Ontario’s class distinction stings ordinary hydro customers

Electricity bill-payers are subsidizing business to the tune of over $1 billion, every year

 In early 2010, then Minister of Energy Brad Duguid issued a directive to the OPA (Ontario Power Authority) instructing them to create and deliver an “industrial energy efficiency program” specifically for large transmission connected (TX) ratepayers.

That directive led to the creation of the two classes of ratepayers that now exist in Ontario.

Originally, Class A ratepayers were only the largest industrial clients (TX) whose peak hourly demand was 5 megawatts (MW) per hour, or higher.   Since the launch of the new distinction in January 2011, Class A clients have evolved further under Energy Ministers Chiarelli and Thibeault, to allow those with peak demand exceeding 500 kilowatts (kW) per hour.

That move leave the great unwashed “B” Class – you and me — to pick up the subsidy costs for  Ontario’s larger employers. The concern was (is) that those companies without subsidies might exit the province and take their jobs with them.

The algorithm that determines what a Class A customer pays is related to how successful they are at picking the top five hours of Ontario’s peak demand. The “A” class companies who fire up their own generators (usually natural gas) or close their plants/operations down and reduce demand on Ontario’s generation sources during the five highest peak-demand hours over the 12 months, will get the biggest discount.

The focus on “conservation” during those hours carries the political hope of achieving “peak” demand reduction.  The theory is the reduction should result in reduced need for new generation.*

While that goal may have been the intent, at the same time Ministers Duguid, Chiarelli and Thibeault were (are!) giving orders to contract for more and more renewable wind and solar contracts to the point where the “market price” or HOEP (Hourly Ontario Electricity price) continued a slow descent due to surplus generation.   The HOEP in May 2017 achieved a new low of $3.17 per MWh or 32/100th of 1 cent/kWh. In June 2008, it was $62.30/MWh.

Both classes of ratepayer equally pick up the full cost of the HOEP on a per kWh basis!

With the focus on the cost shift of the ratepayer classes tied to the GA (Global Adjustment), the higher the latter the greater the cost shift.   The addition of so many more businesses to the Class A group simply amplified the cross-class subsidy!

For an example of the growth in the dollar value of that shift, let’s look at some June numbers, now that IESO has released the June 2017 summary report.

The first year the B to A shift happened was in 2011: for June of that year the GA was $423.1 million and Class A ratepayers picked up $46 million of that cost. Unfortunately, IESO did not start disclosing the consumption by ratepayer class until 2015, so it is not possible to determine what percentage of the GA was being paid by Class A versus Class B ratepayers.

The June 2015 IESO webpage discloses consumption of 11.004 terawatt hours** (TWh) with Class A consumption of 2.061 TWh (23%), and GA paid by Class A ratepayers of $90.4 million. That’s 9.6% out of total GA costs of $943.1 million.  So, Class B ratepayers picked up $126.5 million to subsidize Class A ratepayers that month.  That translates to a GA cost per kWh for Class A of 4.4 cents versus 9.5 cents for Class B ratepayers. HOEP for June 2015 was $15.31/MWh!

IESO discloses total consumption of 11.509 TWh for June 2016 with Class A consumption of 2.308 TWh (20.05%). The GA for Class A was $121.6 million out of GA costs of $995.3 million. Had the GA been allocated on the 20.05% Class A consumption, they would have paid $200.4 million meaning Class B ratepayers subsidies were $78.8 million for the month.  HOEP for that month was $20.17.

June 2017 total consumption was 11.617 TWh, of which 2.482 TWh (21.36%) was for Class A ratepayers. The Class A GA totaled $137.9 million, but if they had been allocated the 21.36% of their consumption on the GA of $1.208.8 billion instead of the 11.4%, they would have paid $258.2 million.  Class B ratepayers provided a subsidy of $120.3 million.

The 5,055,000 (2015 OEB Yearbook of distributors) Class B ratepayers in the province each picked up an average of $23.80 of subsidy costs for June 2017.

If that becomes the norm, those ratepayers will pony up around $1.4 billion annually. 

