With the release of the latest report from the International Panel on Climate Change (IPCC) yesterday, which forecast more dire consequences from climate change, there may be more calls for wind power as a source of electricity.
The City of Ottawa’s “Energy Evolution” document calls for as much electrification as possible by 2050, and proposes the installation of as much as 3,200 megawatts of wind power (more than 700 wind turbines) to do that.
It won’t work.
Ontario has already gone through the experience of incorporating wind power into its power generation mix with disastrous results. Two Auditors General noted the lack of any cost-benefit analysis for the rush to wind power (Ottawa hasn’t proposed any such study either) and the enormous cost of wind power. To date, wind makes up less than 10 percent of Ontario’s power supply and its intermittency due to being dependent on weather means it often shows up when not needed.
Ontario has lost billions selling off surplus wind power we don’t need, and we regularly pay generators not to produce.
While people may call for the “clean” “green” expansion of wind power there are facts that must be acknowledged:
Wind power generation is intermittent and produced out of phase with demand
Wind power has a huge impact on the environment in terms of the harm to wildlife, the altered landscapes and the danger to wildlife as well as the introduction of harmful noise pollution to the environment
Wind turbines require a massive amount of land and represent “energy sprawl” in comparison with other forms of generation
Wind power projects are socially divisive as they must be forced on quiet rural communities, in effect industrializing them
Wind can’t “replace” anything. Coal was replaced in Ontario by nuclear and natural gas.
Wind power development cannot exist without subsidy and is very costly to electricity customers (i.e., everybody)
In short, wind doesn’t work.
So, while we are looking for ways to adapt to and perhaps mitigate climate change, or to take a more holistic approach, do everything we can to protect the environment, there are other alternatives.
Wind power is not the future: it is the product of a vigorous marketing program to which well-meaning people have fallen prey.
Nepean-Carleton MPP Lisa MacLeod addressed Energy Minister Glenn Thibeault in an evening session of the Ontario Legislature, to express concern about the plight of Ontario farmers and growers whose livelihoods are suffering due to high electricity bills.
She used the examples of the Manotick-based greenhouse operation SunTech, Osgoode Mushroom, and North Gower Grains to show how different growers are being affected by unrelenting increases in electricity bills, much of which is due to the government’s push for wind and solar power.
See MPP MacLeod’s speech and the Energy Minister’s response here.
Even though her riding will soon split, MacLeod said, she will “always” stand up for Ontario farmers.
With the Ontario government introducing a new program severing the link between the cost of power and the price of power so it can shift 25 per cent of household power bills today to future generation by way massive new debts, it seems like a good idea to know why Ontario’s power rate crisis developed.
Ontario’s power rates were relatively stable until 2008, when they started steep yearly increases. With the fastest rising rates in North America since then, Ontario’s rates surpassed the U.S. average years ago. The largest single factor driving this increase has been new generating capacity from wind and solar renewable generation.
The Ontario government and its supporters commonly report the costs of different types of generation counting only payments made directly to particular forms of generation.
But, when renewable energy costs trickle down to consumers, those costs are much more than just payments to renewable generators. While it is true that the payments to generators for wind power – 14 cents per kilowatt-hour (kWh) – is cheaper than for gas power — 17 cents/kWh – not all electricity has equal value. (For context, the average rate households pay for the commodity portion of their bill is about 11 cents/kWh.)
Why don’t we replace wind power with gas power, save money and cut emissions?
Where gas power is delivered on demand, wind is fickle. Eighty per cent of Ontario’s wind generation occurs at times and seasons so far out of phase with usage patterns that the entire output is surplus and is exported at a substantial loss or squandered with payments to generators to not generate. Gas power in Ontario backs up unreliable wind and solar, a necessary function if the lights are to stay on, but we pay twice for the same service.
Direct payments to solar generators average 48 cents/kWh, but the output is similarly low value. Except for a few days per year, Ontario’s peak usage of power is just as solar panels shut down – in the evening.
Massive losses through exports
Not only is Ontario’s renewable energy production driving massive losses to subsidize exports and payments to generators to not generate under the terms of contracts that obligate consumers to buy even useless power, but it is also driving costly but low-value “smart grid” projects required to accommodate renewables.
Rising power rates have driven down usage. Spreading rising costs over declining sales has amplified the pace of rate increases.
