Ratepayers to Queen’s Park: we have a problem 

Wind power costs plenty for only 4% of generation

In the past six months, reports from the Canadian Manufacturers and Exporters, the C.D. Howe Institute, the Association of Major Power Consumers of Ontario, the Canadian Federation of Independent Business and the Ontario Chamber of Commerce have all called for “competitive” electricity prices.

A few of the members of some of those associations already benefit from absorption of some costs by residential and small business ratepayers, but still complain their electricity bills are too high and not competitive with competing jurisdictions in Canada and the U.S.!

Ontario is cursed with probably the most complex electricity system in the world even though 80% of our electricity is generated by nuclear and hydro.  Both of those generation sources produce power at an average of about 6-7 cents per kilowatt hour (kWh), yet Ontario’s delivered electricity prices are among the highest in North America.   Why? Most of the reasons relate to the Global Adjustment Mechanism (GA)^{NB 1:} which has increased every year since its creation in 2005. The GA absorbs a plethora of ratepayer costs that are billed out via the “electricity” line on our bill. In the first six months of the current year, the GA accumulation is $4.6 billion versus only $2.2 billion in the comparable six month-period of 2014.

Here are some of the reasons for the increasing cost of electricity to Ontario’s ratepayers.  Note that many have nothing to do with generating electricity.

Some current ratepayer costs:

1. Moving two gas plants (Oakville and Mississauga) at a cost of $1.1 billion
2. Smart meters costing $2 billion to enable time of use (TOU) billing with no benefit
3. The shift in costs (estimated at $422 million for 2012 by the C.D. Howe Institute) from Class A ratepayers to residential and small commercial enterprises
4. Cost overruns on the Niagara tunnel (“Big Becky”) of $500 million
5. Supporting the employee pensions of Hydro One and OPG pensions by contributing $4. for every $1 contributed by the employees^{NB 2:}
6. The $200 million cost of Hydro One’s messed up billing system
7. The costs for the 1.2 million letters and postage ($600K) for the CEO of Hydro One to apologize to their ratepaying customers for messing up their billing system
8. The $120 million annual cost of the Northern Industrial Electricity Rate Program to reduce electricity rates by 2 cents/kWh for industry in Northern Ontario
9. The $35-40 million annual cost of the Northern Ontario Energy Credit to assist single and family households with their electricity bills
10. The $2.6 billion it cost for the Lower Mattagami run of river project to principally produce expensive hydro electric power in the Spring when Ontario’s demand is at its lowest level
11. The Low-income Energy Assistance Program with an annual cost of $4 million to assist households living in Energy Poverty^{NB: 2}
12. The annual costs (currently estimated at $40 million annually) associated with the development of a “smart grid” (smart grid entity charge) estimated in 2010 to cost $1.5 billion
13. The costs of the Net Revenue Requirement (NRR) for gas plants estimated to be a minimum of $650 million annually for them to sit idling so they can back up wind and solar generation
14. The annual costs of $30 million for the recovery of OPG’s expenses related to the conversion of one unit of Thunder Bay to biomass from coal
15. The $170 million costs of converting Atitokan from a coal generation unit to biomass together with the annual operating costs (operation, maintenance and administration) to sit idle for most of the time
16. Annual Conservation spending of $400 million that provides grants for people to purchase high efficiency air conditioners, LED bulbs,  etc., and for businesses to retrofit their lighting system, purchase high efficiency refrigeration units, etc. and for municipalities to switch their street lighting systems and municipally owned arenas to LED, etc. etc.
17. The costs (unknown) of the “Lost Revenue Adjustment Charge” to allow your LDC to recover revenues (via the “delivery” charges) lost because your community has used less electricity
18. The costs of spilling clean hydro (3.7 terawatts in 2014 for OPG), constraining wind and solar generation, steaming off Bruce Nuclear, all at an estimated annual cost of $400-500 million.
19. The costs of subsidizing utility-scale wind power generation, which represented about 9% ($700 million + unknown amount for constrained wind generation) of the GA costs but only 4% (6.8 TWh) of total electricity generated
20. The costs of erecting and maintaining meteorological station for IESO to measure constrained wind at every wind development with a capacity rating of 10 Megawatts or more
21. The actual generation and costs of (an average of $500. per MWh) of solar panels NB^{: 3} to generate electricity usually when not needed.  With 2,000 MW of capacity IESO doesn’t disclose what they produce yet claim they are transparent.  An estimate of costs to ratepayers at 15% of rated capacity suggests ratepayers absorb in excess of $1 billion annually or 15% of the total GA costs but they produce less than 2% of total generated electricity
22. The costs associated with exporting Ontario’s surplus electricity production which was about $1.2 billion in 2014 and appears headed to $2 billion in 2015

