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.

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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.

 

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.

Ontario summer day means low power demand, high costs for consumers

A windy, sunny August day: sounds nice? In Ontario, that costs you. [Photo: Dorothea Larsen]
August 5 2017 was an interesting day: the wind was blowing and the sun was shining, in part of Ontario, anyway.

Unfortunately for Ontario ratepayers that weather will cost them a lot of money.

Why? The cost stems from the fact Ontario’s demand for electricity on that day was only 317,000 megawatts (MWh),* according to the IESO Daily Market Summary, probably due to conservation efforts and mild temperatures.  Low demand doesn’t save money: in fact, it will cost Ontario ratepayers millions of dollars due to bad management of the electricity sector by the current government.

I was curious about this windy, sunny day, which led me to contact Scott Luft, a master at using IESO data to give us a real picture of market demand and its costs.  Scott occasionally produces “Daily Ontario Supply Estimates” which provide a picture of both our demand and generated sources, what it cost, how much was exported, how much was curtailed/spilled (wasted), etc., and even how much of the costs were picked up by Class B ratepayers versus Class A.

Scott also estimates curtailed wind, spilled hydro, etc., using a conservative approach; they are generally confirmed months later by IESO.

Scott’s daily estimate for August 5, 2017 confirmed my suspicions!   Emissions-free nuclear and hydro generators alone supplied the 340,000 MWh of power Ontario needed easily, even exceeding Ontario demand by 23,000 MWh.  The cost of that generation was $21.1 million. After allowing for the value of the surplus 23,000 MWh as exports at the average hourly Ontario energy price (HOEP) of $4.94/MWh the cost per MWh comes to $66.34/MWh or 6.6 cents/kWh.**

Double the cost — and you’re paying it

Part of Scott’s daily estimate includes additional costs in the form of all the other generation sources, plus curtailed wind and solar, spilled hydro, biofuel and idling costs of gas plants. When those are added to the $21.1 million of nuclear and hydro, the price billed to ratepayers for the day jumps to $37.8 million — $119.24/MWh or 11.9 cents/kWh.  The Class A to Class B subsidy results in the cost per kWh for the “B” Class (that’s you and me) jumping to $131.10/MWh or 13.1 cents/kWh.

The other generation sources on Scott’s August 5 daily estimates include transmission (TX) and distributor (DX) connected generation, along with curtailed/idled, etc. costs with gas at 9,123 MWh (cost $4.1 million), wind at 49,088 MWh (cost $6.3 million), solar at 13,002 MWh (cost $6.1 million), biofuel at 701 MWh (cost $368,000) and imports of 8,563 MWh (cost $52,000).

The costs to you are mounting

Are you with me so far? What this means is, those other generation sources (including curtailed wind, etc.) of 85,000 MWh cost $16.7 million — $196.47/MWh or 19.5 cents/kWh) and are billed to … you, Ontario’s ratepayers.

Approximately $8.1 million of the day’s costs will be allocated to the Fair Hydro Plan and wind up on future electricity bills. If August 5 was a typical day, the amount kicked down the road for the next four years by the Premier Wynne-led government will amount to $3 billion annually (plus interest).  (The $8.1 million estimate for this day comes from the use of what is referred to as the “Global Adjustment Modifier” set by the OEB at $32.90/MWh from July 1, 2017 to April 30, 2018 and will be reset at the later date. The $8.1 million was obtained by simply multiplying Class B consumption — 246,000 MWh — by the $32.90 “Modifier”.)

Mismanagement of the energy portfolio by the Wynne-led government on August 5 generated a cost for Class B ratepayers that was excessive. It will continue, and lead to an explosion of households living in “energy poverty”*** when the Fair Hydro Plan comes to an end in four years.

The Minister of Energy needs to recognize the problems caused by intermittent and unreliable renewable energy!  Once he understands the latter he should immediately cancel any wind and solar contracted projects that have not commenced construction, along with any in the early planning stages.

Kicking the can down the road via the Fair Hydro Act is anything but fair. Paying twice for non-emitting clean energy simply amplifies the bad management this portfolio has received from our government.

Parker Gallant

August 11, 2017

*   Some of the above MWh references are rounded to the nearest thousand.

** The 6.6 cent rate, coincidentally, is close to our new off-peak rate of 6.5 cents/kWh (previously 8.7 cents/kWh) which came into effect July 1, 2017. The lower rate is a result of the “Fair Hydro Plan” instituted by the Premier Wynne that kicked 25% of the costs down the road for four years.  The Off-Peak rate back on May 1, 2007 was 3.2 cents/kWh so even after the recent reduction it is still up over 103% in the last 10 years.

*** Energy poverty is generally defined as utilizing 10% or more of a household’s disposal income to pay for their electricity and heating needs.