Parker Gallant and Scott Luft: Michigan and New York’s best friend–Ontario

(September 18, 2013) The press releases flowing from the Ministry of Energy’s offices have been many over the past several years and claim a variety of wonderful things despite the mundane attributes of the electricity sector.

One such release dated January 12, 2012 claimed Ontario earned $13 million by exporting its surplus power in December 2011 and that it “keeps costs down” for ratepayers. It also said 20,000 jobs had been created and that the GEA was on track to create 50,000 jobs by the end of 2012. Fast forward a year and a half to a press release dated June 20, 2013 about the revised Samsung contract which claimed that the GEA had created just 31,000 jobs.

The latter claim indicates that the target was missed by at least 19,000 jobs. We now know that most of those jobs were short-term construction jobs to erect wind turbines and install solar panels. We no longer see press releases that claim we earn money from selling our surplus power to the likes of Michigan and New York, perhaps because the Auditor General in his 2011 Annual Report stated 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.” When you examine the Independent Electricity System Operator’s data you quickly learn why the Ministry no longer brags about earning revenue from exports or keeping costs down for ratepayers. The exporting of our surplus power was the subject of a joint article over two years ago but the impact at the time was at a lower dollar level.

Looking at data for the first eight months of 2013 and comparing it to the same period in 2012 discloses that while we are exporting more power (an increase of 23% year over year) it is costing Ontario’s ratepayers more. For the first eight months of 2012 we sold Michigan and New York 8.3 million megawatt hours (MWh) or enough to power over 800,000 homes and for the first eight months of 2013 Michigan and New York bought 10.1 million MWh or enough to power over one million Ontario homes. The market value (Hourly Ontario Energy Price) of power sold to NY and Michigan in 2012 indicates approximate revenues of $182 million and $262 million for 2013. On the surface it makes it appear that Ontario earned $80 million more but that sale price doesn’t include what we Ontario ratepayers refer to as the Global Adjustment (GA) which is described by IESO as:

The Global Adjustment (GA) is the difference between the total payments made to certain contracted or regulated generators/demand management projects, and market revenues.

The GA is the huge basket that picks up the difference between the guaranteed “contracted” generation and the market price (the amount we sold our power to Michigan and New York for). That basket has been growing at an incredible pace over the past few years as renewable energy (wind and solar) are added to the grid.


What that means is that Ontario’s ratepayers wound up subsidizing those export sales. We estimate that in the first eight months of 2012 Ontario’s ratepayers picked up the GA costs of $420 million and in 2013 the subsidy bill was $584 million or an increase of 39% for the same period. Put another way; for each kilowatt hour (kWh) of exports in 2012, Ontario subsidized GA costs of 5.1 cents per kWh and for the same period in 2013 that subsidy had jumped to 5.8 cents per kWh. At the time of the Auditor General’s report, only 20 months ago, the subsidy was estimated to be 3 to 4 cents per kWh.

Since the Auditor General reported on the cost of exports, we estimate the net exports through New York and Michigan interties have sold for more than $1.2 billion less than Ontarians paid for the same amount of electricity, which makes the estimated gas plant moves seem cheap as those subsidies will continue to grow. The Ontario Power Authority (OPA) has delivered contracts to the wind and solar developers that will increase their generation capacity by upwards of 60% with most of that cost flowing to the GA basket.

What Ontario exported in the most recent eight month period is equivalent to what might be produced (intermittently when it’s not needed) by 3,700 MW of wind turbines (another 1,700 towers spread throughout Ontario) or 8,000 MW of solar panels (using 64,000 acres of land). The foregoing assumes wind turbines produce at a 29% level of capacity and solar panels at a 15% level.

The interesting and disturbing fact that has emerged since Premier Wynne has become the leader of the Liberal Party is that we have seen an acceleration in the implementation of contracts awarded for wind turbine projects despite the downsizing of the Samsung contract. Under Wynne’s short term as our Premier, Ontario has awarded as many, if not more Renewable Energy Approvals for wind turbine projects as were granted under McGuinty’s term. The reasoning behind this sudden rush to wind has caused consternation throughout the Province as 67 municipalities have declared themselves “unwilling hosts”, which they were invited to do by Premier Wynne in her Throne Speech. While mouthing a desire for conversation with the “unwilling hosts”, Wynne is set to add more than 3000 MW of “transmission connected” wind capacity in the next 18 months; double the amount existing when she became Premier.

The projection of an $8-billion annual Global Adjustment basket in the “Power Dumping” article of two years ago looks set to become a reality near the end of the current year. In the interim, both Michigan and New York are no doubt very happy the Ontario Liberals have created such a mess of the Ontario electricity system and hopefully appreciate the generosity of Ontario’s ratepayers.

Parker Gallant is a retired bank executive and a former director of Energy Probe Research Foundation. Scott Luft is a former retailer with a statistical interest in Ontario electricity data.

As with all independent bloggers on this site, the views of the authors do not necessarily reflect those of Energy Probe.


This entry was posted in Conservation, Electricity, Power Generation in Ontario, Renewables. Bookmark the permalink.

9 Responses to Parker Gallant and Scott Luft: Michigan and New York’s best friend–Ontario

  1. 1957chev says:

    Reblogged this on Mothers Against Wind Turbines and commented:
    The Liberals should be held criminally responsible, for the mess they have created.

  2. Pingback: Did you know that your Hydro payments are supporting cheap power in the U.S.A???? | The Big Green Lie

  3. Bill Palmer says:

    Hmmm, so Minister Chiarelli claims Ontario made 6 Billion $ selling more power than it imported up to the end of August. A quick look at the IESO Monthly reports shows that we typically import about 1000 MW in the daytime, and export 1000 MW in the daytime and 2000 MW at night time. So, we buy say (1000 MW x 12 hours x 250 days) at $50 a MWh in the daytime, and we sell say (1000 MW x 12 hours x 250 days) at $50 a MWh in the daytime [so daytime hours are a wash], and then sell say (2000 MW x 12 hours x 250 days) at $30 at night … for a profit of 2000 MW x 12 hours x 250 days x $30 a MWh = $180,000,000 … already I am having a problem to find $6,000,000,000 in profits the minister quotes.

    But also, the 2000 MW we sell at night is perhaps 500 MW wind that we are paying $135 a MWh for, to sell at $30 … for a net cost to Ontario consumers of $105 x 500 MW x 12 hours x 250 days = $157,500,000 … that pretty well eats the profit that we are making … and if there is more wind, then the cost is even higher.

    It’s not easy to go through the IESO listing and do simple math, but let’s just leave it that it is sure hard to find the profits that the Minister claims we are making.

  4. ericjelinski says:

    And now Wynne is looking for “revenue tools”, ie. taxes to pay for subways and cover other losses they created. Only fools need revenue tools, everybody else balances thier books.

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  6. Randy Cross says:

    Green Energy Act begs the question ..?? Who’s gonna clean up this F@ckin’ Mess ??

  7. Pingback: Recent Energy And Environmental News – October 7th 2013 | PA Pundits - International

  8. Vanita Alden says:

    Great post.

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