May power cost stats a harbinger of worse to come

If May is any indication, the Wynne government’s “Fair Hydro” plan costs will be considerable

The “Fair Hydro” plan ushered in by the Wynne government is setting up ratepayers for higher bills as soon as 2021 arrives. When the hiatus ends, limiting increases to ratepayer bills to no more than the “cost of living” (COL) over the next four years, the cumulative debt acquired by OPG to “refinance” the reported $50 billion of electricity assets will have to be repaid.

Early indications suggest the costs will be higher than the $2.5 billion being set aside for the next three years by Premier Wynne and Energy Minister, Glenn Thibeault.

Evidence? A look at May 2017 compared to May 2016 indicates the increase in the Global Adjustment (GA) costs for Class B ratepayers was 7.9% higher than 2016 and well above the May COL index of 1.4%.  Any increase in costs above the inflation rate will be added to the $2.5 billion being refinanced and become the responsibility of ratepayers to pay when the hiatus ends.

Demand drops but the cost goes UP

The IESO May 2017 Monthly Market Report indicates Ontario Class B ratepayers consumed 344,000 megawatt hours (MWh) less than they did in May 2016, which represents a 4% drop. That’s about the same as 460,000 average households would consume for the month. The Global Adjustment (GA) costs on the reduced amount of electricity consumed, however, increased by $82.7 million from $931.2 million in 2016 to $1,013.9 million in 2017.  Many will recall in May 2016, lower consumption during the prior six months caused the OEB to raise rates!

So, what caused the 7.9% spike ($82.7 million) in GA costs?   It appears there were two principal causes with one of them related to Ontario’s “Net Exports”.*

In 2017, net exports averaged 600 MW per hour higher than 2016, meaning they increased by 446,400 MWh (600MWh X 24 hours X 31 days) in May 2017 (enough to power almost 600,000 average households for the month). The buyers in New York, Michigan, Quebec, etc., paid only the Hourly Ontario Electricity Price (HOEP) of $3.17/MWh, while Ontario’s ratepayers were required to pay the GA costs of $54.8 million or $122.89/MWh.

The other major cause of the GA spike appears related to power generation from wind and its record curtailment in May 2017. My friend Scott Luft posts both the generation from TX (transmission connected) and DX (distributor connected) industrial wind turbines (IWT), and also conservatively estimates “curtailment”.  In May 2016 TX and DX connected IWT generated 699,371 MWh, not including 130,000 MWh of curtailed generation.

Combined: wind power in May 2016 cost ratepayers about $113 million or $162/MWh.  May 2017 saw 669,011 MWh of wind power delivered either to the grid (TX) or to local distribution companies (DX). Curtailed wind in May 2017 was a record as Scott estimated almost 524,000 MWh (enough to power almost 700,000 average households for the month) were curtailed.   The cost for generated and curtailed wind increased to slightly more than $158 million for the month, which raised the cost of accepted wind generation to $236/MWh.

$100 million added … for just one month

What this means is, wind-generated and curtailed costs in May 2017 were $45 million higher. Coupled with the increase in net exports of surplus generation and related costs, $100 million was added to the GA … for just one month.  If May 2017 is in any way representative of the four years of the rate freeze (tied to the COL index), the costs of refinancing those assets will be much more than the March 2, 2017 press release suggested it would be:  “These new measures will cost the government up to $2.5 billion over the next three years.”

Based on past forecasts by the Ontario’s Liberal government, keeping the costs at $2.5 billion over the next three years may be a “stretch goal”!

Parker Gallant

*“Net Exports” are total exports less total imports.

 

Where did the $50 billion go, Premier Wynne?

He said, she said: we say, where did the money GO? [Photo: Toronto Star]
Last September 13, Minister of Energy Glenn Thibeault issued a press release announcing the  Ontario Liberal government would reduce electricity bills for five million families, farms and small businesses.  The relief granted was equivalent to the 8% provincial portion of the HST. The press release also claimed Ontario had “invested more than $35 billion” in new and refurbished generation.

Fast forward to March 2, 2017 and that $35 billion jumped to $50 billion in a press conference the Premier jointly held with Minister Thibeault. An increase of $15 billion in six months!

The press conference was to inform us the 8% relief announced by Minister Thibeault would be added to, with a further 17% reduction. A Toronto Star op-ed Premier Wynne wrote March 7, 2017 reaffirmed the $50 billion investment claim made the previous week, and further claimed: “By delivering the biggest rate cut in Ontario’s history and holding rate increases to inflation for at least four years, this plan provides an overdue solution.”

