Wynne government electricity bill relief comes with a price tag

Not a chance ...
Not a chance …

October 13, 2016

Ontario Minister of Energy Glenn Thibeault is promising Ontario’s electricity customers some relief, according to several press releases springing from the Throne Speech in early September.

While the costs of the relief including the 8% Provincial Sales Tax abatement and the “low-density” monthly reduction is worrying, in that funding for it has not been disclosed, a bigger hit may be coming. The Minister said “more than a thousand new businesses soon eligible for ICI, in the September 15th press release.

ICI is the “Industrial Conservation Initiative” and refers to Class A customers (companies with peak demand is 5 megawatts or higher) whose electricity rates are subsidized by the Class B customers (demand over 50 kilowatts but less than 5 megawatts) if they reduce consumption during a few “peak” hours over the course of a year.

In Germany, the equivalent of Ontario’s Class B ratepayers pay 98% more for a kilowatt (kWh) of power than a German industrial consumer, according to statistics from Eurostat. Looking at the information for Ontario on the IESO site it appears that with the Minister’s announcement Ontario’s ratepayers may soon be put in the same position.  Currently it appears a kWh of power (commodity only) costs an average Ontario ratepayer 58% more than a Class A industrial consumer. The foregoing calculation is based on the GA (Global Adjustment) information from IESO plus the average HOEP (hourly Ontario energy price) for the 2016 January/August period.

The Minister’s announcement of an expanded ICI program reducing peak demand from 3 MW to

1 MW and adding “more than a thousand new businesses” will push the commodity cost down for those 1,000 businesses reportedly by 34%, but the contracted value of the generated power will remain.

Someone will have to pay for the difference.

Unless Minister Thibeault has suddenly found a cache of money that Finance Minister Sousa is willing to part with, it will be left to Class B ratepayers to pick up the tab.

The Energy Minister’s press release suggested a “Customer Impact Example” which was a plastic manufacturer whom he suggests could save $42K per month or $500,000 per annum.  If all 1,000 of those businesses are successful in doing that, the implication is that the cost of the ICI shift may total $500 million.

Quick math indicates the 4.5 million “average” residential ratepayers will be looking at an increase in their bills of about $10 a month, or $120 on an annual basis. Coincidentally, that $10 a month is almost equal to the $11 a month those same ratepayers  will supposedly save due to the removal of the Provincial Sales Tax portion (8%) of the HST.

What it is: another crushing blow to all of the residential ratepayers of the province.

The Energy Minister’s concept of a “benefit to all consumers in Ontario” looks to be simply a shuffling of money from one ratepayer’s pocket to another.

Parker Gallant

 

Ontario in Panic Mode: how Hydro One gets their money, cleans up their debt record, and you pay for it all

2. Ratepayer relief for Hydro One and its arrears

October 12, 2016

Yesterday, I dealt with the announcements from the Minister of Energy, Glenn Thibeault in September and the ways he promised would reduce our electricity bills. What the minister failed to explain was where the money is coming from.

Electricity ratepayers should be worried.

As Global TV began its coverage of the electricity sector in Ontario and how it affected people’s lives, many horror stories about “energy poverty” were showcased, particularly from Hydro One’s clients. We customers have become accustomed to bad news stories related to Hydro One’s “smart meters” and “over-billing” highlighted by former Ombudsman, Andre Marin.   The stories Global uncovered were even more remarkable as they were able to obtain data from the OEB that disclosed the number of ratepayers in arrears as of December 31, 2015.  As it turned out, Hydro One had almost 226,000 clients in arrears (20% of all their residential clients and 40% of all ratepayers in arrears in the province and 63% [$105.6 million] of the total dollar amount).  Additionally Hydro One Remote (a not-for-profit subsidiary serving remote communities) had 1,147 in arrears (33.7% of all [3,400] their residential ratepayers).

In the latter case, the rest of Ontario’s ratepayers supplement (read: subsidize) the 3,400 “remote” ratepayers at an average of $9,500 each (about $32 million annually) via the RRRP (Rural or Remote Electricity Rate Protection) fund.  The fund is set at $174 million annually which adds 0.13 cents/kWh  to each kilowatt hour consumed in the province.  The fund is also used to reduce the 329,000 Hydro One customers classified as “low-density” ratepayers.  The latter bills are reportedly reduced by $31.50 per month.  This eats up another $124 million of the fund.

It is my strong suspicion that it will be this fund that, using the words in Minister Thibeault’s press release of September 13th, result in:  “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”.

