April 2015: surplus wind power costs Ontario millions
Energy Minister hiding his head over consumer losses due to surplus power, lots of it wind
Electricity exports cost heading for $2 billion in 2015
The continued costs to Ontario’s ratepayers for the oversupply of electricity generation in Ontario continued in April 2015; we exported another 2 terawatts (TWh) of power to our neighbours. April’s exported TWh brings exports for the first four months of 2015 to 8.65 TWh — that’s enough to supply 900,000 average Ontario ratepayers with power for a full year.
Surplus exports represented over 19% of Ontario’s total demand for the month; that figure doesn’t include curtailed wind, steamed-off nuclear or spilled hydro.
The cost (Hourly Ontario Electricity Price + Global Adjustment) to ratepayers for exported power in April was $223 million. We sold it for 1.57 cents per kilowatt hour, thereby generating only $32 million. Ontario’s electricity ratepayers had to eat $191 million in losses that will find their way to the Global Adjustment pot and the “electricity” line on our bills.
As noted in a prior article, the first quarter of the current year generated losses (costs to ratepayers) of $437 million. So now, with the April figures, those costs to date are $608 million or $135 per ratepayer.
We still have eight months left in the year: at the current pace, our bill to support surplus exports will amount to over $400 for the average ratepayer.
Wind power generation for April represented 39% of the exported volume as it produced about 850,000 MWh (megawatt hours) at an average of $123.50 per/MWh, meaning its cost of $104 million represented almost 50% of total export costs.
Energy Minister Bob Chiarelli doesn’t seem to notice our growing surplus*; however, he has directed the IESO to acquire another 500 MW of renewable energy from wind and solar in 2015, and mandated conservation of another 7 TWh by 2020.
The views expressed are those of the author and do not represent Wind Concerns Ontario policy.
Editor’s note: speaking at a wind power information evening in Finch, Ontario, on May 6th, Ontario Federation of Agriculture president Don McCabe said there is no surplus of power in Ontario. This is a lot of lost power and a lot of losses to electricity consumers—including farmers—to deny.
A recent news report stated that South Dundas council was rethinking its position of not supporting a proposed wind power generation project, partly because of the tax revenues that would come to the municipality.
Council need to reads this.
No windfall in tax revenue for Ontario communities hosting wind farms
With a cap on assessments for wind turbines, Ontario municipalities are limited in tax revenues on the multi-million-dollar power projects. Revenues work out to less than 1% of what the developers have in their money bags
Revenues no more than “Chump Change” for municipalities
Wind power developers bringing projects to Ontario’s municipalities offer various inducements to persuade politicians they will benefit from millions of dollars. Like the landowners signing leases for turbines, money is frequently the reason municipal politicians support wind power development and locating projects locally.
In Ontario, local politicians have no real power to support or deny those projects, and also, little ability to generate a real community benefit due to the Green Energy and Green Economy Act (GEA). It doesn’t matter what the capital value of an industrial wind turbine (IWT) is, or what they levy in local realty taxes as the provincial government has set the taxable value! Former Minister of Finance, Dwight Duncan decreed (one year before resigning) IWTs would be assessed by the Municipal Property Assessment Corporation (MPAC) at a maximum of $40,000 per megawatt (MW). That translates to tax revenue averaging $1,000/2,000 per MW, based on local industrial mill rates.
My research indicates Ontario has the lowest assessed value per/MW capacity of all provinces.
Ontario:
The 2014 3rd Quarter update from the OPA claimed they had contracted for 5,697 MW of wind capacity. Payment per MW hour for wind generated power averages $123.50/MWh.
Using an average of $1,500 per MW for the OPA-contracted 5,697 MW of wind means Ontario host municipalities will generate about $8.5 million annual realty taxes. (5,697 X $1,500 = $8.5 million)
Those 5,697 MW will produce energy at 30% of their capacity producing cash for the developers of $1.8 billion (5,697 X 30% X 8760 [hours per annum] X $123.50 = $1.8 billion) Eighty percent (80%) of the time the power will be surplus to Ontario’s demand.1. Tax revenues represent less than 1% of developers’ revenue.
