 per vehicle plus another $1,000 to install a charging station (which will cause problems in the distribution system) if the forecast is for sales to ramp up to the predicted level?

 

Q.3. Who will pay for road upkeep if no gas tax is being collected from the 2.4 million EVs using our roads?

About projected power costs

I would point out that one of the notes on the chart depicting projected bill increases on page 28 has in very small print the following note: “OEB defined the typical residential customer as a household that consumed 800 kWh of electricity per month. As of May 2016, the OEB changed their typical residential consumption to 750 kWh per month, due to declining household consumption”

Q.4. Why compare the average cost increases of 750 kWh now and in the future to the 800 kWh used in the two prior LTEPs unless the objective was make the percentage and dollar increases look better?

Those 50 kWh would equate to 2.5 days of monthly usage (one month per year) at the lower level used in the current LTEP which equates to a $121.00 annual increase!

About community benefits from Industrial Wind Turbines

Under the heading: “Communities Benefiting from Renewable Energy” the LTEP states: “The Municipality of Chatham-Kent is widely recognized as one of Ontario’s leading green energy communities, which has helped spur local economic development. The municipality has received significant benefits for hosting a number of wind energy projects. Recent and proposed wind projects will deliver an estimated $27 million in community benefits and property tax revenue over a 20-year period for the municipality.”

I presume one of the Ministry’s staff would have briefed you that when Dwight Duncan was the Minister of Finance, he decreed that MPAC (Municipality Property Assessment Corp.) would assess the value of Industrial Wind Turbines at $40,000 per MW (megawatt) even though the capital cost of one would be in the US$1.5/2 million range. What that means is most municipalities get little property tax revenue from any of those 500-foot monsters. In other words, it was hardly worth mentioning in the LTEP! Now one of the other issues related to Chatham-Kent was fairly recent news (a couple of months ago) about “water well contamination” caused by one of those contracts (Pattern Energy and Samsung) awarded and the Mayor, Randy Hope, even asked for help so I was curious why this example would have been included in the LTEP.   That leads me to my next question.

Q.5. Why was no mention made in your LTEP of contaminated well waters in this area, complaints about human health effects, property devaluation, effects on tourism or bird and bat kills?

About comparing average electricity prices

I note you had a section on large industrial electricity consumers with the following statement taken from the LTEP: “Currently, the electricity price for industrial electricity consumers in Ontario is lower than the average price in the Great Lakes region as reported by the U.S. Energy Information Administration”

In examining the LTEP claim related to the foregoing statement I note what has been done by your Ministry was to simply remove 30% of the Ontario industrial rates due to the difference between the US and Canadian dollar at the present time. You do realize that 4 years ago in 2012 our dollar was at par with the US dollar. Another fact omitted is the U.S. EIA data for August 2017 for the Great Lakes states of New York, Michigan and Ohio all show electricity costs declined from August 2016. Two of those states benefit the most from our, almost free, surplus exports.   In that regard it leads me to a couple of questions:

Q.6. Did the advent of the Class A rates in 2012 signal that Ontario’s industrial rates had far outstripped our neighbours and the Ministry was being aggressively lobbied to reduce them by AMPCO?

Q.7. Are you comfortable with the fact that our surplus net exports of electricity in 2016 of 13.864 terawatts (TWh) were sold at a price of $16.6 million/TWh generating $230 million of revenue while Ontario’s ratepayers were picking up the Global Adjustment costs of $96.6 million/TWh meaning Ontario’s ratepayers subsidized those surplus exports with $1.109 billion or the cost of moving two gas plants?

  1. 8. There was nothing in the 156 pages that spoke to residential or small business rate comparisons and was that because Ontario’s rates are the highest in Canada and most of the US?

About wind and solar renewables

The following remarks in “Delivering Fairness and Choice” about wind and solar caught my attention: “Due to the substantial decline in the cost of wind and solar technologies over the last decade, renewables are increasingly competitive with conventional energy sources and will continue to play a key role in helping Ontario meet its climate change goals.” That claim is surprising due to the fact that we pay wind development companies for delivering power when we don’t need it putting us in surplus which frequently requires us to sell it to New York or Michigan, etc. at a huge cost, so how can you claim you are striving “to make energy more affordable” unless you are doing it for our neighbours. Perhaps wind and solar are “increasingly competitive” because our electricity rates have increased at multiples of the inflation rate!