If just the 329,000 “low-density”1: Hydro One clients are the “eligible” rural ratepayers envisaged in Minister Thibeault’s press release, the cost will be an additional $150 million.  What that means is that “electricity” rates will increase by an additional 0.12 cents/kWh for all the remaining Ontario ratepayers, adding about $20/25 per year to the “average” residential bill.

This also means Hydro One will be handed a guarantee they will receive the $150 million whereas they now have to be concerned with arrears and non-payment from those same clients.  This in turn would favourably impact their writeoffs for bad debts which were reported as $66 million in 2014 and $61 million in 2014.  It would also put Hydro One in the enviable position of knowing they could deliver zero kilowatt hours but still bill their clients for over $725 million or about 53% of their 2015 gross (net of cost of power) distribution revenue.

Hydro One, despite their smart meter and billing mess, have been on a rampage to shame their paying clients. They do this by sending a “Home Energy Report,a printed paper report delivered to participating customers via the mail. These reports include a so-called comparison to “efficient” neighbours and other neighbours.

For shame!
For shame!

People living year-round in low-density rated areas are talking about these reports. The bills I have seen viewed belong to people living close to many “seasonal” residences used on weekends or for short summer periods. A couple of these homes were heated with electricity.  The unsolicited Energy Reports are specific in their language with a cover letter from the “Director, Customer Strategy & Conservation Officer.”  A recent letter falsely claimed “You’re among the first in Ontario to receive this innovative new report”.   I wrote an article about one of those reports almost two years ago so the recent letter provided to me was hardly “among the first.”  One recent letter admonished the recipient “you used 56% more electricity than your neighbours.” In fact this particular ratepayer for the January-June 2016 period used 800 kWh hours monthly which until the May 1, 2016  change announced by the OEB was an “average” ratepayer consuming 9.6 MWh annually.

The ironic issue about these “shaming letters” is if the customer consumes less, Hydro One will submit an application to increase their rates to recover lost revenue.  So Hydro One not only bills us for the “shaming letter” costs (via the $400 million a year spent on conservation efforts) via the cost of the electricity we consume, but they then obtain a rate increase to recover lost distribution revenue.

Sweet deal.

Parker Gallant

NEXT: The third in this series will examine ratepayer subsidies related to another of Minister Thibeault’s announcements.
1. The following chart was provided to the writer by Hydro One who advised me that “Residential-High Density customers are now classified as “Residential-Medium Density”.

hydro-one-residential-customers-by-rate-class

Wynne government in panic mode

First in a series of three

In July, Energy Minister Glenn Thibeault was pressed by Shirlee Engel of Global TV on the rising cost of electricity bills. He said, “While I’m still not using the word crisis,” said Thibeault. “I know it’s important. For one family if it’s a hundred bucks out of their own pocket that’s a crisis for them and I get that.”

In September Premier Wynne mentioned the word “hydro” at an international plowing match, and was instantly booed.

Now it appears we have a government in a panic mode trying to deal with a crisis of their own making.

The Throne Speech held promises about getting rid of the provincial portion of the HST on electricity bills. Then on September 13, 2016 a press release from Minister Thibeault confirmed the 8% reduction reducing bills $130 annually, and announced other actions such as, “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”.

The press release did not detail what constitutes an “eligible” rural ratepayer; however, if it is just the 329,000 or so who are Hydro One’s “low-density” ratepayers the annual cost will be approximately $150 million. The press release went on to say: “Empowering businesses to reduce their bill by up to 34 per cent through the expansion of the Industrial Conservation Initiative” (ICI). 

Neither the Throne Speech nor the press releases say where the government is getting the money to pay for those initiatives, but removal of the 8% provincial portion of the HST will be on the backs of the taxpayers.

The electricity sector in the province is a $20-billion (before HST) business. That means $1.6 billion previously allocated to other ministries will now be unavailable, or the government will need to forgo balancing the budget or raise taxes/fees, etc. to cover off the lost tax revenue.

Minister Thibeault issued another press release in September related to “Empowering businesses to reduce their bill”.  This one had a “Customer Impact Example”:

“With more than a thousand new businesses soon eligible for ICI, cost impact across sectors and industries will vary. As an illustrative example of the impact, a plastics manufacturer with an average peak demand of 2 MW that participates in the ICI program could see its electricity price reduced from $154 per MWh to as low as $102 per MWh. This would result in energy cost savings of up to $42,000 per month.”

