Ford government floundering on electricity portfolio

(October 2, 2019) The IESO’s monthly market report for August broke several records and none of them were to the benefit of Ontario ratepayers.

By Parker Gallant (a former banker who didn’t like what he was seeing in his Ontario electricity bills).

For the original version of this posting, see here.

For more analysis by Parker Gallant, check out his blog here:
https://parkergallantenergyperspectivesblog.wordpress.com/

The IESO (Independent Electricity System Operator) just released the August 2019 Monthly Market Report and what it disclosed is that the GA (Global Adjustment) for the month set several records.

The records broken in August 2019 had nothing to do with higher consumption as it was actually down from August 2018. Total Ontario Demand for the month dropped by almost 864,000 MWh (megawatt hours) or 7.3% as average weekly temperatures were lower suggesting air conditioners were operating less.  As Ontario’s ratepayers have come to expect, lower consumption often means higher electricity costs and that expectation was borne out in a major way for August.

The records broken in August include:

  1. Highest GA costs for both Class A and Class B customers reaching $67.19/MWh for Class A and $126.07 for Class B ratepayers.
  2. The total GA for the month also set another record coming in at $1,327.7 million or $1.33 billion when rounded versus $876.4 million in August 2018! When the HOEP (hourly Ontario electricity price) is added in, the cost to “B” ratepayers becomes 14.2 cents/kWh not including, delivery and regulatory charges, which generally add another 30/35% to monthly bills.
  3. Another record broken in August was the monthly transfer to the “Variance Account” as it was up 75.3% from August 2018 and came in at $306.9 million versus $175.1 million in 2018.

Not to worry about the big jump in costs for August 2019 though, as the Ford government has limited “future” rate increases to the inflation rate. When the OEB (Ontario Energy Board) announces a rate increase next month a big chunk of the GA will suddenly disappear.  It will wind up in what IESO refer to as the “Variance Account” which was the Wynne government’s “Fair Hydro Plan” (FHP); simply a deferral of rate increases (25%) to the future.  According to page 129 of the 2019 Ontario Budget the Ford government on November 1, 2019 will move the costs of the FHP deferral to Ontario taxpayers.

Another interesting aspect of August 2019 versus August 2018 was the fact Ontario’s net exports (exports minus imports) in 2018 was small at only around 208,000 MWh versus just over 798,000 MWh in 2019.  The result was, the cost of losses on those “net exports” in 2018 was about $15.5 million versus over $100 million in 2019.   This month we can’t pin the blame on those intermittent industrial wind turbines for the big jump as their additional costs came in at about $9.6 million according to my friend Scott Luft’s tracking of them.

While IESO doesn’t publicize “records” of this type it is important to know when they are broken so that politicians are informed.

If informed, perhaps politicians will examine the reasons to determine what caused those increased costs.  At that juncture perhaps they will examine the reasons and actually do something to slow or reduce the future impacts.  We ratepayers certainly know that wasn’t the case for the McGuinty/Wynne governments but, I think most of us anticipated better results from the Ford led government!

Time for them to show some real action on the energy portfolio!

Parker Gallant is a retired banker. Retirement allows Parker to spend time researching the energy sector, applying his banker’s common sense to analyzing the sector’s approach to the production, transmission and distribution of electricity to Ontario’s consumers. Parker is a regular contributor to the Financial Post on matters related to the energy sector. He is a former director of the umbrella organization Energy Probe belongs to (see Energy Probe Research Foundation).

For previous blogs by Parker Gallant, published by Energy Probe: see here.

About parkergallant2

A retired International Banker
This entry was posted in Power Generation in Ontario, Reforming Ontario's Local Electrical Distribution Sector, Reforming Ontario's Local Electrical Distribution Sector and tagged , , . Bookmark the permalink.

1 Response to Ford government floundering on electricity portfolio

  1. Andrew Roman says:

    The reason why the Ford Government is floundering is because during the last election campaign it started competing with the NDP to see who could promise to reduce electricity prices the most. Ford promised a 12% reduction, which was obviously impossible at the time, but he was outbid by the NDP, who promised 30%.

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