Ontario ratepayers gored at Goreway

What’s up with the big consumer rip-off Mike Crawley has ably reported on? (ref: http://www.cbc.ca/news/canada/toronto/goreway-power-station-investigation-1.4433061)

The report that Crawley relies up on was issued by a secondary watchdog agency within Ontario’s power system called the Market Surveillance Panel (MSP). The MSP reports to the OEB and relies on a research department within the IESO.

Here is the report: https://www.oeb.ca/sites/default/files/MSP_Report_Goreway_201709.pdf

As Crawley notes, the report explains in detail how Ontario ratepayers have been getting ripped off by a large gas-fired power generator located near Bramalea called Goreway Station Partnership (Goreway).

The current owners are the Japanese firms Toyota Tsusho Corporation and JERA Co. Inc., each with 50%.

The dollar amounts of the estimated ripoff are large. The MSP estimates that over a three-year period starting when the plant went online in June 2009, Goreway was paid at least $89 million more than could be justified. Some secret amount plus a $10 million fine was paid by Goreway over the course of subsequent investigations. In addition, in a parallel investigation the MSP found that “the Panel believes that a substantial portion of the $11.2 million in Ramping CMSC payments received by Goreway during shut-down over the course of the Investigation Period was the result of gaming.”

In addition, in another parallel investigation the MSP found that Goreway had benefitted from approximately $5.6 million in what the panel called “anomalous top-up payments” under a payment program called the Day Ahead Commitment Process that were “unwarranted”.

More troubling than the dollar amounts of the particular Goreway example, the investigation has pointed to vulnerabilities in the power situation that make it likely that other related ripoffs have occurred.

Goreway is not the only example. Gaming of those CMSC payments has proven to be a persistent problem for consumers, with both generators and large industrial loads exploiting gaps in the system to capture excess payments.

As noted by the MSP in a December 2016 report, the MSP has completed other investigations prior to Goreway that found gaming to have occurred. The first one concerned a gas-fired generating station located near Sarnia, Greenfield Energy Centre. Another investigation identified two dispatchable loads both owned by Abitibi-Bowater. Power importers and exporters have also been found to be gaming the system. (https://www.oeb.ca/oeb/_Documents/MSP/MSP_CMSC_Report_201612.pdf)

A key problem that has made the power system vulnerable to gaming like that pursued by Goreway is a flaw in Ontario’s market design arising from decisions taken in 1999 to maintain Ontario’s long-standing practice of pricing power equally for consumer irrespective of where they take power off the Ontario grid. (I voted against the uniform price market design bullshit which requires the 2-schedule system in favour of nodal pricing.)

The problem with this concept is that transmission constraints that are inherent to a grid like Ontario’s mean that increments or decrements of power injected or withdrawn from the grid do not have equivalent value at all locations. To accommodate the reality of transmission constraints, the IESO operates a two-schedule market. Under this workaround, consumers are billed on the basis of a theoretical unconstrained market plus top-up payments, whereas generators and dispatchable loads that are required to operate outside of the parameters of that unconstrained market in order to manage constraints get paid various incremental amounts, primarily Congestion Management Settlement Credits, often called CMSC payments. Other top-up payments available to generators are Generator Cost Guarantee (GCG) program and the Day Ahead Commitment Process
(DACP), both of which the MCP found Goreway gamed.

The MSP has warned for years about the market design flaws that Goreway
exploited:

“The Panel has, on more than one occasion, recommended that Ramping CMSC paid during shutdown be eliminated…Proposed changes to the rules that govern Ramping CMSC during shut-down have been brought forward by the IESO from time to time, and been defeated. In May, 2013, the IESO launched a further stakeholder engagement that included the issue of eliminating Ramping CMSC during shut-down. Goreway made numerous submissions on the issue, first opposing its inclusion in the
process at all, then questioning its materiality and suggesting that the Panel’s 2011 Monitoring Document had adequately dealt with any problem…After several postponements, the Market Rule amendment took effect in December 2016.”

The new rule appears vulnerable to similar abuses as the old rule.

On the topic of the RT-GCG :

“Among other things, the Panel has estimated that payments for O&M have exceeded a quarter of a billion dollars since 2010, with little or no apparent incremental reliability benefit…The Panel
acknowledges that the IESO is considering a longer-term solution in the form of an enhanced intra-day unit commitment program that would replace the RT-GCG program. However, by the IESO’s own admission that solution is many years away and it remains unclear to the Panel why changes to the program that have the potential to save millions in costs should not be made immediately. Goreway stands as a clear example of how generators are able to exploit the GCG regime and of how difficult and time-consuming it is to address. The Panel is concerned that the same situation remains in place today.”