Before penning this letter, I had a look at the first nine (9) months of the current year and guess what—we paid wind developers $265 million to curtail generation because we didn’t need it. The 2.209 TWh they curtailed was over 22% of what they could have produced (if we needed it) and could have supplied about 250,000 average households with power for the full year. Because of the braggadocio evident in the “Plan” when speaking about wind and solar I naturally have two questions for you.

Q.9. Why did you say wind and solar “are increasingly competitive yet we continue to subsidize them?

Q.10. Why not cancel the projects that have not commenced construction as it is clear we don’t need wind’s intermittent and unreliable power that creates surplus supply and often are paid to not generate power?

About those GHG emissions

Another claim in the LTEP after brief comments about investments in “clean generation sources” the following statement appears: “Thanks to these investments, Ontario’s electricity sector is forecast to account for only about two per cent of Ontario’s total GHG emissions in 2017 and the emissions are forecast to be more than 80 per cent below 1990 levels.” 

Q.11: So, are you suggesting Ontario’s ratepayers have been paying a carbon tax via the price of electricity and renewable subsidies since 1990, but all of the governments since then have not been transparent?

About creating jobs

The LTEP suggests that it will be responsible for creating 163,400 jobs due to nuclear refurbishments, renewable energy jobs in wind and solar etc. Seems like a stretch goal particularly when we heard the same theme in the very first LTEP released by Brad Duguid when he sat in your chair! One example you included was: “According to a report from an expert third-party, the renewables sector is forecast to contribute nearly $5.4 billion to Ontario’s gross domestic product and create 56,500 jobs between 2017 and 2021. Many of the companies that participated in Ontario’s expansion of renewable energy are now poised to export their expertise and products to foreign markets. This could contribute as much as $1 billion to Ontario’s GDP and could add as many as 10,700 jobs between 2017 and 2021.”

The example you cite in the “Plan” employs 90 people or about one quarter of the Siemens plant in Tillisonburg that is closing.   Naturally the claim made incites me to ask another question:

  1. Could you please provide me a copy of the report you reference from the “expert third-party”?

Thanks in advance for your response.

Yours truly,

Parker Gallant

Prince Edward County, Ontario

Ontario’s new energy plan: bragging, promises, and unanswered questions

Ontario’s Long-Term Energy Plan (LTEP) 2017 is labeled “Delivering Fairness and Choice”. It comes on the heels of the Fair Hydro Act, indicating the government has moved beyond their Stretch Goal concept and now, pre-election, favour the term “fair”.

The 2017 LTEP is full of self-congratulation starting with the Minister’s Message describing their concept of fair! Energy Minister Thibeault says:

“Delivering Fairness and Choice makes an important commitment: we will strive to make energy more affordable, and give customers more choices in their energy use, ensuring that Ontarians and their families continue to be at the centre of everything we do.”

He goes on to state, “By eliminating coal-fired generation, we now have an electricity system that is more than 90 per cent free of emissions that cause climate change. The phase-out of coal-fired generation and our investments in clean generation have contributed to dramatically improved air quality in Ontario – smog advisories have dropped from 53 as recently as 2005 to zero in 2016.”

The latter comment makes one wonder why he went back to 2005 instead of going to 2012, but perhaps it was because the claim wouldn’t look nearly as impressive. By that time the Liberals had been in power for over nine years. It is worth noting that in 2012 the coal plants generated only 4.3 TWh of electricity and there were 30 days with smog advisories.

Minister Thibeault continues by describing the wonders of what (they claim) has been accomplished, and broadly describes future plans while elaborating on how government “is using this opportunity to move ahead with innovative ideas for managing the system and reducing costs. Initiatives such as Market Renewal will ensure the province has appropriate sources of electricity at the lowest possible price. This initiative could save Ontarians up to $5.2 billion over a 10-year period.” 

In a quick review of the 156 pages of the report I found several other claims about all the money they previously saved, together with how much the 2017 LTEP will save! Here are some of them spread throughout the plan:

  • Deferring the construction of two new nuclear reactors at the Darlington Nuclear Generating Station, avoiding an estimated $15 billion in new construction costs;
  • Driving down the cost of renewable energy generation through annual reviews of Feed-In Tariff (FIT) pricing, revised procurement totals, and the introduction of competitive procurement for large renewable projects. This reduced the cost of renewable energy generation by at least $3 billion, compared to the forecast in the 2013 Long-Term Energy Plan (2013 LTEP);
  • Suspending the second round of the large renewable procurement process (LRP ll) and the Energy-from-Waste Standard Offer Program. This is expected to save up to $3.8 billion compared to the forecast in the 2013 LTEP;
  • Renegotiating the Green Energy Investment Agreement with Samsung, reducing contract costs by $3.7 billion;
  • Starting the refurbishments at the Bruce Nuclear Generating Station in 2020, instead of 2016, helping to save $1.7 billion compared to the forecast in the 2013 LTEP; and
  • Pending regulatory approvals, continuing to operate the Pickering Nuclear Generating Station up to 2024, for an estimated saving for ratepayers of as much as $600 million.