Nova Scotia:
Nova Scotia’s legislature set the annual price for their realty taxes at $5,500 per MW “plus a percentage of $5,500.00 equal to the percentage increase in the Consumer Price Index for Canada at the end of the calendar year ending in the immediately preceding municipal taxation year relative to the Consumer Price Index for Canada at the end of the 2005 calendar year”.
If Nova Scotia had contracted for the 5,697 MW the OPA has in Ontario, realty tax revenues would be in excess of $31 million. (5,697 X $5,500 = $31.3 million)
In Nova Scotia those 5,697 MW of wind turbines operating at 30% of capacity would be paid an an average of $100 MWh and generate $1.5 billion. Tax revenues would represent slightly more than 2% of revenue for the developers.
British Columbia:
For British Columbia realty taxes applicable to farms are applied to wind developments which presumably means assessment of the capital cost (depreciating) of about $1.5 million per MW. Specific information was difficult to locate; however, what I found indicates realty taxes appear to be approximately $14K/MW and the price paid for generation is $105 per/MWh.
Using the limited amount of information available and applying it to the Ontario contracted 5,697 MW of capacity; in BC the tax revenue would be $80 million annually (5,697 X $14K = $80 million) and at $105 per MWh would generate $1.6 billion annually for the developers. Taxes would represent 5% of the revenue generated for the developers.
Alberta:
It was almost impossible to locate assessment values for wind turbines in Alberta except for one reference in a report from the Greengate Power Corporation posted on the University of Calgary site. That report claimed a 300 MW wind development would pay municipal taxes of $5 million annually which indicates a realty tax of about $16K per MW.
Using that information and applying it to Ontario’s 5,697MW of contracted capacity, suggests annual tax revenue for municipalities would be $91 million. In Alberta the wind developers must sell their production via the spot market and in 2013 a BNN article suggested they earned an average of $54.97 per MWh which translates to annual revenue of $820 million for the developers. In Alberta realty taxes would therefore represent 11% of the revenue generated by the developers.
Summary:
With Ontario municipalities receiving so little for hosting industrial wind turbines it is surprising the Canadian Wind Energy Association (CanWEA) when faced with any kind of opposition would issue a press release that claims: “Right now there are literally thousands of Ontarians participating in the province’s ground-breaking clean energy economy. Communities across this province — from Chatham-Kent to Frontenac Island, Tillsonburg to Niagara — stand to receive hundreds of millions of dollars in direct benefits from wind energy projects.”
MPAC’s 2014 annual report claims they assess and classify “more than five million properties with an estimated total value of $2.2 trillion.”The assessed value of the contracted 5,697 industrial wind turbines at $40K per MW gives them a total value of $228 million or .0001% of total assessed values versus a likely capital cost approaching $8.5 billion, or 4% of MPAC’s total value!
So, Ontario’s wind developers walk away with an estimated $1.8 billion annually and $36 billion over the 20-year term of the contracts, while Ontario’s hosting municipalities have to make do with chump change of $8.5 million annually, and only $170 million over the full terms of those contracts.
Far from enjoying millions in cash windfall, Ontario’s municipalities got stuck with the worst possible deal.
Ontario’s electricity customers pay and pay and pay while neighbours get our power cheap
Wind almost 40% of exported power; cost of surplus export $437 million in just 3 months
The first quarter of the current year indicates Ontario is exporting record quantities of surplus electricity.
It appears to be part of the Liberal government plan as this excerpt from Finance Minister Sousa’s budget “Building Ontario Up” claims: “Through our four-part economic plan, we are supporting greater investment in productivity and innovation, providing a renewed focus on international exports, encouraging the transition to a low-carbon economy and creating more jobs for Ontarians.”
It would be better if our surplus electricity was exported profitably, instead of a cost to ratepayers, but alas, that is not the way the Liberal Energy Ministers past and present have structured the portfolio.
The first quarter of the current year saw Ontario export a record 6.65 TWh (terawatts) — that’s enough to power 690,000 average households for a full year.
Export costs up 75% in first quarter
The 6.65 TWh sold to our neighbours was up 75% from 3.81 TWh in 2014′s first quarter. We sold that surplus at prices well below what we received. Exports represented 17.5 % of Ontario’s demand in 2015 versus 10% in the same period in 2014. Wind (generated and curtailed) in 2014 was 2.05 TWh and 53.7% of Ontario’s exports; in 2015, wind grew to 2.61 TWh and was 39.2 % of our exports.