The IESO Board of Directors has some serious explaining to do to justify why these problems have gone unsolved for so long.

The basic chronology of events also indicates that something rotten is up at the OEB:

The MSP initiated various gaming investigations of Goreway in 2011 and 2012.

The MSP found the gaming started in 2009, immediately after the plant started operations.

The MSP report was complete as of December 2016, but MSP chairman’s cover letter is dated Oct. 2. What? The chair of the MSP is a very well respected energy lawyer. It doesn’t seem reasonable to me that he would sit on his own report. Could the OEB have ordered a revised date on the cover letter to avoid blame for
sitting on the report?

The OEB didn’t release the report until November. What’s that
about?

Parker Gallant and Tom Adams

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Day of Judgment on the gas plant scandal: Parker Gallant and Tom Adams

Posted on The Financial Post website today here

The trial of two aides of former Ontario premier Dalton McGuinty is likely to lay bare some inner workings behind the politicized management of Ontario’s power system over the past 10 years

On Monday, the criminal trial of David Livingston and Laura Miller, who served former Ontario premier Dalton McGuinty as chief of staff and deputy chief of staff respectively, convenes in Toronto. They face charges of breach of trust and mischief in relation to the alleged destruction of government files dealing with power plants originally contracted for the Greater Toronto Area. The trial is sure to attract media attention, particularly since another trial related to alleged Election Act violations by prominent Ontario Liberals — Pat Sorbara, Premier Kathleen Wynne’s former chief of staff, and Liberal fundraiser Gerry Lougheed — is going on at the same time.

Read the entire article here

You’re paying a tax you don’t even know about: the water rental fee

And, it’s going up. And up.

Sir Adam Beck generation station: take a good look--you're "renting" the water
Sir Adam Beck generation station: take a good look–you’re “renting” the water

December 21, 2016

A neighbour and good friend who farms in Prince Edward County kindly provided a copy of a recent issue of the Farmers Forum newspaper and pointed out an excellent article written by Angela Dorie, an agricultural writer and Jersey cattle farmer.  The article highlighted the “water rental fee”* hidden in the electricity line on our bills to pay for the water used to generate electricity.  Dorie only realized the fee was there when journalist Paul Bliss of CTV brought it to light during a National News broadcast.

I recently wrote article on the fuel tax, suggesting a reduction of it was a way to offer relief to climbing electricity prices, but I didn’t examine how much the “water fuel tax” has risen over the past several years, or how much it has contributed to the province’s revenue.

As it turned out, in 2015 the water fuel tax was $345 million for the generation of 30.4 terawatts (TWh) and represented a cost to ratepayers that amounted to $11.35 cents per megawatt (MWh) or 1.14 cents per kilowatt hour of electricity generated. While the current government didn’t institute the tax, they have significantly raised it over the years.  Back in 2002 the tax was $116 million for the 34.3 TWh generated or $3.38/MWh and 0.34 cents/kWh so it is now 3.3 times what it was the year before the Liberals gained power.

                                                         Water fuel tax:  $2.7 billion and climbing

According to the Ministry of Finance the “water rental charge rate is fixed at 9.5% of a station’s gross revenue from annual generation.”  Reviewing OPG’s financial statements for the past 10 years (2006 to 2015) one can see the fuel tax totaled $2.735 billion.  In 2015 the fuel tax cost the average ratepayer household approximately $70.

It appears that when Dalton McGuinty was premier, he not only burdened us with the “health tax” he also raised electricity bills via a stealth tax which many of us have only just become aware of. Premier Wynne is now suggesting transparency may come to our electricity bills by endorsing the appearance on our bills of the Global Adjustment.   In the current year the GA appears headed to a record $12 billion or about 8.8 cents per kWh based on anticipated consumption of 137 TWh.

One has to wonder how many other taxes and fees are hidden within our electricity bills that will come to light if we actually get an explanation of the GA that is truthful and fully transparent!

Excerpt from the CTV news story:

For decades, the provincial government has been charging for every litre of water flowing through its own power turbines at dams to produce electricity. The tax includes water surging through Niagara Falls.

“It’s effectively a water rental,” independent energy advisor Tom Adams told CTV’s Paul Bliss.

The government charges Ontario Power Generation for the water it uses. Those expenses are passed on from the company to taxpayers.