Some future ratepayer costs:

• The Ontario Energy Support Program, estimated to cost $200 million annually commences January 1, 2016 and will support 570,000 household’s currently living in “energy poverty”
• Also effective January 1, 2016 the Ontario Clean Energy Benefit will no longer exist raising electricity bills 10%
• Another 500 MW of capacity from wind (300 MW) and solar (200 MW) is to be added to the grid raising annual costs by about $200 million
• The further shift of smaller industrials from Class B to Class A ratepayers will effectively transfer costs (estimated) of $300/400 million from clients with peak energy needs of 3MW under the “High 5” system
• Lump sum payments and free Hydro One shares (after privatization) to Hydro One and OPG employees.  Cost to ratepayers is an unknown at this time
• The costs to convert the Toronto Zoo’s “zoo poo” to electricity
• The costs of research and grants related to “energy storage.”  The Energy Storage Association‘s members appear to be the beneficiaries of the grants but haven’t registered as lobbyists with the Ontario Registry.   Costs are unknown!  Members of the Association include:  NextEra, Northland Power, MaRS Discovery District and even Ontario Sustainable Energy Association.
• Another 1,500 MW of wind capacity scheduled to be in place by December 31, 2016 that will add a further $500 million annual cost to the system.

Future Ratepayer Savings:

As of January 1, 2016 the Debt Retirement Charge will no longer be levied saving an average ratepayer (residential) about $70 annually.  The DRC will continue to be charged to businesses!

Net Ratepayer Increase:

The additional future costs coupled with the demise of the Ontario Clean Energy Benefit will see residential rates increase by a minimum of $400 annually, based on a quick estimate, and raise overall rates to rival those of Alaska and Hawaii. 

Taxpayer-related costs:                                                                                                                                   

• The Ministry of the Environment and Climate Change will continue to incur costs associated with the legal fees to defend the issuance of their approvals of industrial wind developments via the Environmental Review Tribunal! Costs are unknown.
• The Ontario Ministry of Transportation (MTO) will continue to experience costs associated with grants of $8,500 to individuals, etc. purchasing electric vehicles for those who can afford luxury Tesla automobiles, etc! Overall costs are unknown.
• The MTO will continue to incur costs associated with the installation of charging station for electric vehicles!  Costs are unknown.
• Various municipalities will eventually experience declining property value assessments from their residential taxpayers associated with industrial wind turbines driving down property values and municipal tax revenue and require additional funding from the Ministry of Municipal Affairs and Housing or higher municipal taxes.  Costs are presently unknown!

Taxpayer related benefit:

The one and only taxpayer benefit relates to the end of the Ontario Clean Energy Benefit on January 1, 2016, saving taxpayers about $1 billion annually.  The taxpayer savings will however increase ratepayer bills by a like amount and will also generate about $130 million via the cost of the HST for the additional cost of electricity.

Premier Wynne and her Minister of Energy, Bob Chiarelli seem to believe we can continue on this path of destruction of the province in an effort to have Ontario save the world from “climate change” as she noted when her Environment Minister Glen Murray announced their “cap and trade” plans back on April 13, 2015 by stating:  “The action we are taking today will help secure a healthier environment, a more competitive economy and a better future for our children and grandchildren.”

The Liberal government may feel it has created a “healthier environment” but that has come at the expense of what was once a thriving economy and the envy of the developed world.  The debt they have created coupled with the highest electricity rates of competing economies will continue to undermine the future for our children and grandchildren.  There goes “the better future for our children and grandchildren” that Premier Wynne claims.

©Parker Gallant

July 23, 2015

NB 1:  The GA was originally established to capture the difference between the contracted rates for power and the actual market value given via the hourly Ontario electricity price (HOEP) but has become the dumping ground for anything that doesn’t fit elsewhere.

NB 2: Energy poverty reflects itself when energy costs are 10%, or more of a household’s total income.

NB 3: Solar panels on your neighbour’s roof, the farmer’s barn, your municipally owned arena, IKEA, Loblaws, Toronto District Public Schools, etc., etc.

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