The concept of exporting is one that economists encourage; however, they expect it will be profitable, create jobs, and not burden the rest of the economy though subsidization. Subsidizing exports is often referred to as “dumping” and frequently challenged under the WTO (World Trade Organization) rules.
Cost to ratepayers is shocking
Examining the cost to Ontario ratepayers for the 3.81 TWh exported in 2014 and the 6.65 TWh exported in 2015 using data from the Independent Electricity System Operator’s (IESO) “Market Summaries” is shocking.
The 2014 first Quarter exports cost (average of $102.6 million/TWh) ratepayers $391 million to produce and was sold via the HOEP (hourly Ontario electricity price) market at an average of $75.54 million/TWh. That cost Ontario’s ratepayers $103 million. In 2015, the 6.65 TWh exported cost Ontario’s ratepayers $672 million (average cost of $101 million/TWh), and sold at an average of $35.4 million/TWh, costing Ontario ratepayers $437 million.
To put some context to the latter, the money lost exporting the 6.65 TWh was equal to 6.6 cents per kilowatt hour. The foregoing subsidy does not include other costs Ontario’s ratepayers pick up including: spilled hydro, steamed-off nuclear or payments to idling gas plants. The subsidies supporting exports is double what Energy Minister Bob Chiarelli suggests is needed to assist almost 600,000 “low-income” households to pay their hydro bills. Ontario’s ratepayers will start paying the latter January 1, 2015.
This analysis would not be complete without noting the cost of wind generation (two quarters) in 2014 was $252.7 million (average cost of $123.5 million per/TWh) and $322.5 million for 2015!
Perhaps our Finance Minister should “focus” on the harm to Ontario’s ratepayers instead of dumping our surplus electricity on our neighbours who are happy to take it and not raise the issue with the WTO. If the first quarter of 2015 is indicative of the full year, ratepayers will pick up $1.8 billion in subsidies to supply our neighbours with cheap electricity, while Ontario’s citizens struggle.
Parker Gallant, April 28, 2015
The views expressed here are those of the author and do not necessarily represent Wind Concerns Ontario policy.
Chart courtesy Scott Luft of Cold Air Online
EDITOR’S NOTE: Parker Gallant will be on the Rob Snow show on radio CFRA, Friday May 1st, to discuss this. Listen in an AM 580 or online at cfra.com
New rate increase removes $635 million from electricity customers’ pockets
Ontario now has highest electricity bills in Canada
Ontario’s Minister of Energy Bob Chiarelli in a press release of March 26, 2015 announced the end of the Debt Retirement Charge December 31, 2015. In the “Quick Facts” of the release stated: “Removing the Debt Retirement Charge will save the typical residential electricity ratepayer $5.60 per month.”
Less than a month later the Ontario Energy Board (OEB) issued their semi-annual rate setting letter for the upcoming six months of May 1st to November 30th; it was full of continuing bad news for households and small businesses. The OEB told us effective May 1st, our electricity bill would increase $5.71 a month. So much for that savings of $5.60 a month!
Written to assuage the reader, the OEB’s letter pretends to be what it isn’t. Rates are going up substantially and while the letter states monthly increases for the “average” consumer will be 4.6% or $5.71 per month, on the Electricity, line the truth is more daunting. The rate increases should be annualized, but they aren’t. If they were, the additional $70 annual increase suggested would be $143.
Off-peak rates are up 6.7% or about four times the inflation rate and the On-peak rate jumps up over 19% per annum.
By increasing on-peak rates by 19%, the OEB suggests the “ratio” shift to 2:1 between on-and off-peak prices “will benefit customers who shift their use to the cheapest time period.” In another document the OEB released they say that about two-thirds of consumption is already in the off-peak period leaving the consumption split between mid and on-peak at 17% each.
So small businesses operating during on-peak periods, seniors living on fixed incomes, people with disabilities, the unemployed, and stay-at-home parents are locked into paying 16.1 cents per kilowatt hour. Those who can least afford high rates are the ones expected to shoulder the burden. This increase will simply add to the 570,000 households Energy Minister Bob Chiarelli admits are currently living in “energy poverty” in Ontario.