Back before former Energy Minister Duguid issued his directive, the Association of Major Power Consumers of Ontario, the Ontario Chamber of Commerce, and the Canadian Federation of Independent Business were lamenting the rising costs of electricity in Ontario. Some companies left the province due to costs, so it was inevitable the Ontario Liberal government would finally hear their pleas for relief.  The result? The creation of the two rate classes.

In effect, the creation of the two rate classes and the subsidy shift from Class B to Class A ratepayers should be labeled “employment insurance” as it was needed to simply retain jobs in jeopardy because many companies were threatening to leave the province due to high uncompetitive electricity rates.

Why can’t our Energy Ministers come to the realization they should cease contracting for new, unreliable and intermittent wind and solar generation that produces power out of phase with demand?

*   The claim by the government is that by not contracting for new capital investment in generation, we ratepayers save future rate increases

**1 terawatt is equal to 1 billion kilowatts

Wind power waste not healthy for Ontario

A few days ago (July 11, 2017) Ontario’s Minister of Health and Long-Term Care Dr. Eric Hoskins issued a press release saying 131 hospitals would receive $175 million for “repairs and upgrades”.  That’s an average of $1.3 million per hospital to be doled out, apparently because the Wynne government finally produced a “balanced budget”.

The press release states: “Funding from the province allows hospitals to make critical improvements to their facilities, including upgrades or replacements to roofs, windows, heating and air conditioning systems, fire alarms and back-up generators.”

One wonders if Minister Hoskins ever chats with Minister of Energy Glenn Thibeault who doles out money to industrial wind turbine (IWT) developments at a pace that would make his $1.3 million per hospital look like small potatoes!   In the first six months of 2017, the bill to Ontario ratepayers was approximately $1.089 billion for accepted and curtailed industrial wind.  That works out to approximately $475,000 per turbine … for six months!  (That assumes there are about 2300 turbines with an average capacity of 2 MW or megawatts currently operating in the province.)

Also in the first six months of 2017, grid-connected and distributor-connected IWT collectively generated 6,143,000 MWh and curtailed 1,906,000 MWh* according to IESO data and curtailed estimates by Scott Luft.  That means the cost per grid-accepted MWh was about $177 or 17.7 cents/kWh! If the next six months are similar to the first six, each average 2-MW wind turbine will cost $950,000** generating or curtailing the intermittent and unreliable power they are famous for.

Those wind turbines require back-up by gas plants and frequently cause the spilling of hydro power and the steam-off of nuclear plants. The costs of these grid managing activities to ratepayers easily drive the costs per turbine well past the hospital repair allocations.

Kicking the can down the road under the Fair Hydro Act will see the foregoing incredible waste of ratepayer dollars accumulate within OPG, and result in rate increases as high as those we have experienced over the past 10 years, once 2021 arrives.

Try to imagine how much better our health care system would be with that estimated annual waste of $2 billion ($40 billion over the 20-year terms of the contracts) allocated towards health care instead of handing it over to mainly foreign industrial wind developers.

The time has come to stop signing those contracts!

Parker Gallant

* The average curtailed wind for the first 6 months of 2017 was 23.6% and for May was 43.8%.

** This assumes accepted generation is paid $140/MWh and curtailed wind is paid $120/MWh.

Ontario’s cyclonic wind costs keep heading higher

Compare power output from wind and the cost to consumers between 2010 and 2016 and we learn this: we’re paying more for intermittent wind power, produced out-of-phase with demand

More wind=more cost [Photo: Dorothea Larsen]

In 2010, industrial wind turbines (IWT) in Ontario represented total installed capacity of approximately 1,200 megawatts (MW); they generated 2.95 terawatt hours (TWh*) of transmission (TX) and distributed (DX) connected electricity.  The power from wind cost Ontario’s ratepayers about $413 million for those 2.95 TWh, about 2.1% of total 2010 consumption.  The cost of IWT generation in 2010 was 3.1% of total generation costs (Global Adjustment [GA] + Hourly Ontario Energy Price [HOEP]) and represented 33.5% of “net exports”** of electricity to our neighbours in Michigan, New York, and others.

Wind was over 90% of exported power

Jump to 2016: wind turbines represented installed capacity of almost 4,500 MW, and generated and curtailed*** TX and DX connected electricity totaling 13.15 TWh.  The cost to Ontario’s ratepayers jumped to $1,894.3 million — about 12.2 % of total generation costs.  The 13.15 TWh of generation was 7.9% of Ontario’s total consumption but 94.9% of net exports.