That made history alright, but not the way she meant. What the Premier forgot to say was that her government had brought us the biggest rate increases in Ontario’s history.  In March 2011 the Ontario Energy Board (OEB) website shows the average electricity rate was 6.84 cents per kilowatt hour (kWh) and on May 1, 2016 it had increased to 11.1cents/kWh.  In just over five years, the price of the commodity — electricity — increased 62%, a multiple of the inflation rate during that five years, which added about $400 to the average consumer bill.

Electricity price goes down, your bills go UP

From 2010 to 2015 Ontario demand fell by 5 TWh (terawatt hours) to 137 TWh.* That is enough to provide electricity to 550,000 “average” Ontario households for a year, yet the price for residential consumers increased 62%.   The increase was not driven by the trading value via the hourly Ontario electricity price (HOEP) market.  In fact, the market treated Ontario generated electricity badly as it fell from an average of 3.79 cents/kWh in 2010 to 1.66 cents/kWh in value for 2016 —  a 56.2% drop.

As to how they were achieving this “relief,” Wynne and Thibeault told us they were pushing the payback period for the 20-year contracts (wind and solar) out another 10 years. Those generation sources are the principal cause of the increase in electricity prices.  (For further proof of that, read  Scott Luft’s recent analysis on the costs of “other” generation in 2016 which confirms its effect on our rising electricity rates.)

Where did the money go?

What the Wynne/Thibeault announcement means is, ratepayers will pay for the intermittent and unreliable power for their 20-year contracted term(s), and continue to pay for the same contracts which, by that time use equipment that will be heading for, or already in the scrap yard.

It is time for Minister Thibeault to disclose what is behind his claim of $35 billion invested and for Premier Wynne to disclose the details of the $50 billion she says went to “necessary renovations” to rebuild “the system.”

Time to come clean.

* Ontario consumption remained at 137 TWh in 2016.

Where did our $50 billion go? Or, how Ontario citizens lost $18 mil in just 2 days

Premier Wynne making her announcement: no accounting for costs [Photo: PostMedia]
Almost a week after Premier Wynne announced her plan to reduce our electricity bills by 25%, the wind was blowing!  On March 8, six days after the cost shifting  announcement (from ratepayer to taxpayer), potential power generation from wind was forecast by IESO to produce at levels of 80/95% of their capacity, for many hours of the day.  IESO was concerned about grid stability and as a consequence, curtailed much of the forecasted generation.

When the Premier made her announcement about reducing hydro bills, she also claimed “Decades of under-investment in the electricity system by governments of all stripes resulted in the need to invest more than $50 billion in generation, transmission and distribution assets to ensure the system is clean and reliable.”

It is worth noting that much of that $50 billion was spent acquiring wind and solar generation and its associated spending on transmission, plus gas plants (to back them up because the power is intermittent), and distribution assets to hook them into the grid or embed them with the local distribution companies. It would have been informative if Premier Wynne had had Energy Minister Glen Thibeault provide an accounting of exactly what the $50 billion was spent on.

As it turned out the amount of curtailed wind generated on March 8 was 37,044 megawatt hours (MWh) was just short of the record of 38,018 MWh set almost a year ago on March 16, 2016 (estimated by my friend Scott Luft).  The curtailed wind on March 8, 2017 cost Ontario’s ratepayers $120/MWh or $4,445,280.

The cost on March 16, 2016 was $4,562,160.

What does it mean? Curtailing or restricting power output but paying for it anyway means a portion of the $50 billion spent was simply wasted money. It went to the corporate power developers that rushed to sign those above-market contracts for renewable power.

The other interesting aspect of the surplus power generation on March 16, 2016 and March 8, 2017 is revealed in IESO’s Daily Market Summaries: the hourly Ontario energy price (HOEP)  March 16, 2016 was negative at -$1.25/MWh and on March 8th, 2017 was also negative at -.49 cents/MWh. This meant ratepayers paid for surplus exports sold to our neighbours in New York and Michigan, etc. Net exports (exports minus imports) on March 16, 2016 were 52,368 MWh, and on March 8, 2017 were 37,944 MWh. Total costs of their generation (HOEP + GA) fell to Ontario’s ratepayers along with the cost of any spilled hydro, steamed off nuclear and idling gas plants.

