The Independent Electricity System Operator (IESO) just released the Monthly Summary for October 2016. Comparing the prices to their report for October 2015 will make you weep.
Comparing the two months one year apart, you’ll see Ontario’s consumption decreased by almost 170,000 megawatts (MWh), but the costs of consuming less increased the commodity cost by over $176 million.
What that means: the 1% drop in consumption from 10.7 TWh (terawatts) to 10.5 TWh will probably result in the OEB (Ontario Energy Board) raising prices in the spring of 2017.
Here’s why. In 2016 we exported 1.4 TWh of power, one full TWh more than in 2015. The 2015 hourly Ontario energy price (HOEP) was also $10/MWh higher than 2016, and so for that reason our 2016 net exports cost us $110 million more. Coupling that drop in HOEP and the additional exports, my friend Scott Luft also estimated a wind curtailment* increase by the Independent Electricity System Operator or IESO (year over year) of 180,000 MWh. The cost of that curtailment added an estimated $22 million to October’s costs of electricity.
October is a bad sign
If October is just the beginning of five months of increases, the news in mid-April 2017 when the OEB announces the price of electricity for the following six months will be terrible.
The “mistake” Premier Wynne admitted to at the Ontario Liberal Party Convention in Ottawa just days ago will loom even larger by mid-April 2017 as any increase will create more energy poverty. I would remind all at the convention she noted: “In the weeks and the months ahead, we are going to find more ways to lower rates and reduce the burden on consumers.” Those “ways to lower rates” are getting harder to find as the government continues to sign new long-term power contracts.
I believe electricity ratepayers in Ontario would welcome some relief from the burden of our electricity bills, but I fear the damage caused by the Green Energy Act will take a decade or more before Ontarians see it.
Premier Wynne should immediately cancel plans to acquire any more wind and solar power generation as planned under Large Renewable Procurement (LRP) I and LRP II as a demonstration of genuine concern for energy poverty and the citizens of Ontario.
*Curtailment: reduction in scheduled capacity or energy delivery
The Wynne government is selling off surplus power at bargain rates … and yet, has contracted for more power produced out-of-phase with demand. Time to reverse engines.
November 14, 2016
Ontario’s Independent Electricity System Operator (IESO) has responsibility for running the “market” referred to as the HOEP (Hourly Ontario Electricity Price). That is defined as “the average of the twelve market clearing prices in each hour.” IESO also says the HOEP is “a real-time market, meaning purchases of electricity are made as they are needed. There are occasions, when the best-priced energy may not be available due to limitations on the transmission lines. In this case, that generator’s offer is still used to help set the price, but another generator may be asked to provide the electricity.”
Since the beginning of 2016, the “real-time market” has valued a traded megawatt (MWh) at an average of about $16.00 or 1.6 cents a kilowatt (kWh). Compare that to what households and small businesses pay, an average price of 11.1 cents a kWh or almost seven times the market rate.
What the HOEP market is telling Ontario’s Minister of Energy Glenn Thibeault: the value you get ratepayers to pay for unreliable and intermittent renewable energy in the form of wind and solar generation has absolutely no relationship to its actual worth!
The data my friend Scott Luft posts highlights just how much the feed-in-tariff (FIT) program, with their above market rate contracts for intermittent wind and solar have distorted the HOEP.
Scott’s data source is the IESO although for reasons best known to them they don’t post DX (local distributed FIT and MicroFIT contracted generation) connected wind or solar generation. Scott estimates these in his spreadsheet and his estimates have so far proven to be conservative when the DX results are posted many months later.
Let’s examine the data. The TX (transmission connected) wind generation for the first 10 months of the current year (January 1st to October 31st) was (rounded) 6,966,000 MWh, and the DX connected are estimated at 1,079,000 MWh. Curtailed wind generation is estimated at 1,804,000 MWh bringing total wind (generated and curtailed) to 9,849,000 MWh.. Those 9.8 TWh (terawatt hours) could have supplied approximately 1.3 million “average” households with electricity if it was delivered when needed.
So what that means is, 26% of the available energy from TX connected wind power developments was curtailed. Combining TX and DX curtailed wind MWh represents 18.3% of available energy from that source!