Again, government and its supporters have pumped their claim that using less will save us money. What has actually happened is that conservation in Ontario is indeed saving money but mostly for utilities and their customers in Michigan and New York State on the receiving end of our subsidized exports.
But didn’t renewables enable Ontario to get off coal, saving us from smog days, and slash health-care costs? Although endlessly repeated by the government and its supporters, none of these claims bear scrutiny.
Coal’s replacement in Ontario was achieved with increased output from nuclear and gas generators. Improvement in air quality in recent years has been the result of a massive conversion to gas power in the mid-western states upwind of Ontario as well as improvements in transportation fleets and industry. Most of the coal power Ontario produced in its last years came from plants with good new scrubbers, delivering effectively smog-free energy. Predicted health-care savings from the coal phaseout never materialized.
But isn’t the cost of renewable energy plunging?
Ten years ago, the average payment to Ontario wind generators was around 8.3 cents/kWh. Taking into account inflation, the average today is up 50 per cent.
Wind and solar aren’t the only renewable energy ripoff. Recent additions to Ontario’s hydro-electric capacity have added billions in new costs but no additional production. Ontario’s most costly generator is a converted coal-fired station in Thunder Bay, now fueled with a wood product imported from Norway.
Punishing contracts in place for 20 years
A bad smell emanates from renewable politics at Queen’s Park. Renewables developers who made the biggest donations to the provincial Liberals have tended to win the biggest contracts.
Ontario’s renewable energy program is not the only disaster on consumers’ bills. Excessive payroll costs and wasteful conservation programs also lurk, but no single factor has contributed more to the compounding semi-annual increases in rates since 2008 than renewables.
Most of the punishing cost consequences of Ontario’s radical renewables program are locked in with 20-year contracts. Children today will be paying these irresponsible contracts long into the future, along with current costs that the Wynne government has now decided will be added to this future burden.
Tom Adams is an independent energy and environmental advisor and researcher focused on energy consumer concerns, mostly in Eastern Canada. He has worked for several environmental organizations and served on the Ontario Independent Electricity Market Operator Board of Directors and the Ontario Centre for Excellence for Energy Board of Management.
This past week, Zoomer Media hosted a panel discussion on Ontario’s growing electricity rates which the media organization (affiliated with the Canadian Association of Retired Persons/CARP) says is adversely affecting seniors and others on fixed incomes.
Energy analyst Tom Adams was one of the panel members, who called on the government to rescind the Green Energy Act, which he says is at the core of the problems today. Wind power produces only 6 percent of the Ontario supply, he said, but at 30 percent of the cost.
McMaster University professor Marvin Ryder agreed that expensive contracts were a problem but he said the damage has been done, and it will be 10 years before Ontario can climb out of the hole.
NDP leader Andrea Horwath said she still supports the Green Energy Act, but suggested creating subsidies for everyone having problems paying their electricity bills. (The cost of that would be …. added to the bills…)
The Ontario government awarded five contracts for new wind power generation in 2016, including two in the Ottawa area. The cost of these projects is about $1.3 billion. If the projects proceed (they do not yet have Renewable Energy Approvals/REA), the cost will be a further addition to Ontario electricity ratepayers’ bills.
Leeds-Grenville councillors say rural electricity rates are negatively impacting their constituents, farmers and businesses, although Burnbrae Farms – one business cited by council members as a victim of high rates – says electricity costs were not behind its recent decision to expand its operations out of province. The Burnbrae operation near Lyn is shown on Tuesday morning, Feb. 7, 2017. (Ronald Zajac/The Recorder and Times)
Frustration at Ontario’s high hydro rates boiled over at a United Counties meeting Tuesday as mayors railed against an “out-of-touch” provincial government that is indifferent to the plight of rural Ontarians.
“Seniors are losing their homes, seniors are going to food kitchens,” said Mayor David Gordon of North Grenville, who said he knows of 89- and 90-year-old farmers in his township who have to continue to work because they can’t afford their electricity bills.
Gordon said that if Americans were experiencing the same increasing power rates as in Ontario they would be demonstrating and rioting in the streets.
“Up here it’s just ‘deary, deary me’,” he said. “What’s going to happen when somebody dies because they don’t have any heat?”
Augusta Mayor Doug Malanka said the government has failed to consider the unintended consequences of high hydro rates.