The cost per kilowatt hour of electricity generated by wind in 2010 was 14 cents and in 2016 it had increased to 17.5 cents, despite downward adjustments to the contracted values between 2010 and 2016.   That cost doesn’t include the back-up costs of gas generation when the wind doesn’t blow and we need the power, nor does it include costs associated with spilled hydro or steamed off nuclear, but it does include the cost of curtailed wind, which was 2.33 TWh in 2016 and just shy of total wind generated electricity in 2010.

In the seven years from 2010 to 2016, Ontario’s electricity ratepayers picked up total costs of $7.746 billion for 56.9 TWh of grid-accepted and curtailed (4.9 TWh) wind-generated electricity.   The actual value given to those 56.9 TWh by the HOEP market was just shy of $570 million meaning ratepayers were forced to pick up the difference of $7.166 billion for power that wasn’t needed.  The foregoing is based on the fact we have continually exported our surplus generation since the passing of the Green Energy Act and contracted for IWT generation at above market prices.

During those same seven years, Ontario had “net exports” of 85.95 TWh while curtailing wind, spilling hydro and steaming off nuclear. And, at the same time, we were contracting for gas plant generators that are now only occasionally called on to generate electricity yet are paid considerable dollars for simply idling!

Refinancing wind payments

As noted above the cost of wind generation in 2016 was almost $1.9 billion and represented 15.3% of the Global Adjustment pot. That cost was close to what was inferred in an Energy Ministry press release headlined: “Refinancing the Global Adjustment” but suggesting it was taxpayer owned “infrastructure”:  “To relieve the current burden on ratepayers and share costs more fairly, a portion of the GA is being refinanced. Refinancing the GA would provide significant and immediate rate relief by spreading the cost of electricity investments over the expected lifecycle of the infrastructure that has been built.”

What’s really being refinanced is a portion of the guaranteed payments to the wind and solar developers who were contracted at above market rates! So, what is being touted as a 25% reduction includes the 8% provincial portion of the HST and a portion of annual payments being made to wind and solar developers for their intermittent (and unreliable) power.

Premier Wynne’s shell game continues!

(C) Parker Gallant

May 22, 2017

Note: Special thanks to Scott Luft for his recent chart outlining the data enabling the writer to complete the math associated with this Liberal shell game!

*    One  TWh equals 1 million MWh and the average household in Ontario reputedly consumes 9 MWh annually, meaning 1 TWh could power 111,000 average household for one year.

**   Net exports are total exports less total imports.

*** Ontario commenced paying for “curtailed” wind generation in September 2013.

Wynne spin and the Fair Hydro Plan, Part 3

The recent 2017/2018 budget speech from Finance Minister Sousa had this to say about the Fair Hydro Plan.

“People from across the province shared their concerns about rising electricity bills. We listened and we are responding. Recognizing that there needed to be a fairer way to share the costs of building a cleaner, more modern and reliable electricity generation system, we are taking action to reduce electricity costs. Through Ontario’s Fair Hydro Plan, starting this summer, household electricity costs would be lowered by an average of 25 per cent. We are also capping rate  increases to inflation for the next four years. Low‐income families, and those living in rural, remote or on-reserve First Nation communities, would receive additional relief as well.”

Impressive words signaling reallocation of charges to taxpayers previously paid by ratepayers as well as direct relief. The budget’s forecast however doesn’t jibe with the words contained in the speech from Premier Wynne when she announced the relief March 2, 2017 and said, “Although the refinancing occurs within the electricity system and is accounted for separately, the overall fiscal impact of this relief and restructuring will cost the province about $2.5 billion over the next three years.”

The Premier’s remarks suggest relief will cost about $833 million annually but the budget notes the “Electricity Rate Relief Programs” are forecast to cost $1.438 billion.

