Friday, April 27, 2012

Ontario replaces Independent: Weakly Electricity Sector Downgrades

I posted the latest weekly reporting figures this afternoon, and the data, fittingly, indicates a new record.  Week 16 is notable as the first week with Ontario demand growth over the previous year (Easter weekend was in 2011's week 16) - but the growth average for Ontario's demand was only 305MW/h, whereas the growth in net exports was 828MW/h.  The increase in net exports, combined with pricing remaining a third lower than in 2011, caused the export subsidies, by my estimation, to surge to record levels - for the third week in a row.

The Canadian Press shared this important bit of news this week:
TORONTO - Energy Minister Chris Bentley hasn't abandoned the idea of having a "real name" for the merger of the Ontario Power Authority and the Independent Electricity System Operator after all.
Bentley complained the energy sector is full of agencies known by acronyms like the OPA and IESO when he announced the planned merger of the two electricity planning agencies.
The minister said at the time he wanted the new agency to have a real name, but in legislation introduced today, it is known as the Ontario Electricity System Operator, or OESO.
In rearranging the Ontario Power Authority and the Independent Electricity System Operator,  Minister Bentley kept on 4 of the words: Ontario Electricity System Operator (OESO) is the working title.


These words the Minister extinguished.

To make sure they stay dead, the legislation for the merged entity includes:
   25.30  (1)  The Minister may, in consultation with the OESO or any other person, develop and, with the approval of the Lieutenant Governor in Council, issue energy plans.
The Minister of Energy has had a draft proposal of an Integrate Power System Plan (IPSP) since before Mr. Bentley was the Minister of Energy.  Despite that, he recently cheered on not only continued purchase of more supply, but at an accelerated pace.  This is a reference to the conclusion of the 'review' of the Green Energy Act's Feed-In Tariff program (GEA, FIT ... FUBAR).

George Smitherman, former occupant of the Minster of Energy's office, introduced the GEA on February 23, 2009.  At the time demand had dropped about 5TWh over the past year, and was about 10TWh off it's 2005 peak.  Increased exports had essentially replaced the reduced domestic demand during that period.  However, as 2009 progressed, in recession, exports no longer were capable of replacing the continued reductions in demand - and we came to know the concept of surplus generation.  A hot summer in 2010, along with a slight recovery in industrial demand, saw exports drop for a short time, but when demand leveled off exports rose again (because we continue to bring supply online).  A warm winter saw demand dropping rapidly once again, but export opportunities don't seem to exist, even though pricing, since early in March, has dropped below $20/MWh.

The disaster is just beginning.  February commodity rates for Ontario's Class B customers were $72.94/MWh; March $77.79; April is estimated at $92.10 ($74.70 global adjustment estimate and month-to-date HOEP of $17.40), and May should be really bad.  Supply is so overbought that any drop in demand will increasingly send pricing higher and higher.

In that environment the Ontario Energy Board released "Guidelines for Electricity Distributor
Conservation and Demand Management."  On the same day the regulator was issuing codes demanding the reduction of consumption, the operator (IESO) was releasing some comments from 'stakeholders' involved with SE-91(Renewable Integration).

SE-91 is all about rules for curtailing production.

You might wonder if there is some good news in Ontario's dual characteristics of procuring more and more supply while demand has resumed it's decline.

There sort of is.  Just last week Ontario paid, to suppliers, about $20 million more than it received for electricity sold to export customers.

Industrial electricity prices in New York are getting lower and lower.
Good for them.


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