As an example, Malanka cited the Prescott Curling Club, which has complained to the Ministry of Sport, Tourism and Culture that its escalating power bills put the future of the club in doubt.
Malanka said the club did extensive energy-saving upgrades to its rink several years ago. Despite this, the club’s power bill increased by $13,000 over an 18-month-period, bringing it to $25,000 annually, he said, noting that the rink operates only six months a year.
Club president Ron Whitehorne said the hydro bill now accounts for half of the club’s budget, and the rates continue to rise despite the $120,000 spent on renovations to make the rink more energy-efficient.
The rising rates, coupled with the depletion of the club’s capital reserves to pay for the improvements, has put a real squeeze on the volunteer-run club, Whitehorne said.
Malanka said counties mayors raised the hydro issues with Liberal MPP Bob Delaney, parliamentary assistant to the energy minister, at a meeting during last week’s Rural Ontario Municipal Association conference. Delaney was initially defensive about the mayors’ complaints, Malanka said, but he later agreed to a followup meeting with counties’ representatives. Warden Robin Jones agreed to contact Delaney to arrange a followup meeting.
Gordon said that the Liberal government has lost touch with the average Ontarian.
“These people living in Toronto don’t care because they are living in their fancy condo on the 27th floor,” he said.
Rideau Lakes Mayor Ron Holman, who chairs ROMA, said the Ontario government needs to set “predictable, prudent, long-term” hydro rates so that businesses and residents can plan for the future. Instead, the government seems to be taking an ad-hoc approach to hydro by fiddling with rates in response to the “flavour of the day,” he said.
Holman said Ontario Premier Kathleen Wynne is continuing to promise “adjustments” to hydro rates in the next budget.
“What does that mean? I have no idea. What assurance does that give to individuals or businesses that want to come to our community? It doesn’t,” he said.
Several mayors pointed to Burnbrae Farm’s decision to build new hen houses in Quebec, instead of Ontario, as a consequence of high energy costs. They were basing their comments on a news report that said the egg producer, which is centred in the United Counties of Leeds and Grenville, was expanding to Quebec to escape Ontario’s hydro rates.
But Margaret Hudson, president of Burnbrae Farms Ltd., flatly denied that hydro rates played a part in the decision.
“The cost of electricity was never a factor in our decision on where to locate our new farm,” Hudson said in a statement Tuesday.
Special guest will be Parker Gallant. Mr Gallant’s commentary on energy issues is regularly published in The Financial Post and other media; he is a former international banker and vice-president at Toronto Dominion Bank. He is vice-president of Wind Concerns Ontario.
The second event will be in early March, location TBA.
WCO vice-president Parker Gallant and president Jane Wilson speak on Ontario’s mismanaged electricity sector, energy poverty, wind turbine noise regulation, and what’s ahead for 2017
(C) Wind Concerns Ontario
Q:You’ve been telling people about the impact of renewables, specifically wind power, on Ontario’s electricity or hydro bills. How much of our electricity bills is due to the wind power/renewables program in Ontario?
Parker Gallant: I recently reviewed the cost of wind and solar generation relative to its contribution to Ontario’s demand for electricity and its impact on our electricity costs is shocking. Wind and solar in the first six months of 2016 delivered 8% of our generated power and represented 35% of the Global Adjustment which appears set to average over $1 billion per month. That represents a cost of over 36 cents a kilowatt hour (kWh), including the hourly Ontario energy price (HOEP).
Q: Parker, you’ve also been telling people about the Global Adjustment or GA, which is where a lot of charges are hidden. Do you think these charges should be detailed on our bills, or is that even possible?Parker Gallant: While I believe in principle the GA should be revealed on our monthly bills, in practice, that would require reams of paper. How will the local distribution company explain how much you are billed for curtailed wind generation or the meteorological stations that measure the amount of curtailed wind that might have been generated? How to explain, say, the cost of spilled hydro or steamed off nuclear or the water fuel fee, or how to tell the ratepayer how much they are subsidizing the rates for large industrial clients, or what it is costing under the rural and remote rate plan (RRRP) that transports diesel fuel to remote First Nations, among dozens of other items included in our monthly bills?