The budget estimate(s) presumably include the costs associated with the OESP (Ontario Electricity Support Program) for low-income families. Those “heat or eat” households were driven to that situation by climbing electricity rates caused by lucrative contracts handed out by the current and past energy ministers.  As well, free delivery costs for First Nations communities will become standard and taxpayer supported as will the RRRP (Rural or Remote Rate Protection) in low-density regions.  Also added to the pot is an “Affordability Fund” for households who can’t afford energy efficiency upgrades.  Finance Minister Sousa’s budget obviously forecasts those costs to taxpayers at over $600 million more than the Premier!  So what are Ontario’s taxpayers/ratepayers to believe?

Based on the foregoing we must assume the Premier’s $2.5 billion over three years are to only cover the programs moved to other ministries and will cost taxpayers about $4.5 billion if the relief ends three years hence.  Based on the record of this government we shouldn’t expect the relief programs to end in three years!

The other part of the Premier’s statement was: “In addition, this rate relief is designed to last. After we bring bills down by 25% we will hold them there with rates rising only with inflation — or roughly 2% — for at least four years.”  Once again the Premier avoids telling us the whole story. Other associated documents the general public have a difficult time locating tell another story.  One such document was the “Technical Briefing” appendix attached to a directive dated March 2, 2017 sent to the OEB by Energy Minister Glenn Thibeault.  Under a heading labeled “Refinancing the Global Adjustment” we find:  “Under current forecasts, the immediate reduction (i.e., the financed portion) in the GA would be about $2.5 billion per year on average over the first ten years,  with a maximum annual interest cost of $1.4 billion.”

What that means is, they are “kicking the can down the road” by refinancing $25 billion of contract and adding $14 billion in interest costs. At some point in the not too distant future (year 5?) electricity rates will need to jump to accommodate the $39 billion of accumulated debt within the portfolio.  What is being refinanced are those 20-year contracts for wind, solar and gas generation, yet the contracts will have expired and should, yet we don’t know if they will still be operational!

Interestingly enough, if we include the taxpayer-related relief costs of at least $4.314 billion ($1,438 million X 3 years) “kicking the can down the road” will labour taxpayers/ratepayers with $43.3 billion in costs. That $43.3 billion exceeds what was supposed invested in electricity generation ($35 billion) and is only $6.7 billion short of what they claim has been invested in the electricity system as this quote from the “Technical Briefing” notes:  Between 2005 and 2015, government invested more than $50 billion in the electricity system, including $35 billion in electricity generation to restore reliability, replace coal and meet environmental objectives.

So what are taxpayers and ratepayers seeing when they look ahead? First, a new debt associated with the electricity system will burden us with an additional $43.3 billion on top of the reputed $50 billion the Premier Wynne led government claims has been invested.  That accumulated debt will require payback which will drive rates and taxes higher.   Secondly many of the $35 billion investments in electricity generation and the $15 billion of investments in the electricity system will have reached their end of life and will require replacement.

The forecast for ratepayers is they should expect to see a new charge on their future hydro bills. Logic suggests the new charge should be referred to as the LDRC (Liberal Debt Retirement Charge)!

 

 

 

Premier Wynne’s Easter basket full of rotten eggs

Count the eggs! $50 million plus, lost in just 3 days!

The nice weather on Easter weekend in Ontario disguised the fact that April 14th, 15th and 16th were really bad days for electricity customers.

Scott Luft’s daily reports detailed the bad news, even before the Independent Electricity System Operator or IESO got out their daily summary for April 12th.   Some of the information in Scott’s reports are estimates, but they have always proven to be on the conservative side. These three reports paint a disturbing picture of what’s going on, and how badly the Ontario government is mismanaging the electricity file.

Here are a few of the events that our Energy Minister Glenn Thibeault and Premier Wynne should find embarrassing. They also confirm what many of us have been telling them for several years.

First, Thursday April 13th saw a disclosure from the Energy Ministry that Ontario paid out $28,095,332 including about $240,000 in interest to Windstream Energy to satisfy the award made to them under the NAFTA (North American Free Trade Agreement) tribunal, due to cancellation of  a 300-MW offshore industrial wind turbine project.

Second, the HOEP (hourly Ontario electricity price) market, traded all of Ontario’s generation over the three days at “0” (zero) or negative value. While total demand for electricity was 1,031,448 MWh over the three days the HOEP market valued it at -$869,220 or an average of -.84 cents/MWh.  The “0” and negative values for the HOEP lasted 77 continuous hours, breaking a prior record of 62 hours.