If you do the quick math on the above and assume each of those 1,000 plus businesses save $42,000 a month the reduction may be $500 million but once again, there is no indication where the funds will come from to cover those costs.

The above electricity bill reductions promised by the government total almost $2.2 billion and considerably more than the $1.5 billion in funds allocated to balancing the budget currently in dispute between the Ontario Auditor General and Liz Sandals, Ontario’s Treasury Board President.

So exactly how the governing party plans to pull off these bill reductions is not known.

Perhaps to create confusion amongst voters/taxpayers and inattentive media, Minister Thibeault issued another press release  September 27th announcing the “suspension” of LRP II to acquire 1,000 MW of renewable energy, principally in the form of wind, solar and biomass.  The press release declared  “This decision is expected to save up to $3.8 billion in electricity system costs relative to Ontario’s 2013 Long-Term Energy Plan (LTEP) forecast. This would save the typical residential electricity consumer an average of approximately $2.45 per month on their electricity bill, relative to previous forecasts.

It is unclear if Minister Thibeault is suggesting suspending future rate increases will somehow cover off the costs of his promises to reduce our electricity bills by $2.3 billion.

Or is it somehow related to the accounting dispute the government is engaged in with the Auditor General?

Parker Gallant

The Premier’s mandate letters (2): why bills are rising so fast

September 28, 2016

More proof of why Ontario’s electricity bills are rising the fastest in North America

Ontario Energy Minister Thibeault has been the centre of media attention over the past several days for his announcement we will save $2.45 every month because he has “suspended” the Large Renewable Procurement process or LRPII, the result of a directive issued by former Energy Minister Bob Chiarelli to acquire 600 megawatts (MW) of wind and 300 MW of solar capacity.

Premier Wynne’s mandate letter to Minister Thibeault contained directions which were previously tied to a press release issued by his Ministry related to building transmission lines to service First Nations communities. The news release dated July 29, 2016 announced: “Ontario has selected Wataynikaneyap Power LP (Watay) to connect 16 remote First Nation communities that currently rely on diesel power to the province’s electricity grid.”

No mention was made about the cost of the project, only that it would create “over 680 jobs” and “save $1 billion over the life of the project” compared to the “use of costly diesel fuel”.   It was subsequently  reported the project was a $1.4 billion dollar build and would service 10,000 people in those 16 communities and save $43 million in annual diesel costs.  In simple terms that works out to be $140,000 per person and a 32.5 year payback.  I am not sure how the government got to the idea of saving “$1 billion over the life of the project.”

To reinforce the Minister’s earlier press release we must presume these extracts from the Premier’s mandate letter are related: “Working within the principles of the recent Political Accord, and upholding commitments to First Nation and Métis communities, to support and participate in new generation and transmission projects, and in conservation and community energy planning initiatives.” And “Expanding transmission to remote First Nation communities in Northwestern Ontario to reduce reliance on diesel-powered generation.” And, “Continuing negotiations with the federal government to secure a fair cost sharing arrangement in support of the remote communities grid connection project.”

Those comments Ontario is moving ahead with the project while counting on the federal government to kick in money. No matter the outcome of  Minister Thibeault’s negotiations with the federal government, it certainly appears it will be up to the province to supply the lion’s share of the $1.4 billion. What does that mean? Ontario’s electricity ratepayers will pick up the costs.

It is ironic that the Province is committed to the transmission build but not to building a road to the “ring of fire” estimated to only cost $550 million according to a joint study by Provincial/Federal officials and reported in the Globe and Mail.  The road would actually create both investments and jobs for the same First Nations communities and presumably allow cheaper construction of transmission lines while generating new taxes.

The actions of the Provincial government continue to remind me of the recent Cadillac ads which show the car moving forward but everything else in the ad moving backwards.

The time has come for Ontario to move forward with some common sense planning.

Parker Gallant

Wynne government ‘rebate’ just a finger in the dike for electricity costs

September 14, 2016

Global TV News reported how Ontario Premier Wynne heard the cries from rural communities about the high cost of electricity and how they affect people’s living standards. Premier Wynne said: “One of the things that we heard most consistently was hydro rates. I heard about electricity rates in the north. It is not something that is isolated in one riding in Toronto. This is a concern across the province. I recognize that.” 

“It’s an urgent issue for the minister of energy,” the premier also said, adding that her government will look at “further mitigationsto offset the high cost of electricity in the province. 

