My discombobulated might be far more coherent than people find in other places, so ... here's my look at August's stats using the Agenda discussion to indicate points of interest.
Mr Paikin started off the discussion with "The cost of energy seems to be going up. How Come?"
The answer is probably somewhere between 'because we are eliminating coal' and; ' because the government is contracting supply that is more expensive, and has all but eliminated any hope of a functional market benefiting Ontario's energy consumers'.
I have a template for estimating the global adjustment figure. I'm sure it is not entirely accurate - but it usually ends up underestimating the global adjustment figures by about 10%, and that should be true because the Ontario Power Authority's programs add about that much on top of the generation contracts. For August, the figures from my estimates look like this:
My estimates for August indicate the market recovered about $452 million through the hourly Ontario Energy Price (HOEP), and the other $379.5 will need to be paid through the global adjustment (GA). The IESO estimate is currently $420.4 million, which is up 268% from $156.8 million in August 2010.
A couple of the people at that table on the TV show - most vociferously Mr. Dyck from the Green party, argued your rates are up around $73/MWh because of $57.50/MWh nuclear supply (the DRC charge I've dealt with separately). To the extent that is true, it is only true because improving performance from an aging fleet of reactors is both replacing an even cheaper source, and contributing to increased dumping of excess production at rates far below the cost of production.
Confusing stuff to explain - but lets' start with the coal issue.
We are using less of the cheapest supply - coal. This graph is a rearrangement of Figure 19 in every monthly IESO report, with the supply by fuel stacked from cheapest to most expensive, and the commodity charge (HOEP plus GA) added on a second Y axis):
But the answer that prices are increasing because we are replacing coal isn't very communicative. It is how we are replacing coal that impacts not only the commodity charges, but delivery charges, the debt retirement charge (DRC), and the Ontario Clean Energy Benefit (OCEB). The next chart is year-date figures with, primarily publicly owned, nuclear and hydro, at the base of the stack, and again the commodity charge/wholesale rate on the second axis.
Here we see an acceleration in price increases, which is largely unique to Ontario in North America. We also see production stabilized after 2009's sharp drop. In terms of the election, a breakdown of sources on year-to-date figures to the end of August, from just the last election of 2007 and now in 2011, shows the rapid price increase in 2011 is bizarrely accompanied by a banner year in cheaper hydro and nuclear (cheaper in terms of the rates paid to OPG and Bruce Power for their production).
So the big hit must be for natural gas - and those who follow the industry know that throughout the rest of our continent other sources of electricity are being made uneconomical by the current glut of cheap natural gas supply, while Ontario pays dearly to private suppliers for natural gas supply.
The big hit on natural gas-fired generation is because the new supply is attracted by guaranteeing net revenue requirements. Economically, this is where the 'green' energy is hammering the commodity charge. It is because wind and solar are purchased on a must take basis that no other supplier will build in Ontario on the basis of selling their output into a free market. A new CCGT plant in the US - and there are many - can expect to operate at a capacity factor of over 40%. In Ontario the plant has no expectation of what their capacity factor might be in 5 years. 'Green' energy has also clearly had a big impact on the delivery section of the bill - and the demand reduction programs noted as barely existent, by the NDP and Green party participants in the TV discussion, will add over $300 million to bills this year.
I have argued, on this site, that the debt retirement is essentially dishonest now. The value of Ontario Hydro was underestimated, and the value of OPG's generation is being used to fund private generation - private generation that is argued to be replacing coal.
The OCEB is, similarly, being used to disguise the true cost of changing supply and infrastructure.
Both are successful (as is the HST discussion) in that they deflect the conversation from real issues related to markets, and value ... and values.