Wasted, unneeded wind power

Third, during the three days, ratepayers picked up the bill for 99,109 MWh of curtailed wind which exceeded the transmission (TX) and distribution (DX) connected wind by 60.2%. Curtailed wind at an estimated $120/MWh alone cost ratepayers $11.9 million, driving the price of delivered wind (61,882MWh) to a cost of $335.34/MWh or 33.5 cents a kWh.  Total wind costs were $20.8 million.

Fourth, solar power over the three days generated and curtailed (1,124 MWh) 35,539 MWh at a cost of   $16.8 million, which works out to $472.86/MWh or 47.3 cents/kWh.

Fifth was the cost of gas which in three days produced 18,433 MWh, but the cost was $12.5 million and $676.56/MWh or 67.7 cents/kWh.  The 9,943 MW of IESO grid-connected gas operated at 2.6% of actual capacity during the three days.

Sixth was the generosity shown to our neighbours in New York, Michigan and Quebec who took delivery of 157,768 MWh of free power along with a payment of $132,525.

The quick math on the above indicates a cost of wind, solar and gas generation plus the payment for exported power comes to $50.2 million.

Nuclear and hydro was all we needed

That’s bad enough, but if you look at nuclear and hydro generation during those three days, clearly the $50.2 million was “money for nothing” paid for by Ontario’s ratepayers.  Nuclear (including steamed-off of 49,118 MWh) was 688,981 MWh and combined with hydro generation of 324,001 MWh of could have provided 1,012,982 MWh versus Ontario’s demand over those three days of 869,232 MWh leaving 143,750 MWh of surplus.  Three days of nuclear and hydro cost $61.9 million or 6.1 cents/kWh.

Bottom line? Ontario ratepayers picked up the bill for not only the $28.1 million paid to Windstream for a canceled offshore wind project, but also another $50.2 million, making the past four days very expensive for everyone.

The $78.3 million could have been better spent on health care or so many other pressing needs!

It’s time to kill the Green Energy Act and cancel any uncompleted wind and solar contracts before all our weekends turn out like this one!

One spring day just cost you millions

A happy day for power importers south of the border. For you? Not so much…

April 9, 2017 was a perfect day to demonstrate the mess the current Ontario government could have expected if they had simply done a cost-benefit study of the electricity sector prior to imposing the GEA (Green Energy and Green Economy Act).

The April 9th IESO generator report and Daily Market Summary provide highlights of many of the mistakes the Liberal government has made, as does my friend Scott Luft’s “Daily Electricity Supply Estimates.”  IESO’s report fails to provide details of distributor connected (DX) generation (principally solar and wind) whereas Scott estimates those along with the curtailment of wind, solar, hydro and nuclear generation. His estimates have proven to be on the conservative side in the past.

IESO’s “Market Summary” shows Ontario Demand was only 294,600 MWh (megawatt hours) which Scott noted was the “3rd lowest Ontario Demand day in the history of the market” and that day, along with five other recent “lowest Ontario Demand” days have all occurred within the past 12 months.   How low is demand? Scott says the six low demand days were lower than any day during the massive blackout of 2003.

Seriously.

Demand in Ontario on April 9th of 294,600 MWh could have been easily supplied by nuclear generation (236,400 MWh including 14,800 MWh steamed-off) and hydro generation (101,900 MWh including 1,200 MWh spilled, and 2,600 MWh from DX).  Those two clean, emission-free power sources could have delivered 338,300 MWh, leaving 43,700 MWh available for sale to our neighbours.  The 338,300 MWh should have cost Ontario ratepayers $20,554,000 based on what we pay on average for nuclear and hydro generation.  That would equate to 6.1 cents per kilowatt hour (kWh) combined!

As it happened, Sunday April 9 saw 51,400 MWh of net exports (exports less imports) sent to our neighbours in Michigan, New York and elsewhere, along with an average payment of $3.08/MWh. They gladly took those free MWh along with our payment of $158,312.00.