The Throne Speech of September 12, 2016 disclosed what those “further mitigations” are to be — they are a “finger in the dike” approach to stopping climbing electricity rates.

Specifically what the Throne Speech suggested was: the provincial portion of the HST on all residential electricity bills will be rescinded and a direct credit will appear on electricity bills each month advising us what the credit was. This action was described in a press release from Energy Minister Glenn Thibeault as: “Reducing Ontario residential electricity bills by 8 per cent on the amount before tax, an average savings of about $130 annually or $11 each month”.

The next major action proposed in the press release indicated rural customers experiencing well above “average” electricity bills will be helped by a 20% “on-bill” monthly savings credit: “Providing eligible rural ratepayers with additional relief, decreasing total electricity bills by an average of $540 a year or $45 each month”. No mention of when that might occur. And, no definition of what an “eligible” rural ratepayer is.

The third action says “commercial and industrial” customers will benefit from lower electricity costs via a reduction in qualifications to enter the “Class A” rate class. This is suggested to reflect in substantial rate decreases of as much as 34%: “Empowering businesses to reduce their bill by up to 34 per cent through the expansion of the Industrial Conservation Initiative”.

Presumably the above three actions are supposed to comfort Ontario’s ratepayers in the knowledge that Premier Wynne and her Energy Minister have not only recognized the problems created by rising electricity prices, but will do something about stopping it.

Let’s see.

  1. Provincial Sales Tax Rebate: moving the burden around The first action of removing the Provincial Sales Tax portion of the bill was originally placed there by the Ontario Liberal Party (OLP) in 2010. Later they offset it by granting ratepayers a 10% credit via the Ontario Clean Energy Benefit (OCEB) so those two actions reduced the bill by 2% temporarily; the OCEB ended January 1, 2016.   Now they claim the rebate of 8% will save the average residential ratepayer $11.00 per month commencing January 1, 2017 which, coincidentally, is when the new tax for the cap and trade plan will kick in and hit the average ratepayer heating with gas with a $5.00 monthly tax. In short, the net gain will be $6.00 per month. Note the two most recent rate increases (Nov. 1, 2015 & May 1, 2016) hit the “average” ratepayer $8.00 per month for the electricity line only.
  2. Rural ratepayer relief; who gets it? Who pays? The second action they suggest will occur will supposedly “relieve eligible rural ratepayers” of $45.00 each month but the press release does not define “eligible”. We should suspect that to be eligible the rural ratepayer will have to qualify for the rebate and the inference is that it will be related to household income under the Ontario Electricity Support Program or OESP. If that is what is planned the Ontario Energy Board’s estimated cost of the OESP will easily surpass their estimate of $200 million per annum. The OESP is a part of the GA (Global Adjustment) bill all of the non-eligible ratepayers pay for, so any increase via the “rural relief” proffered in the Throne Speech will increase hydro bills. Logically their funding should be from the Ministry of Community and Social Services budget.
  3. Class B to Class A transfer: more energy poverty will resultThe ICI (Industrial Conservation Initiative) was initially established in 2011and transfers a portion of the GA from Class A to Class B ratepayer subject to the Class A ratepayers agreement to curtail their demand during peak hours. In the first six months of 2016 the extra portion of the GA picked up by Class B ratepayers was $495 million or about 3.6 cents per kilowatt hour of the 13.83 TWh (terawatts) consumed by Class A ratepayers. Increasing the number of Class A eligible clients will increase the amount being absorbed by the remaining Class B ratepayers. It will simply create more energy poverty. Once again neither the Throne Speech or the press release notes when the implementation of this will occur.

The end results of the “mitigations”

What the Wynne government plan likely means is that rate relief for residential ratepayers will be short lived, if at all, as the cap and trade costs and the increased costs of the OESP and the Class B to Class A transfers click in. The “finger in the dike” announcement from the Throne Speech will be short lived and residential ratepayers should expect the flood of rate increases to reappear in the very near future.

Parker Gallant                                                                                                                                        

NEXT: Some of the ways the government could immediately reduce the current costs of electricity and also reduce any future rate increases.

 

 

Hydro bill assistance programs not enough

Here is a link to an interview I did with CBC radio host and journalist Jason Turnbull on “Up North.” This interview followed Jason’s interview with Ontario Energy Minister Glenn Thibeault in which the minister, among other not quite accurate statements, said that government assistance programs should help people cope with Ontario’s rising electricity bills.

Listen here.