Power sold at a fraction of the contract price
At the same time as wind turbines were delivering or curtailing those megawatts of power, IESO was exporting surplus generation to our neighbours in New York, Michigan, Quebec, etc., selling it for a fraction of the FIT contracted price. Referring again to Scott Luft’s data it should be noted he actually includes the average HOEP price as of the hour(s) of generation or curtailment. That price averaged about $9.50 per MWh for the 10 months using his data! The sale price is a far cry from the FIT and MicroFIT contracted value for wind of $135.00/MWh plus as much as 20% for cost of living (COL) increases and an estimated $120.00/MWh for curtailed generation.
What we can calculate from the pricing information is that wind power generated and curtailed for the 10 months cost ratepayers almost $1.3 billion. If all the 9.8 TWh were included in the exported surpluses the net cost to ratepayers after recovering almost $100 million (9.8 TWh X $9.5 per TWh = $93.1 million) from its sale value is $1.2 billion. That’s about the same as moving two gas plants.
Cost: $300 a year for each electricity customer
The monthly cost of $120 million adds over $300 annually to the average ratepayer’s bill — and that doesn’t include the additional costs of the wasted power from other sources such as spilled hydro, steamed-off nuclear or the idling gas plants.
While we can’t say for sure the exported surplus generation sold to our neighbours came from industrial wind power developments, it is worth noting exports to the end of October were about 18.2 TWh or almost twice the amount of generated and curtailed wind produced in the same time-frame. Was wind-generated electricity a large part of those exports or did it cause other, cheaper, power to be exported? It is extremely likely.
Energy Minister Thibeault needs to recognize he needs to permanently cancel LRP I and LRP II along with any remaining unbuilt wind and solar projects in order to stop the upward pressure on electricity rates. As noted in the press release from the Ministry September 27, 2016, “Ontario will benefit from a robust supply of electricity over the coming decade to meet projected demand.”
It’s time for Energy Minister Thibeault to recognize the power to reduce upward pressure on electricity rates resides with him; he should use it to halt purchases of power we don’t need.
The Canadian Wind Energy Association (CanWEA), the wind power development lobbyist and trade association, posted a declaration last week defending wind power, saying it has no role in Ontario’s rising electricity bills. CanWEA’s Regional Director for Ontario Brandy Giannetta posted an article on their website claiming she has facts showing that wind power is a minor factor in the raft of electricity bill increases we have seen in Ontario.
Her chief source of information is a study conducted in 2014 by Power Advisory for “environmental action organization” Environmental Defence; this study has been very influential on the Wynne government’s energy policy.
The claim by CanWEA needs to be challenged. Let’s look atreal factsfrom the Independent Electricity System Operator (IESO). Scott Luft collects wind data from IESO and posts it monthly on his energy analysis website. His estimates of “curtailed” generation are indeed estimates; however, they have proven to be conservative over the past couple of years.
Luft posted data on wind power in Ontario in the first nine months of the current year; wind generated 7,035,901 megawatt hours (MWh) of electricity and curtailed* another 1,558,555 MWh. The power restricted or curtailed actually represents slightly more than 18% of total power generation from wind.
Together (assuming an average price of $123.50/MWh), the cost of the 8,594,456 MWh of generated and curtailed wind cost ratepayers about $1,061,415.000. What Luft has also done is use IESO data to determine the HOEP (hourly Ontario energy price) during the generation and curtailment times and, based on that data, the market valuation of that almost 8.6 terawatt hours (TWh) was just shy of $87 million. What that clearly indicates is the market value of 8.6 million of generated and curtailed wind contracted as a result of the GEA cost Ontario ratepayers $974 million for unneeded power that was principally exported or curtailed because it was surplus to our needs.
The data from the first nine months of the current year suggest approximately 90% of the costs associated with generating unneeded electricity from industrial wind turbines (curtailed and exported) were costs adding no value to Ontario’s ratepayers (except for the 1 cent per kilowatt hour they would have received in a truly competitive market environment).
What this means is, the Auditor General’s observation that the government of Ontario needed to do a cost/benefit study for its non-hydro renewable energy program has become patently obvious. The wind power lobby can claim what it wants about wind power’s role in electricity bills, but the figures speak for themselves.
*IESO definition: curtailment means the involuntary curtailment of non-dispatchable load as a result of insufficient generation capacity, of a limitation in the capacity of a transmission system or of actions taken by the IESO pursuant to Chapter 5 to maintain the reliability of the IESO-controlled grid or of the electricity system
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
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 writerScott 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.
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 .”