If one annualized the rate increases as it applies to “average” households and small businesses, the electricity sector will take approximately $635 million more from ratepayers’ pockets in pre-tax (small businesses) and after-tax dollars (households) in the next 12 months. They will extract $281 million from on-peak, $134 million from mid-peak and $220 million from off-peak consumption from “average” ratepayers based on 4.5 million residential and small business ratepayers.
Ontario can now claim to be the highest cost electricity market in Canada, and rivals all but three or four of the U.S. states such as California, Alaska and Hawaii.
The Liberals can claim we are “green” but that green is supporting foreign investors enjoying the benefits of ratepayer dollars flowing into their pockets for wind and solar contracts obtained from the OPA under the direction of past and present Liberal Ministers of Energy.
Ontario: now “a place to groan.” No shifting of consumption will ease the burden or stop inflation of our electricity bills.
Wind output up, exports up, cost of electricity up— no coincidence
Five years ago, in 2009, George Smitherman, Minister of Energy during the McGuinty reign, rammed through the Ontario Legislature the Green Energy and Green Economy Act. The Act ushered in the FIT (Feed In Tariff) and MicroFIT programs, attracting corporations from around the world who wanted the lucrative power contracts being let by the government-mandated Ontario Power Authority.
The result of the Act is now evident with huge chunks of rural Ontario covered with solar panels and spiked by 500-foot industrial wind turbines cranking out intermittent electricity, surplus to our demand, 99.9% of the time.
Early in 2010, the Independent Electricity System Operator (IESO) advised us of electricity generation for Ontario by fuel type for 2009. The headline in their press release stated: “Wind Power in Ontario Generates a New Record in 2009.” Wind produced 2.3 terawatt hours (TWh) or 1.6% of Ontario’s total demand of 139 TWh. The same press release noted Ontario exported 15.1 TWh, and wind’s percentage of those exports was 15.2%. The release also disclosed the average HOEP (hourly Ontario electricity price) for 2009 was $31.6 million per TWh, and the Global Adjustment (GA) $30.6 million/TWh.
That means, the costs of power generation (on average) were $60.2 million per/TWh.
Wind significant share of the loss
In 2009, Ontario exported 15.1 TWh generating revenue of $477.2 million (15.1 TWh x $31.6 million), but the TWh exported cost Ontario ratepayers $909 million (15.1 TWh X $60.2) — that means Ontario lost $432 million. The cost of power production from wind was $283 million (2.3 TWh X $123 million/TWh), representing 65.5% of the losses on the exported TWh.
Fast forward five years to January 2015: IESO’s announcement indicated Ontario’s demand in 2014 was 139.8 TWh. Wind was 6.8 TWh, or 4% of all generation. Exports grew to 19.1 TWh and wind’s percentage of exports shot up to 35.6%. HOEP was $36 million/TWh and the GA jumped to $54.6 million/TWh, making the all-in-cost to Ontario’s ratepayers $90.6 million/TWh. The cost to produce 19.1 TWh was $1,730 million (19.1 TWh X $90.6 million), and revenue generated from the sale was $688 million (19.1 TWh X $36 million). That left Ontario’s electricity ratepayers to pick up the $1.042 billion shortfall. The cost for 6.8 TWh of wind was $836 million plus another $42 million1. for curtailed wind bringing its cost to $878 million, representing 84 % of export losses.
$4 billion
The all-in-cost of Ontario’s electricity generation jumped from 6.2 cents/kWh in 2009 to 9.06 cents/kWh in 2014, an increase of 46%. Ratepayers picked up an additional burden of $4,048 million for 139.8 TWh.
The extra .8 TWh (800 million kWh) Ontario ratepayers consumed in 2014 versus 2009 cost us over $4 billion or $5.06 per/kWh, much of it was caused by the push for renewable energy and the need to have back-up power plants for when the wind is not blowing or the sun isn’t shining.
Imagine how many subway stations or hospitals $4 billion might have built.
What the Easter Bunny brought Ontario’s neighbours
Ontario goodies for somebody…just not you
Ontario’s ratepayers won’t care much for what the Easter Bunny delivered over the long weekend.