In the billions: the cost of closing Ontario’s coal power plants

The annual cost of closing Ontario’s coal plants 

The first article in respect to Ontario’s decision to close our coal plants examined the MW (megawatt) capacity and the type of generating capacity added to our electricity grid since 2011. The added capacity replaced the 4,484 MW of coal-fired generation at the end of 2011 in anticipation of increasing demand.

What I’ve done is approximate the costs of the added capacity versus the 4.1 TWh generated by the 4,484 MW of coal-fired plants, which cost only $135 million (3.3 cents/kWh) in 2011. 

Nuclear instead of wind and solar

As an example, the 1,532 MW of emissions-free Bruce Nuclear refurbished generation, at a capacity factor of 90% supplying 12.08 TWh, easily covered the loss of 4.1 TWh of coal-fired generation and left 8.7 TWh for added demand due to its flexibility to steam off or bypass the turbines. The 12.08 TWh could have supplied most of the 2015 solar generation of 3.04 TWh and the 10.2 TWh of wind, which proved to be unneeded.   The latter two alone in 2015 added an additional $2.7 billion to generation costs before curtailment (wind) costs of $88 million.

Bruce Power supplies from the 1,532 MW would have cost ratepayers $800 million, reducing the ratepayer burden by almost $2 billion annually.  Additionally “nuclear maneuvers” (reductions),  of 897 gigawatt hours added about $60 million during surplus baseload periods, caused mainly by (unreliable) intermittent power generation from wind.

Too much gas? 

Let’s look at the gas plant addition of 602 MW:  In 2011 the 9,549 MW of gas generation produced 22 TWh,  operating at a capacity factor of 26.3%.  Fast forward to 2015: the 10,151 MW generated 15.5 TWh  operating at a capacity factor of 17.5%.  Gas plants are quite capable of operating at a capacity factor of 40% to 60% (combined or single cycle).  In either case, they are regarded as peaking plants and for that reason investors know they will be called on when needed. Their contracts pay them for simply being “at the ready.”  Those costs vary but generally payments are $7,000 to $15,000 per MW per month.  The additional 602 MW of gas added about $100 million annually to the costs.  With gas generation falling from 22 TWh in 2011 to 15.5 TWh in 2015, ratepayers were burdened with the costs of the drop of 6.5 TWh at a cost of approximately $100 million per TWh, raising the cost of gas generation by $750 million since 2011.

Adding costly hydro

The bulk of the 754 MW added to the grid since 2011 came from the Niagara tunnel, (“Big Becky”) with a promise of 150 MW, and the Mattagami expansion added 438 MW of run-of-river hydro. Both of these projects by OPG were hugely expensive, costing ratepayers $4.1 billion plus interest on the money borrowed to fund the projects. If one amortizes those costs over 50 years it adds about $80 annually to ratepayer bills and the interest costs annually add about $120 million at 3% per annum. So that is $200 million for those two projects, without adding their OMA (operations, management and administration) costs.

As well, OPG is frequently forced to “spill” water under SBG (surplus baseload generation) periods mainly due to excessive intermittent wind and solar generation. In 2015 the latter was 3.4 TWh which cost ratepayers $150 million.  The other event affecting hydro costs was an amendment to change “unregulated” hydro to regulated pricing.  This change added $474 million to ratepayers’ bills for 2015 for the 30.4 TWh generated by OPG versus 2011.  So hydro costs in the four years from 2011 jumped from a cost of $37.7 million/TWh to $53.3/TWh.  The total additional costs of hydro (OPG only) in 2015 was therefore over $800 million.

Coal conversion 

The Ontario Energy ministers also issued directives instructing conversion of the 200-MW Atikokan and the 300-MW Thunder Bay coal plants operated by OPG.  A 2005 directive from Dwight Duncan was the first and told OPG to convert Thunder Bay “to operate using a fuel source other than coal”.  Later on when Brad Duguid sat in the energy chair he ordered it converted to gas but in the end it became a shareholder direction from Bob Chiarelli, ordering it to be converted to “advanced biomass” and agreed to cover the annual $30 million operating costs.  As disclosed by the Auditor General, if Thunder Bay produces any power, it will cost $1,500 per megawatt hour (MWh).  In respect to the conversion of Atikokan it may produce cheaper power in the 20 cents/kWh range but will probably operate at 10% of capacity and generate an annual cost of about $35 million.  So collectively, both of these conversions will produce almost no power but will add approximately $65 million annually to ratepayers’ bills.

