September 30, 2019 – just another high-cost electricity day in Ontario

(October 2, 2019) If every day was like September 30, 2019, Ontario ratepayers would be paying $2.7 billion for power consumed elsewhere, while operators of FIT generators would be stuffing money in their bank accounts.

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:

Monday September 30, 2019 was a work and school day, meaning the economy was fully functional and electricity in reasonably high demand.  While the foregoing is true in winter and summer days in Ontario, Spring and Fall is when we tend to not be operating our heating source to keep us warm or our air conditioners to keep us cool meaning demand is lower.  Unfortunately for ratepayers, Spring and Fall are great days for wind generation and pretty good for solar generation.

This September 30th was atypical in that total Ontario demand was only about 338,000 MWh according to IESO’s Daily Market Summary and on September 30 in 2018 was only slightly lower at 333,000 MWh.  Those cold winter days or hot summer ones will usually see demand 20/40% above those levels.  What that effectively means is our electricity system must have flexibility with both baseload and on-demand power that can be ramped up or down.  The former has been provided by nuclear generation and “must run” hydro whereas the latter was hydro, a few gas plants and of course those (now closed) coal plants.

Reviewing the sources of the actual generation on September 30, 2019; we were delivered around 256,000 MWh by our nuclear plants and just over 82,000 MWh by our hydro stations. Together they delivered the 338,000 MWh we needed and could have supplied more if required.  The combined cost of those power sources was approximately $22.3 million or 6.6 cents/kWh!

In addition to the nuclear and hydro last Monday, Ontario’s ratepayers also were forced to accept delivery, and payment, of over 20,100 MWh of wind and 7,800 MWh of curtailed wind.  We also had almost 21,400 MWh of gas generated electricity, 1,800 MWh of solar and 1,200 MWh of biomass delivered!  Most of it was surplus generation and was sold off to our neighbours in NY, Michigan and elsewhere for the market price (HOEP) of just over $9/MWh or about one cent per KWh,  The result of that sale plus the payment for curtailed wind increased the total cost of power for the day to about $29.7 million or $88/MWh for Ontario’s ratepayers.

If every day was like September 30, 2019 Ontario ratepayers would be paying $2.7 billion ($29.7 million minus $22.4 million = $7.4 million X 365 days = $2.7 billion) for power others consumed while operators of the FIT (feed in tariff) contracted generators would be stuffing money in their bank accounts.

Things appear to be getting worse as my friend Scott Luft, noted. The second estimate in September issued by IESO for the GA (Global Adjustment) was $163.92/MWh and the first estimate from IESO for October is $178.78/MWh.  What the second estimate for September indicates is that the GA will be $1,260.4 million or $413.1 million higher than it was for the same month in 2018.

We should all wonder when and if, Greg Rickford, Minister of Energy, Northern Development and Mines is going to do something, “for the people”, to gain control of the electricity file.  He needs to ensure our rates remain competitive to attract industry to the province and at the same time stop the growth of energy poverty.  So far, he has not demonstrated either of those events will happen.

Ironically, Minister Rickford was recentyly in Shuniah, Ontario cutting the ribbon for the start of the $777 million NextBridge East-West Tie Line Transmission project.  The contract was reportedly approved via an “Order in Council” on January 31, 2019 under Rickford’s watch.  It is very unclear at this time that this line is needed but what is clear is that it will add to the cost of electricity bills.

Using the term “ironically” above is related to the fact that NextBridge is a partnership between; NextEra Energy Canada (a subsidiary of NextEra Inc. of Florida), Enbridge Inc. and OMERS (Ontario Municipal Employees Retirement System). NextEra, in April 2018 unloaded their Ontario wind and solar FIT contracts to the CPP (Canada Pension Plan) for US $582.3 million along with the $689 million in debt attached to those projects.  Enbridge Inc. also sold off a large portion of its wind and solar assets to CPP for $1.75 billion at about the same time as NextEra did.  With the CPP heavily investing in renewable energy it appears the push for wind and solar generation will continue.

Instead of the Ford Government fixing the electricity portfolio they are becoming engaged in ensuring the price to Ontario’s ratepayers will continue its upward spiral.  “For the people” has taken on a new connotation bowing to those who claim a “climate emergency” which presumably now includes public sector pension funds and a continuing drain on ratepayers and taxpayers of the province for renewable energy!

My personal advice—–fix the mess!

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 Electrical Generation Sector, Utility Reform and tagged . Bookmark the permalink.

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