Cutting Ontario’s electricity bills: promise made, promise (partly) kept

How the Ford government is cutting electricity costs, and some suggestions on how they might do better

A month or so before the 2018 Ontario election, the Ontario PC Party made a promise to reduce electricity bills for Ontario’s residential ratepayers by 12% or specifically: “Putting $173 back in the taxpayer pocket”.  The amount needed to achieve the $173 per ratepayer would amount to approximately $807 million annually, based on the 4,665,055 residential ratepayers Ontario had at the end of 2017, according to the OEB’s (Ontario Energy Board) “2017 Yearbook of Electricity Distributors”.

PC leader Doug Ford promised if elected, they would give ratepayers the dividends the government receives from the partially privatized Hydro One. For 2018, that would amount to $245 million as 47.4% (the province’s current ownership) of total dividends ($518 million) awarded to common shareholders by Hydro One.  The dividends of $245 million annually would translate to about $53 per residential ratepayer.

On July 13, 2018, the Minister of Energy, Northern Development and Mines announced the cancellation of 758 renewable energy contracts* which he said would save ratepayers $790 million over the life of the contracts. Assuming the bulk of the contracts were for 20-year terms, that would amount to about $40 million annually, costs that would have been borne by all ratepayers, not just “residential” ones.

Over the past several years, residential ratepayers consume about 32% of all grid-delivered electricity, so the savings to that group should be relatively small as 32% of $40 million only translates to annual savings of $13 million (rounded) or less than $3.00 per residential ratepayer. (Bob Chiarelli, when Minister of Energy would have suggested it would amount to “a large Timmies”.)

So, these two actions leave a shortfall of slightly more than $545 million or $117 per residential ratepayer — where will the balance come from?

Will “bold action” pay out the shortfall for ratepayers?

March 21, 2019 arrived and the Ministry of Energy, Northern Development and Mines issued a press release declaring: “Ford Government Taking Bold Action to Fix Hydro Mess.” It was full of promises, but were they enough to deliver the missing $117/per residential ratepayer?

Winding down the Fair Hydro Plan (FHP)

The press release specifically stated the Ministry would “wind down the Fair Hydro Plan” (FHP) and in the process save billions of dollars in borrowing costs.  They would do that by simply moving the borrowing process from the OPG “Trust” directly to the Province.  As noted in the report of the FAO (Financial Accountability Office) of early 2017, borrowing via the “Trust”, would increase interest costs by “about $4 billion in interest expense, because the interest rate on Provincial debt is lower than the interest rate on OPG Trust’s debt.”  The FAO noted the timeline required to both fund and repay the total debt under the FHP was 29 years, so the $4 billion in savings would amount to approximately $138 million annually.  As the FHP was all directed at residential ratepayers, $138 million would reduce future rate increases by $30 per residential ratepayer.

That reduces the missing $117 to $87 per ratepayer.

Reducing Conservation Spending

Another position in the recent press release was related to reducing conservation spending which has added about $450 million annually to ratepayer bills for the past 10 years.  The effect on residential ratepayers will be approximately one-third of that amount.  Those coupons your local distribution company handed out for the purchase of LED bulbs, and the rebates for installing energy efficient furnaces or air conditioners have been cancelled, which will reduce the bill to residential ratepayers by around $150 million annually.  The effect on ratepayers should be a reduction in future rate increases of $32 per residential ratepayer. So that means the $173 reduction is now $55!

Unanswered at this point is where the remaining $85 per residential ratepayer will come from. Perhaps Minister Rickford would like a suggestion or two to find the missing $400 million in annual costs needed to eliminate the missing $55 per residential ratepayer? Here we go.

Quick and easy savings                                                                                                                                                             Wyoming State has implemented a “wind tax” and a suggestion to do likewise in Ontario was put forward by the writer back in March 2018 as just one idea.  If that is seen by the current government as going “against the grain” of a conservative government, I have another suggestion which can be easily found in the regulatory pigeonholes!

Enforce the regulations

Enforcement of regulations dealing with complaints surrounding wind turbines would reduce the generation they provide out of sync with demand or where they are curtailing their generation, but paid for doing so.

Enforcing regulations should be something the government should be onside with!

A recent article noted: “The Ontario government now has records of thousands of complaints dating back to 2006 regarding excessive noise and shadow flicker or strobe effect. The detailed files on these complaints, which contain notes by Provincial Officers with the ministry of the environment, also contain comments on adverse health effects stemming from exposure to the noise emissions.”