Conservation is expensive 

The long-term conservation budget for 2015-2020 is $2.6 billion, meaning IESO will allocate spending of $433 million annually to local distribution companies (LDC) to reduce consumption by 7 TWh.   Should the LDC be successful, their delivery revenue will drop.  Assuming the delivery charge represents about 35% (on average) the revenue drop for all LDC would be approximately $300 million.  Then the LDC will be entitled to apply for a rate increase based on the drop in revenue, meaning the $300 million may be fully recovered.  Adding that to the monies spent annually convincing us to reduce our electricity consumption via the “conservation budget” adds another $483 million annually ($433 million + [$300/6 years = $50 million] = $483 million).

$4 billion … a year

So the cost of replacing the 4.1 TWh of coal generated at a cost of about $135 million in 2011 is in excess of $4 billion annually.

Confirmation of the foregoing cost can be simply calculated. If one reviews the “average” cost of a kWh on the OEB “Historical Electricity Prices” as of November 1, 2011 was 7.57 cents/kWh versus 10.70 cents/kWh on November 1, 2015.  The increase of 3.13 cents/kWh (+41.3%) translates to an increase of $31.3 million per TWh and applied to the 143.6 TWh consumed in 2015 provides an annual cost increase of $4.5 billion to ratepayers since 2011.

The cost blows away the purported healthcare costs supposedly caused by coal generation.   At the same time, it removes about $1,000 of after-tax money from the pockets of the 4.5 million ratepayers in the province every year.

This is a sad commentary on what the Ontario Liberal government has done to Ontarians.

Parker Gallant,

August 29, 2016

 

Ontario’s present and future lashed by electricity bills

Building Ontario Up

“Building Ontario Up” — a PR slogan doomed to failure

August 21, 2016

On July 18th Premier Kathleen Wynne bragged about Ontario’s  2016 first quarter GDP growth outpacing Canada, the U.S. and all other G7 countries via news release.  The Premier said,  “Our economic plan is working, and we are building a strong and prosperous future for our province.”

Three weeks later, StatsCan announced Ontario suffered job losses in July of 36,100 — almost 19,000 of them were full-time jobs.  In fact, Ontario’s job losses exceeded total job losses in Canada of 31,200 net jobs.  Needless to say, that didn’t merit a news release from the Premier’s office or Finance Minister Sousa either, about how the Ontario Liberal government might not be “building Ontario up”.

The StatsCan announcement also didn’t signal a change in Ontario’s unemployment rate which is mired at 6.4%. Compare that to the U.S. unemployment rate (June 2016) of 4.9%, or New York’s at 4.7%, and Michigan’s at 4.6%.

Why New York and Michigan love Ontario: cheap power

New York and Michigan are the two neighbours who are the major beneficiaries of Ontario’s management of its electricity system. In 2015, we exported 8,571 gigawatts (GWh) to New York and 10,248 GWh to Michigan at an average price of 2.36 cents per kilowatt hour (US $1.82 cents/kWh). Those sales generated revenue of $444 million but cost Ontario ratepayers $2.3 billion. The loss on those exports of almost $1.9 billion was included on our hydro bills.

That 18,819 GWh of power sold at huge costs to Ontario ratepayers. Here are the facts.

  • The power sold at a loss was enough to have supplied 2 million “average”1. residential ratepayers with power for a year
  • The losses on those exports could have paid the “Total dollar amount of arrears for eligible low income customer accounts in arrears at year end” December 31, 2015 for 146 years
  • The “total dollar amount ($172.6 million) of arrears for residential customer accounts in arrears at year end” could have been paid over 11 times
  • The “total dollar amount ($106 million) of arrears for Hydro One residential customer accounts in arrears at year end” could have been paid over 18 times
  • The power sold represented enough money2. to cover the full annual cost of 766,000 Hydro One, low-density “average” ratepayers

It is impossible to know what the generation sources were for the exported power, but with combined wind (10,765 GWh) and solar (3,026 GWh) generation representing 13,791 GWh in 2015, one must assume a lot of wind and solar power traveled to New York and Michigan. Evidence of that was highlighted in a recent study from the Canadian Nuclear Association: “Wind makes up 34% of the provincial night time surplus.”

Without those surplus exports, one could assume the Hourly Ontario Energy Price or HOEP would have been higher in that trading market, resulting in reduced costs to Ontario’s ratepayers.

Looking back to 2009 at the posted OEB average electricity price at the end of that year (6.07 cents/kWh) and comparing it with the average electricity price at the end of 2015 (10.70 cents/kWh), the annual increase was 12%.