Q: The Premier and Energy Minister are now saying that parts of their policies have been a “mistake” and that they need to get bills down. Wind Concerns is saying that canceling wind power contracts is necessary for that to happen. Can you explain? How much are the 2016 contracts worth?
Parker Gallant: Interesting they are now admitting a “mistake,” but when George Smitherman was Energy Minister he was provided with a long-term energy plan that had been carefully developed by “experts” within the crown agencies. He chose to cancel the plan and instead, impose one developed in conjunction with outsiders who were NOT experts. Previous Energy Ministers (Dwight Duncan comes to mind for his “smart meter” for every ratepayer) made mistakes, as did those who followed such as Brad Duguid and were roundly criticized by both the media and by ratepayers. The canceling of wind power projects not yet built or even contracted is only “step one” and will slow the climb in our bills. The current Minister, Glenn Thibeault has only suspended Large Renewable Procurement or LRP ll, and needs to cancel it, as well as LRP I and any of those contracts now past their agreed-to start date. There are ways to reduce costs almost immediately.
Jane Wilson: Wind Concerns Ontario prepared a detailed document for the IESO on the Long-Term Energy Plan, suggesting ways they could save $1.7 billion annually. That would have an immediate cost reduction impact.
Q: The Energy Minister says that now, Ontario is a “net exporter” of electricity like that’s a good thing. He claims we’re making money: is that true?
Parker Gallant: Being a “net exporter” of 16.8 terawatts (TWh) in 2015 is simply a demonstration of being a bad planner and manager of the system. If one adds the spilled hydro and curtailed wind to the net exports, the 21.2 TWh could have provided over half of all average Ontario households with power for a full year, yet we sold it 2.36 cents/kWh while we paid 10.14 cents/kWh for its generation. Ontario contracted for far too much intermittent and unreliable wind and solar power creating a domino effect the increased our costs of generation. Paradoxically, if Ontario ratepayers consumed more of the annual excess power (15.5% in 2015) it would help reduce our per kWh cost.
Q: What is WCO’s stance on climate change?
Jane Wilson: Our position is that everyone wants to do the right thing for the environment, whether that is preventing air pollution or using the most efficient forms of power generation — but that isn’t industrial-scale wind. For example, the Ontario Society of Professional Engineers or OSPE says that the proliferation of large-scale wind will actually increase greenhouse gas emissions, therefore not achieving the government’s stated goals. In the OSPE’s most recent report, they say “Wind generation offers less GHG reduction value in Ontario because base-load generation is already carbon-free and wind generation often displaces hydroelectric and nuclear base-load generation.”
Q: Why does the Ontario government continue to force wind turbines on communities that don’t want them?
Jane Wilson: The government is acting on an ideology that is not supported by fact and to do that, it erased communities’ right to local land-use planning with the Green Energy Act. We think that’s wrong, and are supporting the now 116 municipal governments that have demanded a return of that control and also that community support be mandatory for wind power contracts. There is a concern too about communities in the North where there may not be elected municipal governments, where contracts can be awarded for wind power projects that have a significant negative impact on the natural environment, for little or no benefit.
WCO worked with Ontario municipalities on the mandatory support resolution.
Q:Can the government really cancel wind power contracts? Can a new government cancel the subsidy programs?
Jane Wilson: Yes. There are clauses in the contracts under LRP I that are “off-ramps” in the case of cancellation, and which set out the financial steps needed to do that. For example, the contract with EDP for the “Nation Rise” project south of Ottawa in North Stormont, worth $430 million over 20 years, would cost $250,000 plus reimbursement for development costs that must be justified, to a maximum of $600,000. And yes, government can cancel subsidy programs. The LRP II, now “suspended”, should be cancelled outright.
The other opportunity is to cancel wind power projects that do not have a “Notice-to-Proceed”: this is straightforward. WCO has also suggested to the IESO that the government look seriously at all contracts and review them for opportunities to cancel. Even costly negotiated buy-outs will reduce hydro costs significantly, due to the high cost of disposing of surplus power.
Q: What is WCO doing to help people already living with wind turbines, and the noise they produce?