Over Friday, Saturday and Sunday on the weekend of April 3, 2015, the Independent Electricity System Operator (IESO) reported we exported 250,500 megawatt hours (MWh) of electricity to our friends and neighbours, but they gave us only $6.21 per/MWh for power that cost us at least $90 per/MWh to produce.
The exported power over those three days was equivalent to almost 24% of total Ontario Demand of 1,009,700 MWh.
On top of that, IESO indicated via their Planned Outage Report they constrained, spilled, idled or steamed-off another 238,000 MWh from a variety of generators which represented 23% of total Ontario Demand. Between exports and the outage requirements, ratepayers picked up the tab for 488,000 MWh or 51% of power we didn’t have a demand for.
So, why are we all told to conserve more?
Wind over that weekend generated about 58,000 MWh and represented 23% of exports. The cost of production was $7.1 million ($123 per/MWh) for which we were paid $360K ($6.21 per/MWh) — that’s a loss of $6.7 million.
Ratepayers also picked up the cost of the other 192,500 MWh exported at a cost of $17.5 million and the constrained production at a cost of about $12 million.
$36 million in losses
In those three days, Ontario’s electricity customers paid for all this and saw no benefit. Yet we are obligated to pick up almost $36 million in losses. Doing this every day would results in annual costs of $3 billion, with no benefit!
We need the Liberal government to tell the Easter Bunny to stay home next time and dole out the Easter treats to Ontario’s ratepayers and taxpayers, instead of our neighbours.
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.
Industry association “lead proponent” in Natural Resources Canada study
Last week, in researching his series on the Canadian Wind Energy Association’s campaign to influence Ontario citizen attitudes toward wind power, and recommendations for the lobby group’s “Ontario campaign,” Parker Gallant discovered via the Ontario Lobbyist Registry that CanWEA disclosed publicly it has received funding of $663,000 from the federal government.
The funding is presumably for CanWEA’s role as lead proponent of a $1.7-million Natural Resources Canada project called the Pan-Canadian Wind Integration Study, “that will evaluate how large penetration of wind energy could be integrated on the provincially run Canadian electric grid and show the challenges and opportunities in doing so. “
In the first paragraph of the NRCan page on this study, which names CanWEA as the lead proponent, is a significant error. CanWEA’s mandate is most decidedly NOT “to promote the responsible and sustainable growth of wind energy in Canada.” CanWEA itself says its mission is “to ensure Canada fully realizes its abundant wind energy potential on behalf of its members.”
In other words, as any specialized industry group does, CanWEA’s goal is to represent and promote the interests of its members.
It is not an environmental organization.
Why, we ask, is an industry group, with some very well-financed members, that states outright its goal is to act in the best interests of its members, receiving government financing to further its members’ fortunes?
Here from former bank VP Parker Gallant, now VP of Wind Concerns Ontario, a review of Ontario’s green energy policy which has resulted in a surplus of power produced when we don’t need it, and the government’s sell off to neighbouring jurisdictions.
Anyone reading an excerpt from the November 18, 2014 Standing Committee on Estimates text of Energy Minister Bob Chiarelli might have trouble discerning what his message was. And, specifically, what his answer had to do with MPPRandy Hillier‘s question on whether Ontario loses money exporting surplus electricity.
Chiarelli had danced around the question, claiming Ontario needed “surplus generation,” but Hillier kept hounding him and finally, Chiarelli responded.
Mr. Randy Hillier: “Listen, I understand that we want to have a margin of surplus. We all can understand that, because you don’t know specifically and exactly how much is going to be needed at any particular point in time. But let’s get back to the question. What are our estimated losses—do you have an estimate—for this year and next year, cumulatively, in our losses of trades?”
Hon. Bob Chiarelli: “Can I ask you to give me 30 seconds without interruption? Just a few seconds, okay?”
Mr. Randy Hillier: “Well, if you can answer the question—60 seconds.”
Hon. Bob Chiarelli: “Walmart buys snow blowers. They expect to sell X number of snow blowers in a winter. At the end of the winter, if they haven’t sold those snow blowers, they sell them at a discount. They’re selling them for less than their costs. That’s part of doing business.
