Weekends or weekdays: wind is a waste

October 20, 2017

Proof of the need to repeal the Unfair Green Energy Act

Tuesday October 17, 2017 was a typical Ontario fall weekday with electricity demand relatively low.

Total Ontario demand for power was slightly over 335,000* MWh for the whole day, peaking at hour 19 (7 PM) at 16,318 MW, according to the IESO’s Daily Market Summary.

That hour has significance as during weekdays, it signals the time when off-peak hours start. That Tuesday, it also was the hour when the Hourly Ontario Electricity Price (HOEP) reached its high for the day, getting all the way up to $5.01/MWh or ½ cent per kWh.

All through the day the wind was blowing. Based on the IESO’s Generator Report and Capability and their “wind generation forecast” it could have produced just over 57,000 MWh — that could have met 17% of Ontario’s demand.  IESO only accepted 20,900 MWh, however, and the other 36,100 MWh were curtailed or cut back.

The collective cost of the grid-delivered and curtailed wind generation over the 24 hours was almost $7.2 million, making the cost of the grid-accepted wind $344.50/MWh or 34 cents/kWh. Also because of a surplus of generated power, Ontario exported 38,200 MWh (almost double what IESO accepted from wind generators), principally to New York and Michigan — they had to pay them an average of $1.13 per MWh to take it.

All this makes it clear: Ontario’s electricity ratepayers don’t need any of wind’s intermittent and unreliable power, but are forced to pay for it anyway. To make matters worse, that power we subsidize gets delivered to our neighbours at negative prices. Those costs wind up on our electricity bills, too.

It’s time for Premier Wynne to stop the bleeding and kill the Unfair Green Energy Act.

 

* Numbers are rounded

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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 OEB flexes its muscles … but Hydro One keeps asking for more

Hydro One asks for more money. Sometimes, the OEB says no. Sometimes.

The Ontario Energy Board said NO to Hydro One’s request for $30 million, essentially for executive salaries — but another application for a rate increase is coming

Over the past several years, the rate applications submitted to the Ontario Energy Board (OEB) by Hydro One generally got the rubber stamp of approval despite the obvious — their distribution rates were growing at multiples of other distributors and their transmission rates also grew well past inflation rates.

The latter were/are not comparable as Hydro One has a transmission monopoly and that was entirely secured when they purchased Great Lakes Power in late 2016 for $373 million.  The purchase was blessed by the OEB even though it basically gave Hydro One control of over 98% of all the transmission lines in the province.  Prior to the purchase of Great Lakes Power, Hydro One had been snapping up small local distribution companies (LDC) and this writer has been critical of that for some time as outlined here and here.

Hydro One’s most recent attempt to acquire one of Ontario’s smaller LDCs was put on hold, however, by the OEB less than two weeks after the announcement of their plan to acquire Avista Corp. of Spokane, Washington for C$6.7 billion. The OEB’s approval related to the purchase of Orillia Power Distribution by Hydro One was held in abeyance because, the OEB’s “board staff found that rates proposed for previously acquired utilities in Hydro One’s distribution rate application suggest large distribution rate increases for some customers in future.”  Funnily enough, that is what I predicted in 2013 when Hydro One was busy scooping up several small LDCs.

The most recent event when the OEB flexed its muscles was in respect to the application from Hydro One asking for increased rates for their transmission monopoly. The OEB basically told Hydro One they would not be able to allocate $30 million in additional administrative costs to their rate increase application over the next two years.  The $30 million, as the OEB stated, was reflective of “hydro customers gain little from the jump in executive salaries that were largely generated by the IPO. The total corporate management costs for Hydro One in 2014 of about $5.5 million are set to increase to $22.1 million in 2018”.

While the two recent decisions by the OEB are encouraging, the worrying one for Hydro One’s ratepayers is the 2018-2022 Distribution Rate Application (OEB File No. EB-2017-0049). This particular application seeks rate increases totaling $11.75 per month or $141.00 annually for an “average” ratepayer consuming 9,000 kWh. It represents an increase of 1.56 cents/kWh!

The OEB’s 2016 Yearbook of Distributors notes Hydro One’s distribution in 2016 was 36,122,262,000 kWh, so the 1.56cents/kWh is an increase in revenue in excess of $565 million annually. If it’s only the 26,289,000,000 kWh that Hydro One report as their distribution total in their annual report, it will amount to increased annual revenues of $411 million. It it’s the former, it represents an increase in distribution revenue of 45% and if the latter, a 33% increased based on the net distribution income (deducting the cost of power) for 2016.   Either one will represent a multiple of the inflation rate.  And, either of those spectacular increases would go a long way to help Hydro One pay for the above market price they have agreed to pay for the acquisition of Avista!

One certainly hopes the OEB will continue to flex their muscles in respect to Hydro One and ensure they are not allowed to extract another $565 million annually from ratepayers’ pockets just so they can pay obscene executive salaries and dividends to Avista shareholders.

In the meantime, many Hydro One households in Ontario continue to have to choose between paying their hydro bill or putting food on the table.

Wynne government hydro discount means larger costs looming

IESO Connecting Today. Powering Tomorrow.

…and racking debt up for tomorrow, too

October 2, 2017

The Wynne government’s (apparent) 25% reduction in electricity rates for Class B ratepayers (ordinary folks, not huge corporations and businesses) under the Fair Hydro Act might have resulted in increased power consumption … but it doesn’t appear to have had that effect.  Should reduced demand for power continue in Ontario, the big discount will simply drive up the debt to be accumulated over the next ten years of the deferral (refinancing existing assets) under the act.

The Independent Electricity System Operator or IESO just released their Monthly Market Report for August 2017. Compared to the August 2016 report, overall consumption was down from 13,113,357 MWh to 11,350,008 MWh or 1,763,349 MWh (-13.4%). That’s enough to power about 200,000 average households for a year.