Jane Wilson: We support the public health investigation being done by the Huron County Health Unit, and hope that other municipalities will take similar action. We are also looking at how research can be done to help change the Ontario regulations on noise –which are not based on current science and in fact, are completely inadequate to protect health. We prepared a detailed document on how to revise noise enforcement regulations, another on how the approval process must be changed to protect health, and we submitted a document to the World Health Organization which is preparing global noise regulations for wind turbines. In short, we take every opportunity possible to explain the situation for people living in communities where wind turbines and their noise emissions have been forced, without consent, on the people of Ontario, with the goal of having regulations and processes changed.
Q: What’s ahead in 2017?Jane Wilson: It’s a very different world for wind power now, than in 2009 when the Green Energy Act was passed. People are genuinely questioning the benefit of high-impact, large-scale wind power development, especially when there seem to be few, if any, benefits, and we are seeing the shocking results of the government’s complete mismanagement of the electricity sector such as lost jobs and rising energy poverty. We believe the government will have to take dramatic action if it is serious about getting electricity bills down. The fact that Ontario municipalities are speaking out on this issue and taking action will also have results, we believe. We are hoping for a complete halt to the ongoing damage of the government’s policies, and that there will be help for people already living with the noise and other impacts of industrial-scale wind turbines.
As for Wind Concerns Ontario, we are not stopping our work.
Former bank vice-president and vice-president of Wind Concerns Ontario was in Ottawa this past weekend, speaking at a Town Hall in Kanata on the details of Ontario’s electricity bills.
Today, he published an analysis of how much wind power is really costing us, on his Energy Perspectivesblog. When the well-financed wind power lobby claims wind power prices are low, they don’t factor in other costs such as wasted hydro, gas, and nuclear, he says.
This is really shocking, given the rise in energy poverty in Ontario.
For the cost to provide a small portion of Ontario’s power, wind is no bargain
Most electricity ratepayers in Ontario are aware that contracts awarded to wind power developers following the Green Energy Act gave them 13.5 cents per kilowatt (kWh) for power generation, no matter when that power was delivered. Last year, the Ontario Auditor General’s report noted that renewable contracts (wind and solar) were handed out at above market prices; as a result, Ontario ratepayers overpaid by billions.
The Auditor General’s findings were vigorously disputed by the wind power lobbyist the Canadian Wind Energy Association or CanWEA, and the Energy Minister of the day, Bob Chiarelli.
Here are some cogent facts about wind power. The U.K. president for German energy giant E.ON stated wind power requires 90% backup from gas or coal plants due to its unreliable and intermittent nature. The average efficiency of onshore wind power generation, accepted by Ontario’s Independent Electricity System Operator (IESO) and other grid operators, is 30% of their rated capacity; the Ontario Society of Professional Engineers (OSPE) supports that claim. OSPE also note the actual value of a kWh of wind is 3 cents a kWh (fuel costs) as all it does is displace gas generators when it is generating during high demand periods. On occasion, wind turbines will generate power at levels over 90% and other times at 0% of capacity. When wind power is generated during low demand hours, the IESO is forced to spill hydro, steam off nuclear or curtail power from the wind turbines, in order to manage the grid. When wind turbines operate at lower capacity levels during peak demand times, other suppliers such as gas plants are called on for what is needed to meet demand.
Bearing all that in mind, it is worth looking at wind generation’s effect on costs in the first six months of 2016 and ask, are the costs are reflective of the $135/MWh (+ up to 20% COL [cost of living] increases) 20 year contracts IESO, and the Ontario Power Authority awarded?
As of June 30, 2016, Ontario had 3,823 MW grid-connected wind turbines and 515 MW distributor-connected. The Ontario Energy Reports for the 1st two quarters of 2016 indicate that wind turbines contributed 4.6 terawatts (TWh) of power, which represented 5.9% of Ontario’s consumption of 69.3 TWh.
Missing something important
Not mentioned in those reports is the “curtailed” wind. The cost of curtailed wind (estimated at $120 per/MWh) is part of the electricity line on our bills via the Global Adjustment, or GA. Estimates by energy analyst Scott Luft have curtailed wind in the first six months of 2016 at 1.228 TWh.
So, based on the foregoing, the GA cost of grid-accepted and curtailed IWT generation in the first six months of 2016 was $759.2 million, made up of a cost of $611.8 million for grid-delivered generation (estimated at $133 million per TWh) and $147.4 million for curtailed generation. Those two costs on their own mean the per kWh cost of wind was 16.5 cents/kWh (3.2 cents about the average of 13.3 cents/kWh). The $759.2 million was 12% of the GA costs ($6.3 billion) for the six months for 5.9% of the power contributed.