The electricity system is exactly the same as Walmart. Why do they have sales? Why do they sell a product that is worth X number of dollars in November for less when they’re selling it in March or April? Why do they do it? They’re giving it away. They’re losing money. How much have they lost?”
Walmart. Ontario’s electricity system is “exactly the same” as Walmart.
Here’s what the Ontario Auditor General’s report for 2011 said about what Ontario lost by exporting electricity surpluses.
“Based on our analysis of net exports and pricing data from the IESO, we estimated that from 2005 to the end of our audit in 2011, Ontario received $1.8 billion less for its electricity exports than what it actually cost electricity ratepayers of Ontario.”
The losses highlighted in the AG’s report are related to the creation of the Global Adjustment or GA. The buyers of our surplus electricity only pay the HOEP (hourly Ontario electricity price) and Ontario’s consumers pick up the difference between the contracted price for generation and the HOEP. It was that difference, the GA, that the AG’s report highlighted.
Ontario has seen three more years of generation since that report and each one has meant increasing costs to Ontario’s electricity consumers. For 2012, IESO reported our exports were 14.6 terawatt hours (TWh) and generated an average price of $24.1 million/TWh, but the costs to Ontario’s consumers for that generation included the GA which was an additional $49.6 million/TWh—that resulted in a cost of $724 million. 2013 was worse: Ontario exported 18.3 TWh generating $26.5 million/TWh with the GA cost at $59.0 million/TWh for a cost of $1.007 billion. 2014 was slightly worse again, with exports of 19.1 TWh generating $36.0 million/TWh, costing ratepayers $53.5 million/TWh for the GA, creating a loss of $1.022 billion.
So, those three years cost ratepayers $2.75 billion for the 52 TWh (11.3% of total generation of 459.8 TWh) of exported power we didn’t need, bringing losses since creation of the GA to $4.550 billion.
Ontario’s ratepayers might be much better off if Walmart really was running the electricity system in Ontario. At least Walmart isn’t continually running at a loss.
Here is a precis of an analysis of the Ontario government’s conservation efforts prepared by local economist Robert Lyman, based on research by Parker Gallant.
Here are the numbers.
In 2009, local electricity distribution companies in Ontario provided 124,206,032 megawatt-hours (MWh) for 4,748,577 households, a monthly average of 2,180 kilowatt hours (kWh).
In 2013, they provided 125,306,563 MWh for 4,944,488 households, a monthly average of 2,112 kWh. Average consumption fell by 3.3%, or 875 kilowatts annually between 2009 and 2013. For the average home, that is a monthly reduction from 800 kWh to 774 kWh (317 kWh per year).
In 2009, the cost of a kWh of electricity delivered averaged 6.15 cents and the “commodity” cost (just the electricity portion) for the full year was $590. By reducing annual consumption by 317 kWh, the savings should have been $19.50.
In 2013, the commodity cost had risen to 9.2 cents per kWh, or $854 per year. Not only did the $19.50 savings disappear, but also, the average household paid an additional $264 annually. That represents an additional cost to all ratepayers in the province of $1.2 billion annually. That does not include the $2 billion cost of installing smart meters.
The average household would have had to reduce its annual consumption by 33%, or 3,200 kWh, in order to have simply matched its cost for electricity consumption in 2009.
The Independent Electricity Systems Operator (IESO) is required to maintain an operating reserve of generating capacity of between 1,300 and 1,600 MW for contingencies. Since 2009 the available surplus has been between 4,000 MW and 5,900 MW. The IESO expects these surpluses will continue until at least the later part of this decade. Thus, while the official rationale for smart meters, time-of-use pricing and “conservation” programs is to avoid the addition of expensive new generation capacity, the province has continued to add that capacity even in the face of a substantial surplus.
What’s next? Current Energy Minister Bob Chiarelli has set new targets for both reductions in peak demand and “conservation” in his long-term energy plan. The target set for reducing peak demand is 10% (2,400 MW by 2025) and for “conservation” is 16% (30 TWh) by 2032. These will be combined with continuing large additions in industrial wind turbine and solar power generators at substantial premiums above most current generation. As a result, despite the lower consumption, ratepayers will be expected to dig deeper into their pockets.
Energy Minister hiding his head over consumer losses due to surplus power, lots of it wind
Ottawa Wind Concerns 