Do the quick math on the above statements, without the savings of $5.2 billion from the “Market Renewal”, you will quickly note they total $27.8 billion! Reading about the above savings one notes a substantial amount of the savings comes from pushing expenditures into the future which will presumably coincide with repayment of the money deferred under the Fair Hydro Plan. That means our children and grandchildren will face some dreadful electricity costs!

One of Minister Thibeault’s closing sentences tells us, “Our plan will ensure we can all depend on a clean and reliable supply of affordable energy to power our households and businesses for many years to come.”

With those purported savings of $27.8 billion we should ask Minister Thibeault to please explain why rates have gone up so much since the Green Energy and Economy Act was passed by the Legislature in 2009?

We should then ask him, why his newly minted 2017 Plan indicates they will continue to climb in future years at well over anticipated inflation rates?

 

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.

 

Labour Day weekend stats show up Wynne government power folly

Mr Thibeault: If you sell the lemonade for 6.5 cents but it costs you 13 cents … oh, never mind

The Labour Day weekend was a disappointment for many as the last summer holiday featured below-normal temperatures in most of Ontario. The cool weather meant Ontario’s demand for electricity was only 904,000* megawatts (MWh) for the three days.

The “weighted” average of the hourly Ontario electricity price (HOEP) averaged a meagre $6.13/MWh (0.61 cents/kWh), meaning the market value for that consumption was only $5.542 million.

At the same time, however, Ontario was exporting 168,000 MWh (net exports i.e., exports minus imports) to New York, Michigan, etc. at about the same price. Ontario got $1.03 million from the sale of that power, which brought the total market value of Ontario’s consumption and exports to $6.572 million.

Apparently.

If the $6.57 million figure was the true cost of power generation, then Ontario’s ratepayers would have been delighted; however, we know the HOEP makes up only a small portion of the cost. The Global Adjustment (GA) represents the bulk of costs.

What the power REALLY cost

The GA includes the difference between the contracted rate and the market or HOEP value and many other costs.   As is the normal process of IESO (Independent Electricity System Operator) they provide a forecast of the GA at the start of each month. For September of this year, it was the highest ever at $127.39/MWh** or 12.7 cents/kWh.    Should IESO’s forecast prove correct, the total cost of those Labour Day megawatt hours for September will be $133.52 or 13.3 cents/kWh.

In other words, the 1,072,000 MWh consumed and exported over the three days of the Labour Day weekend had an all-in cost of over $143 million.

Ontario’s ratepayers in the interim were enjoying TOU (time of use) off-peak rates of 6.5cents/kWh meaning they will be billed $58,760,000 (904,000 X $65/MWh = $58,760,000).  That $58.760 million plus the $1.03 million from the export of the 168,000 MWh will produce revenue of only $59,793,000.

That leaves a shortfall in the costs of contracted generation of $83,340,440. ($143,133,440 – $59,793,000 = $83,340,440)

The $83 million shortfall for those three days winds up in what is referred to as a “variance” account and is normally reflected in the resetting of the rates semi-annually by the Ontario Energy Board on May 1st and November 1st. The Fair Hydro Act however kicked these costs down the road and will accumulate with all the other shortfalls and reflect themselves in future rate increases.

Still digging the hole

Despite these crazy financials, Energy Minister Glenn Thibeault has not cancelled the renewable energy contracts issued in 2016 that are now chasing their Renewable Energy Approvals from the Ministry of the Environment and Climate Change. The amount of exported power on the Labour Day weekend combined with the 36,000 MWh of curtailed wind power represented more than one-fifth (22.6%) of Ontario’s demand.

Ontario clearly does not need any more intermittent wind power generated out of phase with demand.

Time for the Minister of Energy to brush up on his Grade 6 Math and stop punishing Ontario’s ratepayers.

Parker Gallant

 

* Ontario’s demand for the 2016 Labour Day was 1,197,000 MWh

**Hopefully the IESO forecast includes an allowance for curtailed wind which was approximately 36,000 MWh over the three days of the weekend and which Ontario ratepayers pay $120/MWh.