But hold on, that’s not all. We know that wind turbines need gas plant backup, so those costs should be included, too. Those costs (due to the peaking abilities of gas plants) currently are approximately $160/MWh (at 20% of capacity utilization) meaning payments to idling plants for the 4.6 TWh backup was about $662 million. That brings the overall cost of the wind power contribution to the GA to about $1.421 billion, for a per kWh rate of 30.9 cents. If you add in costs of spilled or wasted hydro power to make way for wind (3.4 TWh in the first six months) and steamed off nuclear generation at Bruce Power (unknown and unreported) the cost per/kWh would be higher still.
So when the moneyed corporate wind power lobbyist CanWEA claims that the latest procurement of IWT is priced at 8.59 cents per kWh, they are purposely ignoring the costs of curtailed wind and the costs of gas plant backup.
22% of the costs for 5.9% of the power
Effectively, for the first six months of 2016 the $1.421 billion in costs to deliver 4.6 TWh of wind-generated power represented 22.5% of the total GA of $6.3 billion but delivered only 5.9% of the power. Each of the kWh delivered by IWT, at a cost of 30.9 cents/kWh was 2.8 times the average cost set by the OEB and billed to the ratepayer. As more wind turbines are added to the grid (Ontario signed contracts for more in April 2016), the costs described here will grow and be billed to Ontario’s consumers.
CanWEA recently claimed “Ontario’s decision to nurture a clean energy economy was a smart investment and additional investments in wind energy will provide an increasingly good news story for the province’s electricity customers.”
There is plenty of evidence to counter the claim that wind power is “a smart investment.” But it is true that this is a “good news story” — for the wind power developers, that is. They rushed to Ontario to obtain the generous above-market rates handed out at the expense of Ontario’s residents and businesses. And we’re all paying for it.
The Windlectric wind power project on tiny Amherst Island has no hope of meeting its “drop-dead” Commercial Operation date, so Ontario’s Independent Electricity System Operator (IESO) can cancel the Feed In Tariff (FIT) contract right now, with no penalty, says the Association to Protect Amherst Island.
See the letter to IESO Chair Tim O’Neill here and below.
Dear Dr. O’Neill,
In August 2015 The Association to Protect Amherst Island requested that the IESO exercise its ability to cancel the Fit Contract dated February 25, 2011 with Windlectric Inc. (Algonquin Power) without penalty because of the inability of the company to achieve its commercial operation date.
In its 2016 Q2 Quarterly Report, extract attached, Algonquin now advises that construction is expected to take 12 to 18 months and that the Commercial Operation Date will be in 2018. This timeline is contrary to what was submitted to the Environmental Review Tribunal and to the Ontario Energy Board. A COD of 2018 is seven years from the date of award of the contract.
Cancellation of the contract at this time would enable the IESO to achieve cost avoidance exceeding $500 million over the next 20 years based on the high cost of power generation at 13.5 cents per kilowatt-hour set out in the contract with Windlectric and based on the IESO’s commitment to pay Windlectric to not produce power when capacity exceeds demand. Cancellation of the Windlectric contract could be achieved without penalty due to noncompliance and would address in part the IESO’s budget challenges and energy poverty in Ontario.
Accordingly, the Association reiterates its request that IESO cancel the FIT Contract with Windlectric Inc.
Rick Conroy, in the attached article from the Wellington Times, explains the Kafkaesque and cruel nature of allowing the Amherst island project to continue especially in light of the unused power capacity of the nearby Lennox Generating Station and the Napanee Gas Plant under construction.
• Windlectric cannot comply with the Commercial Operation Date in its FIT Contract.
• At a time of skyrocketing hydro rates and financial challenges the IESO could save $500 million over the next 20 years by cancelling the Windlectric Contract without penalty.
• Existing nearby generating capacity is almost never used and will increase when the Napanee Gas Plant comes online. Intermittent and expensive power from wind turbines on Amherst Island is not necessary
Finally, please provide the IESO’s understanding of the Commercial Operation Date for Windlectric, any extensions awarded by the IESO, and the number of days granted due to Force Majeure and judicial matters.