Sunday April 9th also saw Ontario’s ratepayers pick up the bill for transmission (TX) and DX-connected wind of 25,700 MWh and another 46,300 MWh of curtailed (one of the highest curtailed days ever) wind at a total cost of $9.290 million.  If we calculate the cost for just the accepted wind generation (25,700 MWh,) the cost per MWh becomes $361/MWh or 36.1 cents/kWh.

Ontario ratepayers also picked up the bill for the 10,533 MWh of solar generation (DX and TX) and the 667 MWh of solar estimated as curtailed. Solar’s costs were $5.280 million, which means the delivered generation cost last Sunday was $501.28/MWh or 50.1 cents/kWh.

Meanwhile, those same ratepayers picked up a $4.143 million bill for gas generators who delivered 5,773 MWh (TX and DX) at a delivered cost of $717.12/MWh or 71.7 cents/kWh. Scott Luft noted the 5,773 MWh delivered to the system by the gas plants set a record low.*

The cost of unnecessary power for ONE DAY?

The total cost of the unneeded supply of power on April 9th coming from wind, solar, gas and biofuel ($368,000) plus the payment made to export ($158,312.) came to over $20 million.

What that means is, this one day of generation, Ontario’s ratepayers are obliged to pay for, was $40.8 million or 13.6 cents/kWh yet the 294,000 MWh they actually consumed was produced at a cost of $17.9 million (not including the $2.7 million loss on exporting).

Premier Wynne has admitted her government has made mistakes on the energy file. The “mistake” on that Spring day turned out to be a burden on all of Ontario’s ratepayers (rich and poor) with the extra cost of over $20 million in order for the Minister of the Environment and Climate Change and Premier Wynne to be able to claim the “cap and trade” tax is driving down emissions in the energy sector, by reducing generation from fossil fuels (gas).

They are not likely to mention that anyone using electricity from Ontario’s generators would have had to more than double — 13.8 cents/kWh instead of the 6.1 cents/kWh — so they could make that claim!

* Lower gas generation will allow Glen Murray, Minister of the Environment and Climate Change to claim the “cap and trade” tax is working.

How much did Premier Wynne’s hydro “mistake” actually cost?

Five months ago, Premier Kathleen Wynne admitted to the delegates at the annual Ontario Liberal Party convention her government “made a mistake” allowing electricity rates to rise so high.  Those rates have actually soared, increasing by 80.9% from 2009.

Comparing Ontario electricity rates to other indicators such as inflation, shows just how bad the situation is. Comparing the IESO (Independent Electricity System Operator) Monthly Summaries for January and February 2009 with the same two months in 2017, the combined costs of HOEP (hourly Ontario energy price) plus the Global Adjustment (GA) show costs per kilowatt hour (kWh) have increased from 5.85 cents/kWh to 10.58 cents/kWh. That is an 80.9% increase.  Average inflation over the same time-frame has increased about 14%.   (The reader should note the 2009 and 2017 costs are before HST so the 8% reduction commenced January 1st has had no effect on contracted or regulated electricity rates.)

So how bad? The cost of the basic commodity has increased by almost six times the inflation rate!

Commodity cost is way up

Reviewing the IESO Monthly Summaries for the two-month periods in 2009 versus 2017 also shows Ontario demand fell by 7% or 1,713,000 MWh (1.7 TWh). The Summary reports indicate the 24.43 TWh representing Ontario demand in 2009 cost $58.49 million/TWh or $1,429 million for January and February. The 22.7 TWh of Ontario demand in 2017 cost $105.78 million/ TWh or $2,330 million for the same two months.  That represents an increase in the commodity cost of electricity of $901 million for 7% less electricity — an average monthly increase of $450 million.

So, why?

Exports

One of the reasons was the drop in the market price as the HOEP fell from an average of $51.93/MWh in 2009 for the two months to $21.56/MWh in 2017 while the GA jumped from an average of $6.56/MWh in 2009 to $82.27/MWH in 2017. What that means is, the loss on exports from Ontario in 2009 cost Ontario ratepayers $13.1 million and in 2017 cost ratepayers $174.2 million as the GA costs are not included in the sale of exports via the HOEP.

OK, of that $900+ million increase, we have $174 million found … $727 million to go!