Millions here, millions there = a whole lot of wasted money

So, bear with me here, if we price the cost of the net exports at $110/MWh for those two days, ratepayer costs were approximately $9.8 million with $5.7 million for March 16, 2016 net exports and $4.1 million for March 8, 2017 net exports, not including the $84,000 we paid our neighbours to take our power.

How much did it cost you? Two days out of 729 (2016 was a leap year) cost Ontario ratepayers about $18.1 million for power not delivered (curtailed wind) or needed (net exports).

I hope this helps Minister Thibeault in his calculations for a long overdue accounting to Ontario citizens as to where the other $49.982 billion went.

 

Hydro One bills driving people into poverty

August 17, 2016

Thanks to the persistence of Global TV it appears the Ontario Energy Board (OEB) was obligated (transparency?) to release information on rising electricity bills and how people are being driven into energy poverty.

While the information contained in the PDF file shows a variety of arrears*-related information, and covers all of the local distribution companies (LDC) in the province, the Hydro One data is particularly striking. It is also in keeping with some of the 2015 Ombudsman’s report.

It is important to realize that Hydro One claimed 1,141,369 residential ratepaying customers as of December 31, 2015, representing exactly 25% of total Ontario residential ratepayers according to the Yearbook of Electricity Distributors on the OEB website.

So, focusing on Hydro One only, here are some of the interesting statistics gleaned from the OEB “arrears” report as of December 31, 2015:

  • Hydro One had 59,233 ratepayers in arrears which represented 7.1% of their residential customer base and 68.8% of all residential ratepayers in arrears (86,090) as of that date.
  • Hydro One claimed just over $97 million1. of billing arrears which represented 89% of the total billing arrears reported by all LDC (just over $109 million) as of December 31, 2015.
  • Hydro One’s arrears of $97 million represented 12.5% of their outstanding receivables as at the date of their year end.
  • Hydro One had 17,811 canceled “arrears payment agreements” due to non-payment out of 25,670 for all LDC and that represented 69.4% of all cancellations.
  • Hydro One wrote off $16,504,125.00 of receivables which represented 46.9% out of $35,172,817.00 in arrears written off by all LDC.
  • Hydro One had 7,570 eligible “low-income” households out of 19,914 households for all LDC which represented only 38% of those presumably eligible for the Ontario Electricity Support Program (OESP) which came into effect January 1, 2016

Why…?

Based on the above one would have to ask some pertinent questions such as:

Why did Hydro One have so many ratepayers in arrears when they identified only 7,570 customers as low-income and eligible for the OESP?

Why did Hydro One have such dominance of the number of ratepayers in arrears?

Why did Hydro One represent such a huge portion (89%) of the dollar value in arrears?

If you believe it is related to Hydro One’s excessive delivery rates you would be entirely correct. That was recently reported by writer Scott Luft.

A quick glance at the second Quarter results for Hydro One shows they distributed 6.2 terawatt hours (TWh) versus 6.7 TWh in the comparable 2015 Quarter — that’s a drop of 8% — yet their distribution revenue showed a slight increase of $2 million year over year. What we can determine from those results is in 2015 the “distribution” business of Hydro One generated $51.8 million per TWh and it increased to $56.3 million/TWh in 2016 for an increase of 8.7% per TWh.

The upside-down world of Ontario

In other words, for Hydro One declining demand results in increased revenue. Thanks to their monopoly and the unique cooperation of the OEB, Hydro One has turned the economic model of  “supply and demand” on its head.

One has to wonder now if the sale of shares in Hydro One was driven not only to help achieve a balanced budget in 2018, but also to rid the Ontario Liberal government of even more anticipated bad news about the electricity file and their ownership of Hydro One. Holding a minority interest at the date of the next election might have the Ontario Liberals pointing the finger at the OEB for constantly granting Hydro One’s distribution arm rate increases exceeding inflation by a wide margin.  With that in mind they might just pretend they would do something to right the wrong if re-elected.

Only time will tell if Hydro One is allowed to maintain their lofty position as the generator of the highest arrears levels amongst the ratepayers of the province and continue to be granted the rate increases applied for.

Parker Gallant

  • Average arrears level for Hydro One’s residential ratepayers as at December 31, 2015 was $1,638.59 and the OEB defines arrears as:  “ … an account that is 30 or more days past the 16-day minimum payment period .”