When one looks at the breakout between Class A and Class B ratepayers, however, IESO reports consumption by Class A ratepayers increased from 2.373 TWh (terawatt hours) in 2016 to 3.230 TWh in 2017 —  36.1% (.857 TWh).  Class B ratepayers consumed 22.9% less (2.515 TWh) reducing consumption from 10.962 TWh to 8.447 TWh.*

The lower consumption by Class B ratepayers was partially influenced by a slightly milder August in 2017; however, IESO notes in the recently released 18-Month Outlook “Weather-corrected demand was a similar 11.5 TWh and represents an all-time low for the month.”

Now looking at the Class A consumption, the combined rate (Global Adjustment + HOEP [hourly Ontario energy price]) dropped from $75.05/MWh to $70.53/MWh (-6%) from 2016 to 2017, and that ratepayer class appears to have taken advantage of the drop. Some of the increase was no doubt due to  an expansion of Class A ratepayers following a change in who qualifies under the Industrial Conservation Initiative program. That allowed companies with lower consumption to join the Class A group.  Energy Minister, Glenn Thibeault dropped the Class A attributes from peak consumption of 3 MWh to 1 MWh and then finally to 500 kWh* in an effort to mollify the numerous medium-sized companies and associations who lobbied hard to get a lower electricity price.

Costs are up for regular folks, down for business

The weighted average (GA+HOEP) cost for “B” class ratepayers is up $15.47/MWh year over year, but down for class A by $4.52/MWh. Costs (GA +HOEP) in August for B class ratepayers was $118.37/MWh and those costs for A class ratepayers were $70.53/MWh.  The additional costs of $47.84/MWh that B class ratepayers are responsible for was 67.8% higher than A class costs in August. Under the Fair Hydro Act, 17%** of the B class costs will be deferred and IESO tracks those under a “Variance Account”.  The latter increased in August by $210.8 million to reach $605.5 million for just the first two months.  The monthly variance is being refinanced cumulatively and will come back to haunt ratepayers and whoever is the government, in 10 years

According to my friend Scott Luft, wind power generation in August from grid- and distribution-connected industrial wind turbines (IWTs) produced 597,537 MWh. Another 78,265 MWh were curtailed, or paid for but not added to the grid.

All-in, the cost of IWTs in August was approximately $90 million and represented 79.7 % of our export of surplus power of 847,416 MWh to our neighbours in New York, Michigan and elsewhere.

While we don’t know specifically the source of the power included in the grid, if all the wind generation was exported, we were paid about $17/MWh or around $10 million, meaning a loss of $80 million. Without wind power generation, the August “Variance Account” addition could have been lower by that $80 million.

The future: more costs

So, despite “B” Class ratepayers experiencing the “benefits” of the Fair Hydro Plan, instead they reduced their consumption by 22.9%.

 

Maybe they are concerned about what will happen in 10 years’ time, when they will be billed for that Variance Account the Financial Accountability Office said would be a minimum of $45 billion and could balloon to as much as $93 billion.

 

* The difference of 165,000 MWh between the Market Report and the breakout is presumably due to line losses billed to each ratepayer class and the 22.9% drop is no doubt related to the expanded ICI

** 8% of the 25% reduction was due to the canceling of the 8% provincial portion of the HST.

 

And the winner (loser) is … Ontario!

Ontario ratepayers well ahead in international competition to see who pays more for nothing.

Ontario turbines near Comber: money for nothing

A recent article appearing in Energy Voice was all about the costs of “constraint” payments to onshore industrial wind developments in Scotland.  It started with the following bad news:

“According to figures received by Energy Voice, the cost of paying wind farm operators to power down in order to prevent the generation of excess energy is stacking up with more than £300million* paid out since 2010.”  (£300 million at the current exchange rate is equal to about CAD $500 million. ) 

What Scotland refers to as “constrained” Ontario calls “curtailed,” but they mean exactly the same thing. Ontario didn’t start constraining/curtailing generation until mid-September 2013, or almost three full years after the article’s reference date for Scotland. Curtailment prevents the grid from breaking down and causing blackout or brownouts.

The article from Energy Voice goes on: “In 2016 alone, Scottish onshore wind farms received £69million in constraint payments for limiting 1,048,890MWh worth of energy”.

Ontario in 2016, curtailed 2,327,228 MWh (megawatt hours). That figure comes from Scott Luft who uses data supplied by IESO (Independent Electricity System Operator) for grid-connected wind power projects and conservatively estimates curtailed wind for distributor-connected turbines to compile the information.

What that means: in 2016 it cost Ontario’s ratepayers CAD $$279.2 million** versus £69 million (CAD equivalent $115.2 million) for Scottish ratepayers. So, Ontario easily beat Scotland in both the amount of constrained wind generation as well as the subsidy cost for ratepayers who in both cases paid handsomely for the non-delivery of power!

The article went on to note: “By August 2017, the bill had already reached in excess of £55million in payments for 800,000MWh”!

Once again Ontario’s ratepayers easily took the subsidy title by curtailing 2.1 million MWh in the first eight months of the current year, coughing up over $252.5 million Canadian versus the equivalent of CAD $92 million by Scottish ratepayers.

In fact, since September 2013, Ontario has curtailed about 5.5 million MWh and ratepayers picked up subsidy costs of over $660 million.

Ratepayers in both Ontario and Scotland are victims of government mismanagement and wind power industry propaganda, and are paying to subsidize the intermittent and unreliable generation of electricity by industrial wind turbines.

(C) Parker Gallant

* One British Pound is currently equal to approximately CAD $1.67.

**Industrial wind generators are strongly rumored to be paid $120 per MWh for curtailed generation.

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.