Sunday, May 29, 2011

Jobs Lost, And Ontario's Cheap Electricity Exports

Ontario has been providing Quebec with cheap electricity following the loss of large industrial customers in Ontario to the cheaper electricity of Quebec.

Here is the history: Last year, Xstrata closed their copper refinery in Timmins. They’re going to continue to take the ore out of the ground in Timmins, but now they’re going to ship it to Quebec to have it smelted there, and about 2,000 good jobs are going to follow. Why did they do that? Because they’re paying $70 million a year for electricity in Ontario and they can pay only $35 million in Quebec.
Four and a half years ago, what was then Inco closed their copper refinery in Sudbury. Today, they still take the ore out of the ground in Sudbury, but they ship it to Quebec to smelt it there at half the cost. That’s exactly what is happening with Cliffs Natural Resources. If they move to Manitoba or Quebec, they’ll pay half the cost of refining the metal.
There’s a real problem, a real issue, with hydro rates in Ontario.

$70 million dollars would buy about 1 TWh of electricity in Ontario, but outside of Ontario, in 2011, you'd need less than half that amount to purchase 1 TWh of electricity from Ontario. This is because of the Global Adjustment (GA) included in Ontario's Wholesale Market electricity charges. In 2010 the GA added $27.18 to each MW sold in Ontario (the average price for that was $37.85)1. The numbers over the first 4 months of 2011 have put exports at less than half the price Ontario customers pay, as we have paid the $32.07 the HOEP market rate averaged, plus the $38.03 GA (for a total of $70.1/MWh), while exports would collect only the $32.072. In 2011, Ontario electricity is less than half the price outside of Ontario.
Months before Mr. Hampton spoke in the legislature of the Ontario jobs moving, from the Timmins area, to Quebec, where their electrical bills would be lowered significantly, a new intertie added the ability to move 1250MW between the jurisdictions. The movement was disproportionately to Quebec from Ontario in the latter part of 2010, and the annual figures ended up being approximately a net export from Ontario to Quebec of 1.5 TW.
We exported one-and-a-half times the amount of power that Xstrata  had used at the smelter in the Timmins area, but now are to use in Quebec, and we exported it at a price that provided Quebec with the cheap power Xstata left here to get.

1Figures are on page 25 of December's monthly report, graphs of import/export markets are on page 18 (Fig 20)


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