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Ontario power demand down, prices up—what gives?

2016 off to a great start as ratepayers pay hundreds of millions for surplus power (mostly wind)

tallturbine

March 27,m 2016

By Parker Gallant

The Independent Electricity System Operator (IESO) released the February 2016 Monthly Market Report and it is full of more bad news for Ontario’s beleaguered ratepayers.

Combined with the bad news in the January 2016 report, the average commodity price for the first two months of the current year jumped from $85.37 per megawatt hour (MWh) in 2015 to $108.17 per/MWh.   This could translate to an average household increase of as much as 27% in electricity rates levied, when we get the news from the Ontario Energy Board (OEB) mid-April about effective rates for the ensuing six months.  If “commodity” cost jumps $22.80/MWh, the average Ontario household (consuming 800 kilowatts (kWh) per month) would pay an additional $220 annually and $28.00 more in HST.

So, what caused the 27% jump in the first two months compared to a year ago?

Wind 63 % of wasted power

First, the weather in 2016 was milder meaning demand dropped 6.5%, and many generators were paid to not generate.   My friend Scott Luft does a great job at estimating the power we steam off (nuclear), spill (hydro), curtail (wind), etc.; he estimates the first two months of 2016 saw that class of surplus power was 675,000 MWh versus 332,000 MWh in 2015. Wind was 63% (425,000MWh) of 2016’s wasted power and 28.5% (95,000 MWh) in 2015.  Ratepayers pick up the full cost of that power!

Additionally Ontario’s exports were significant both years; the price achieved excludes the Global Adjustment (GA) or $95.02/MWh for 2016 versus $45.34/MWh in 2015. The GA cost is paid for by Ontario ratepayers and was more than double 2015. Also, a large chunk of the GA  for “Class A” ratepayers (large industrial clients) is paid for by “average” ratepayers who also picked up the costs of the newly launched Ontario Electricity Support Program for ratepayers living in “energy poverty.”  The OEB estimated the annual cost would be $175/$225 million.

If this continues, electricity costs will jump $2.5B … in one year

In all the first two months of 2016 extracted an additional $410 million dollars out of Ontario ratepayers’ pockets, compared to the same 2015 time frame — despite reduced demand.  If this pattern continues, electricity costs will jump $2.5 billion in just one year.

This is despite the promise made by Minister Chiarelli in an article in the Windsor Star June 24, 2015:  “Rates are going to continue to go up everywhere. There was a blip in rate pressures because of the investments that we made but starting in 2016 that will be flatlined very significantly.”

Minister Chiarelli seems unable to comprehend the cause and effect of adding unreliable, intermittent wind and solar generation to the grid when they are not needed. In just the first two months of the current year, the costs of decisions by ministers of Energy (past and present) appear to have added billions to ratepayers’ bills without any perceptible environmental or economic benefit.

©Parker Gallant,

March 25, 2016

The opinions expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.

NB:  From the just released IESO 18 Month Outlook

“About 1,400 MW of new supply – 950 MW of wind, 300 MW of gas and 140 MW of solar generation – will be added to the province’s transmission grid over the Outlook period. By the end of the period, the amount of grid-connected wind and solar generation is expected to increase to about 4,550 MW and 380 MW, respectively. The embedded wind generation over the same period is expected to increase to about 700 MW. Meanwhile, embedded solar generation is expected to increase to about 2,180 MW. “

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