Parker Gallant, the former banker who several years ago launched FP Comment’s prophetic Ontario’s Power Trip campaign against the province’s expensive and pointless electricity industry reforms, has some new advice for the government. As the price of electricity soars, Ontario industries and consumers are being hammered by rate increases that seem never-ending. In an open letter today to Energy Minister Bob Chiarelli, Mr. Gallant lists a few easy initiatives the government could undertake to stop some of the madness and save consumers billions of dollars. Terence Corcoran
LETTER FROM PARKER GALLANT
April 1, 2015
The Honourable Bob Chiarelli, Minister of Energy,
Legislative Building, Queen’s Park, Toronto ON, M7A 1A1
Dear Minister Chiarelli:
Re: Dropping Ontario’s Price for Electricity
I have noted the difficulty you have experienced over the past several months trying to convince the media and the general population of Ontario they should simply bite the bullet and accept the fact that electricity prices will continue their above inflation climb. Having studied the situation I believe I have come up with some suggestions that would allow you to move things in the opposite direction.
First I suspect that Premier Wynne and Finance Minister Sousa exerted considerable pressure on you to come up with a scheme to help out the 500,000 to 700,000 “low-income” households in the province experiencing what is generally referred to as “energy poverty.” While the plan recommended came from the Ontario Energy Board and was altered somewhat by yourself I believe I have a better plan.
More on that later in this letter.
I also suspect that the Premier and Finance Minister told you unequivocally the OCEB was finished at the end of the year as they wish to wave better deficit numbers in front of those pesky credit rating agencies. The $1.2 billion that went to keep electricity rates down, a little bit, would no longer be available and they made that clear to you.
While you did your best to dance around the issue associated with the upcoming big jump in our electricity bills I could see the criticism was troublesome for you. As a result I believe my suggestions on what you should do will put some spring back in your step.
Here they are:
Recommendations to reduce future ratepayer bills
Conservation spending for the period 2015 to 2020 is forecast and budgeted at $1,835 million so drop it and that will provide close to $400 million annually that can go to reduce electricity prices.
Next, cancel the acquisition of the 500 MW of renewable wind and solar that you instructed IESO to acquire. That will save an estimated $200 million annually in future costs that would increase our rates.
I note there are 510 MW of wind generation contracts awarded that have not yet obtained their REA from the MoE and I recommend you also cancel those. I estimate that would provide relief from future increases of another $200 million per annum. I would suspect the costs of exiting these will be nominal.
Needless to say the cancellation of the above 1,010 MW of renewable energy will reduce future power surpluses meaning the HOEP might show some upward movement. That would allow all the dispatched wind and solar, spilled hydro, steamed off nuclear and idled gas to be sold via the market place to our neighbours. I estimate we could sell anywhere from 10/15 TWh annually at a price of somewhere around $40 million per TWh which would earn revenue of $400/600 million annually.
I would also cancel the new OESP plan which is estimated to cost $200 million (including a new administrative bureaucracy costing $20 million) annually.
Now if you do the math on the above the amount of money your portfolio would save in the future and also generate new income it totals $1.7 billion.
You could than use some of that $1.7 billion to both decrease electricity prices and provide relief for those suffering from “energy poverty.”
My recommendations on those two issues follow:
Recommendations to relieve “energy poverty”
First you should instruct the OEB that the .12% allocated to the LEAP program be increased immediately (providing you have completed the other recommendations) to 1% which will immediately make over $30 million available to the social agencies for relief purposes. You should also increase the maximums per household to $1,000 and instruct the OEB that the Return on Equity and/or Return on Assets for the LDC are to reflect a reduction to accommodate this.
Second you should drop the TOU off-peak rate from 7.7 cents per kWh to 5 cents per kWh. The cost of this would be about $350 million. It would also benefit many of those “low-income” households meaning they would no longer suffer from “energy poverty.” The other benefit is that the ratio of offpeak to on-peak would be much closer to the 3 : 1 ratio that the Auditor General suggested it should be and get more people to shift their use. It would also benefit our business community.
The cost of the two above recommendations are less than $400 million meaning ratepayers will be better off by avoiding future rate hikes and seeing some relief on existing rates. At the same time the TOU pricing will provide a clear signal that usage should shift preserving the “conservation” theme.
I certainly hope you will give my suggestions some serious thought and I do look forward to your response.