It is worth noting that distribution rates have also increased as much (or more) for some distributors such as Hydro One.

If one examines U.S. residential electricity prices, we find the average all-inclusive (generation, transmission, delivery, state taxes) price in the U.S. at the end of 2009 was 9.82 cents/kWh and at the end of 2015 had increased to 12.67/kWh for residential clients. This suggests the average annual increase in the all-in price of electricity in the U.S. was 4.8% annually versus the Ontario 12% increase for just the “electricity” line.

Ontario has managed to raise the price of the raw commodity (electricity) almost three times faster than the U.S. has increased all-in rates.

It’s costing us a fortune, so —let’s buy more!

What does Ontario plan to do? The government continues to push ahead with their agenda to acquire more unreliable and intermittent wind and solar generation, with a new bid process beginning in 2017. That’s in spite of pricing Ontario out of the market to attract new industry, and creating “energy poverty” that now affects 12.4% (566,902 as reported by the OEB) of ratepayers. Many were in arrears on their electricity bills at the end of 2015.

 

Recently appointed Energy Minister Glenn Thibeault told Shirley Engel of Global TV News “I’m not using the word crisis” when asked about the massive response of emails and phone calls to Global following stories on painful electricity bills in Ontario.  Global was successful in getting the OEB to release the “arrears” statistics mentioned above.  In the “Backgrounder” to the release of those statistics, the OEB opened with this statement: “The Ontario Energy Board is the regulator responsible for protecting energy consumers in Ontario.”

Why has the OEB failed to protect energy consumers, in essence failing to do its job? You would be obliged to point the finger at the Ontario Liberal government for its their passing the Green Energy Act, and the more than 100 directives given to the Ontario Power Authority (merged with IESO January 1, 2015), IESO, Hydro One, OPG and the OEB by past and present Energy Ministers going back to Dwight Duncan.

Premier McGuinty and now Premier Wynne believe they know far more than the people running those organizations and have ensured their dictates are followed.

“Building Ontario up” is a PR slogan. Its realization is condemned to failure, mostly because of the damage done to a province that once could claim some of the cheapest electricity rates. With the most expensive electricity rates in North America now, the only thing the Ontario Liberal government can claim they are “building up” are the number of ratepayers living in energy poverty.

Parker Gallant

1.The OEB defines an average residential ratepayer as one consuming 750 kilowatt hours (kWh) per month.

2.The OEB’s “Bill Calculator” tells you the monthly cost is $206.64 so annually it is $2,479.68.

How to get electricity bills down: letter to Ontario’s Energy Minister (2)

Parker Gallant

August 16, 2016

OPEN LETTER TO:

The Honourable Glen Thibeault, Minister of Energy,

Legislative Building, Queen’s Park, Toronto ON, M7A 1A1

Dear Minister Thibeault:

Re: Taxing the wind

While I have not as yet received a response to my letter to you of July 17, 2016 I recognize that you are probably still trying to digest the complexities of your portfolio before responding so I will be patient.

I have just read an interesting article1. about the State of Wyoming and specifically the state legislature who asked the question: “who owns the wind?” and I just had to send you my suggestion based on what they have done to increase their tax base.

Well as it turns out the state legislature answered the question quickly and claim ownership of the wind in their state. Wyoming’s lawmakers quickly enacted legislation levying a tax on a per megawatt hour (MWh) basis at $1 per MWh but are looking at increasing it to $12.00/MWh.

It seems to me this is an opportunity for you to do two things! The first is to increase tax revenue and the second would be to use the increased tax revenue to defray future rate increases.

Recognizing that Ontario is far more generous with the long term wind and solar contracts than the U.S. state governments’ my recommendations would be to simply levy the tax as a percentage of the contract price and/or the curtailment price. I would suggest a 10% tax for delivered MWh and a 15% tax for curtailed generation. The latter is based on the fact that wind generated electricity is often only available when its not needed so the higher suggested tax rate.

Just looking at the first six months of the current year I see it shaping up as follows:

  1. Delivered MWh were 4,581,770 according to IESO and at say $13.50/MWh would generate tax of $61.2 million.
  2. Curtailed MWh from wind developments in the 1st 6 months of the current year were 1,234,000 and at 15% of $120.00/MWh (estimated) would generate $22.4 million.Together the two could generate tax revenue of approximately $165 million annually and if applied to the average ratepayer bill would reduce it by about $37.00 annually.

