The Labour Day weekend was a disappointment for many as the last summer holiday featured below-normal temperatures in most of Ontario. The cool weather meant Ontario’s demand for electricity was only 904,000* megawatts (MWh) for the three days.
The “weighted” average of the hourly Ontario electricity price (HOEP) averaged a meagre $6.13/MWh (0.61 cents/kWh), meaning the market value for that consumption was only $5.542 million.
At the same time, however, Ontario was exporting 168,000 MWh (net exports i.e., exports minus imports) to New York, Michigan, etc. at about the same price. Ontario got $1.03 million from the sale of that power, which brought the total market value of Ontario’s consumption and exports to $6.572 million.
Apparently.
If the $6.57 million figure was the true cost of power generation, then Ontario’s ratepayers would have been delighted; however, we know the HOEP makes up only a small portion of the cost. The Global Adjustment (GA) represents the bulk of costs.
What the power REALLY cost
The GA includes the difference between the contracted rate and the market or HOEP value and many other costs. As is the normal process of IESO (Independent Electricity System Operator) they provide a forecast of the GA at the start of each month. For September of this year, it was the highest ever at $127.39/MWh** or 12.7 cents/kWh. Should IESO’s forecast prove correct, the total cost of those Labour Day megawatt hours for September will be $133.52 or 13.3 cents/kWh.
In other words, the 1,072,000 MWh consumed and exported over the three days of the Labour Day weekend had an all-in cost of over $143 million.
Ontario’s ratepayers in the interim were enjoying TOU (time of use) off-peak rates of 6.5cents/kWh meaning they will be billed $58,760,000 (904,000 X $65/MWh = $58,760,000). That $58.760 million plus the $1.03 million from the export of the 168,000 MWh will produce revenue of only $59,793,000.
That leaves a shortfall in the costs of contracted generation of $83,340,440. ($143,133,440 – $59,793,000 = $83,340,440)
The $83 million shortfall for those three days winds up in what is referred to as a “variance” account and is normally reflected in the resetting of the rates semi-annually by the Ontario Energy Board on May 1st and November 1st. The Fair Hydro Act however kicked these costs down the road and will accumulate with all the other shortfalls and reflect themselves in future rate increases.
Still digging the hole
Despite these crazy financials, Energy Minister Glenn Thibeault has not cancelled the renewable energy contracts issued in 2016 that are now chasing their Renewable Energy Approvals from the Ministry of the Environment and Climate Change. The amount of exported power on the Labour Day weekend combined with the 36,000 MWh of curtailed wind power represented more than one-fifth (22.6%) of Ontario’s demand.
Ontario clearly does not need any more intermittent wind power generated out of phase with demand.
Time for the Minister of Energy to brush up on his Grade 6 Math and stop punishing Ontario’s ratepayers.
Parker Gallant
* Ontario’s demand for the 2016 Labour Day was 1,197,000 MWh
**Hopefully the IESO forecast includes an allowance for curtailed wind which was approximately 36,000 MWh over the three days of the weekend and which Ontario ratepayers pay $120/MWh.
Parker Gallant Energy Perspectives 