Wind power

Another obvious cause of the big jump was generation and payment for curtailment of power from industrial wind turbines (IWT). Back in the early part of 2009, Ontario had approximately 800 MW of IWT capacity; in the early 2017 we have about 4,550 MW of capacity.   According to my friend Scott Luft, who uses IESO data to estimate the generation and curtailment of IWTs,  in 2009 the turbines delivered almost 395,000 MWh in January and February. In 2017, it’s a different story: generation and curtailment combined jumped to about 2,926,000 MWh.

The contracted wind power prior the passage of the Green Energy Act is estimated to be at the rate of $90/MWh, whereas wind power contracted for after the Act was at $135/MWh (plus a cost-of-living annual increase) meaning they currently are estimated at $140/MWh. The math on the 2009 generation therefore shows a cost of $35.5 million and the 2017 generation/curtailment cost becomes $409.6 million.  The increased cost of wind from 2009 is ($409.6 million less $35.5 million) $374 million.   Deducting the $374 million from $727 million leaves $353 million to find to get to $901 million!

Gas

Since 2009, more than 3,300 MW of gas plant capacity has been added to the Ontario grid. Its addition was basically to back up the wind and solar capacity (which is unreliable and intermittent) to ensure sufficient generation is available during renewables’ failure and high demand periods.  The private sector companies investing in those plants are paid for their capital investments amortized over their life span. When generating electricity they receive fuel costs plus a nominal markup. Payments details are not available in the public domain, but it is understood payments contracted are per MW of capacity, and  estimates given are $8/15,000 per MW per month.  Assuming the 3,300 MW of capacity secured since 2009 is at the mid-range ($12,000 per MW) the cost to ratepayers is $79 million (3,300 X $12,000 X 2 months).

That $79 million means we are still looking for $274 million.

Consuming less but paying more

IESO shows ratepayers consumed 1.7 TWh less in the first two months of 2017 than in 2009, but paid more. That is evident in OPG reports.  As OPG has not released its 2017 1st Quarter report estimates are based on the 2016, 1st Quarter report.  First we estimate spilled (wasted) hydro was 1.2 TWh at a reported cost of $44 million/TWh so that cost ratepayers $53 million.   The 21.0 TWh produced by OPG in the 2016, 1st Quarter generated average revenue per TWh of $70.4 million.  Estimating the first two months of 2017 generation at 14 TWh results in a cost of $985.6 million.  In 2009 OPG generated 25.6 TWh at an average of $57.8 million/TWh. Again estimating the total cost of the 17 TWh generated by OPG in the first two months produces a cost of $982.6 million so adding the $3 million to the spilled water cost shows an increase of $56 million.  Subtracting $56 million from $274 million means we are looking for the last $218 of the increase.

Solar, conservation, bio-mass and sundry

We assume the balance of the increased 2017 versus 2009 costs came from solar and bio-mass with a portion from the conservation program. Based on Figure 23 “Total Global Adjustment by Components” of the IESO Summary report we can estimate the costs of each of those for the two months.  It appears conservation spending (absent in 2009) represented about $50/55 million for the first two months of 2017 and bio-mass (incented by the FIT and MicroFIT programs) generated costs of around $40 million.  Solar (low during winter months) generated a minimum of $100/$120 million in costs for the two months based on the IESO Figure 23.  While those are “best” estimates to get to the increase of $901 million for the two months, we have not included increased costs from the IESO and OEB budgets which have both increased.

“No checks” in the system

An article recently appeared in the Globe and Mail written by George Vegh, former general counsel to the OEB.  This paragraph is perhaps why Premier Wynne admitted to her “mistake”

“Generation procurements are determined entirely by the government. The system operator – the Independent Electricity System Operator (IESO) – implements government directives. Neither the Ontario Energy Board nor any other independent regulator reviews these procurements. There are no independent criteria, no cost-benefit analysis, no consideration of the need for the procurements, and no review of alternatives. In short, there is virtually no check on the power to procure supply.”

 

What we have in Ontario is a “mistake” that will continue to cost Ontario ratepayers and taxpayers billions for years to come.

Admitting a mistake is one thing, doing something about it is another: Premier Wynne needs to recognize the Ontario Liberal government’s error, kill the Green Energy Act, and halt continued procurement of power from unreliable and intermittent wind and solar generators!