Now if you applied a tax to solar generation (perhaps the 15% rate) you would generate additional tax revenue of $210 million2. and that could reduce residential ratepayers bills by an additional $47.00 annually.

The latter would entail the Ontario legislation claiming they own the sunlight reaching the province allowing that generation but it doesn’t seem like a major obstacle.

The Minister of the Environment and Climate Change, Glen Murray has basically claimed the ability to tax carbon emissions (even though they may be emitted by transport trucks, etc. licensed elsewhere using Ontario’s highways) so if he can do it so can you!

Alternatively you could simply do what the State of Nevada did as noted in the same article referenced above which claims: “the Nevada Public Utilities Commission (PUC) voted unanimously to increase a monthly fee on solar customers by 40% while reducing the amount they get paid for excess power sold to the grid.

Good luck and I look forward to your response to my original letter in due course. I do hope you will take my letter seriously as I know you have been inundated with numerous complaints about the rising costs of electricity in the province since you have assumed the “energy” portfolio.

Yours truly,

Parker Gallant

  1. Link to the article is here: http://www.activistpost.com/2016/08/state-now-claims-owns-wind-taxing-renewable-energy-existence.html]
  2. This assumes an average rate of $448.00/MWh or 44.8 cents a kilowatt hour for all solar contracts.

Ontario Power Generation report: waste and loss, more cost to consumers

Spilling, constraining, steaming off–Ontario’s surplus power situation is costing millions

August 14, 2016

Ontario Power Generation (OPG) just released their second quarter results and if you read the news release quickly you might think everything is wonderful — but it’s not.

OMA (operations, maintenance and administration) costs were up $59 million (9.1%) for the quarter compared to 2015, net income was down to $132 million from $189 million in the comparable quarter, and OPG are now the proud owners of Hydro One shares as this excerpt from the quarterly report indicates.

“In April 2016, OPG acquired nine million common shares of Hydro One at $23.65 per share as part of a secondary share offering by the Province through a syndicate of underwriters. The acquisition was made for investment purposes to mitigate the risk of future price volatility related to OPG’s future share delivery obligations to eligible employees under the collective agreements with the PWU and The Society renewed in 2015.”

The Hydro One share acquisition was of course one of the “net-zero” wage settlements touted by the Ontario Liberal government, and this one made specifically by former Energy Minister Bob Chiarelli when the announcement of a settlement with the employees at OPG was made.

Paid to waste power–and you pay them to do it

OPG also disclosed in the news release that they were again forced to spill hydro power which is normally sold into the grid for about 4.4 cents per kilowatt hour (kWh). The amount they spilled in the quarter was 1.7 terawatts (TWh) and 3.4 TWh for the first six months, compared to 1.5 TWh in the comparable 2015 six month period.  If that information makes you feel bad for OPG, don’t — they are paid the same for spilling hydro as for delivering it to the grid.  A change in regulations by the government created the “pay for spilling” situation.  The 3.4 TWh spilled could have supplied about 750,000 “average” households meaning, we wouldn’t have needed other much more expensive power such as intermittent and unreliable wind and solar.

The cost to ratepayers for the spillage of the hydro is about $150 million and will wind up in our electricity bills under the Global Adjustment charge.

While OPG were busy spilling hydro, we were also curtailing wind in the first six months of this year; my friend Scott Luft (http://coldair.luftonline.net/) keeps a record of those curtailments. Curtailments for the first six months on his chart were estimated at 1.245 TWh, and have already surpassed IESO reported curtailments for the whole of 2015 of .733 TWh.   The latter cost ratepayers about $88 million at the reputed $120 per megawatt (MWh) wind generators are paid for curtailment.   Curtailment costs for 2016 so far are about $150 million.

There were other wastes of generation and ratepayers money in the first six months of 2016 too as Bruce Power was frequently asked to “steam off” nuclear generation at two of their units, but no disclosure is yet available to tell us how much. In 2015 it amounted to .897 TWh which cost ratepayers about $60 million; it is probably more in 2016 as demand is down.

So ratepayers for just the first six months of 2016 will pick up the costs for OPG buying Hydro One shares, spilling hydro, curtailing wind, and steaming off nuclear without one kWh delivered to the “average” household despite the ratepayers responsibility for costs of about $600 million.   We also picked up costs to promote conservation which was probably north of $200 million for the six months.

Ontario’s electricity customers should be “steamed” about the increasing waste we continue to pay for.

© Parker Gallant