Needless to say, those “complaints” have been virtually ignored. If the regulations were enforced wind developers would be told to shut down their turbines thereby saving ratepayers considerable monies and as a wondrous side benefit, would reduce health issues (and costs to the healthcare system) related to the noise and strobe effects.

The Minister of Energy, Northern Development and Mines would quickly find the $260 million missing to help him reach the goal set by Premier Ford to reduce future bills by the $55 per residential ratepayer.

One should hopefully believe (unlike Kathleen Wynne, our previous Premier), Doug Ford was not suggesting the $173 per residential ratepayer he promised will turn out to be a “stretch goal”!

PARKER GALLANT

*One wind power project, the 100-megawatt “Nation Rise” in North Stormont south of Ottawa, escaped the guillotine, despite not being built and in fact, receiving its approval after the election while the defeated Wynne government was in “caretaker mode.” Cancelling this project would save Ontario ratepayers over $400 million for the 20-year contract, less any penalty for cancelling the contract.

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Free power is really expensive!

Stumbling over the IESO weekly summary* for May 24th to May 30th came with a shocking discovery that the HOEP (Hourly Ontario Electricity Price) for the week had descended to a low of $1.05 /MWh (megawatt hour) or 0.11 cents /kWh (kilowatt hour).

As it turns out, there is probably nothing you could buy for eleven one hundredths of a cent except for what was surplus to Ontario’s electricity demand for the week.

If you were looking to buy power from Ontario while living elsewhere it was much better than a Boxing Day or Black Friday sale! During that week IESO exported 278,712 MWh to NY, Michigan, Quebec, etc., which could have supplied 1.6 million average Ontario households with their electricity needs for the whole week for 19 cents.   Yes, you read that right!  The 278,812 MWh cost Ontario ratepayers the GA (Global Adjustment) which IESO’s 2nd estimate for May suggests will be $127.76/MWh (12.8 cents /kWh)!

What that means is, Ontario’s ratepayers will pick up $35.6 million in GA costs reducing electricity rates for our neighbours. Our neighbours can use that cheap power to lure small and medium sized businesses to their state or province. The businesses being lured away provide employment for many Ontarians.

Now, so surprised was I by the foregoing I fired off an e-mail to my friend Scott Luft about the meager amount of the HOEP for that week. Scott quickly responded suggesting a look at the prior week which he said was even more egregious.  So egregious, that the HOEP for the week of May 17th to May 23rd was negative at -0.48 /MWh or -0.5 cents /kWh.  He closed with the thought provoking “free power is really expensive” alluding to wind and solar as a fuel having virtually no cost!

It turned out the 308,616 MWh exported to NY, Michigan, etc., for the week commencing May 17th required Ontario ratepayers to pick up almost the full costs of our surplus and unneeded** generation and to also pay our neighbours to take it off our hands.  The cost of the latter was $148,134. and the cost of the generation based on the second IESO estimate of the GA for May was $39.4 million!  Those exported 308,616 MWh were equivalent to the “average” consumption of 1.8 million Ontario ratepayers for one week.  Those 1.8 million ratepayers if they lived in Ontario, unburdened by the GA costs, would have been paid .83 cents for their average weekly consumption.

Instead of a benefit, those ratepayers were obliged to pay 12.8 cents /kWh for power they didn’t consume and also pay $20.00 for their own “average” consumption of 172 kWh for the week.

Conclusion

In just two weeks of May Ontario ratepayers subsidized the generation and export of 587,328 MWh at a cost of $75 million (excluding costs of curtailed wind, spilled hydro, etc.) to ensure our grid was stable and not cause blackouts or brownouts.

What the foregoing highlights is the complete mess our various Ministers of Energy have made of Ontario’s electricity system by catering to the whims of the many unqualified environmental groups who have led our government down the path of contracting for intermittent and unreliable wind and solar generation at high rates to save the world without even so much as a cursory cost/benefit analysis.

Just those two weeks of May 2017 make it obvious: Free power is really expensive!

Parker Gallant,

June 6, 2017

* IESO’s weekly summaries commence Wednesday running to Tuesday of the following week.

**Unneeded generation costs include: spilled hydro, curtailed wind, steamed-off nuclear and idling gas plants.