Ontario Residential Electricity Rates are dropping. Bills aren't.

The Ontario Energy Board (OEB) released Regulated Price Plan (RPP) rates for the next 12 months, and they're down 10% from the current period. Other changes were not as clear from the material published along with the new rates, which I've come to realize is necessary for residential consumers to understand that their bills will change very little. I was waiting to see what the mainstream media would publish regarding the steep, and internationally rather unique, decline in rates, but I've seen nothing - which is somewhat of a blessing given the poverty of understanding demonstrated in recent reporting on Ontario electricity. I'll explain what is happening to rates, why they're dropping for one category of consumer, why it won't change individuals' bills, and the impact on other categories of consumers from recent changes in the so-called market's pricing.

I've added summary columns to the OEB's presentation of rate changes in the following tables, to demonstrate the reduction is rates. For those hoping to find information of which rate plan is best for them I'll point to my work 2 years ago as there's no real change in the mechanics: if your usage is primarily in the lower threshold of the tiered pricing plan, use that plan - if it's mostly in the upper tier, stay with the default time-of-use (TOU) rate plan.

Refurbish Pickering Nuclear Generating Station

I was approached some time ago about supporting the refurbishment of the Pickering Nuclear Generating Station (PNGS). While I tried to be positive in offering to support proponents with data work, I didn’t add my name to the campaign primarily because, in addition to supporting nuclear, I try to support consumers. Things change, and the argument for a full refurbishment of reactors at PNGS has recently grown much stronger.

When I began this blog back in 2010 I pushed back against increasing electricity supply and the enormous costs unnecessary expansion was having on consumers, despite over half a century of declining growth rates in demand that had become no growth at all. In hindsight this was correct, and consumers benefited from the analysis. While Ontario has been awash in surplus supply for most of the ensuing 12 years, 2010’s desire to contract 10,700 MW of “clean, renewable energy from wind, solar and bioenergy” was never realized and today we have about 3,000 MW less than that under contract. For perspective, 3000 MW of wind at the prices the government in 2010 was contracting would have added about $25 billion in cost to Ontario’s consumers (over 20 years).

‘Renewables’ were not the only supply options being rolled back after 2010-2011. The “Oakville Generating Station” was contracted in 2009 (eventually built as the Napanee Generating Station), and that remains the last procurement initiating a major gas-fired generation station. Ontario Power Generation (OPG) not only abandoned plans for new nuclear builds but also for the refurbishment of the Pickering B, opting instead for life extension options on a far smaller scale.

I’ve long been unenthusiastic about all potential new generation which, in hindsight, was marked by high pricing due to unnecessary contracting, stagnant demand and excess generation. Including nuclear.

I shared my opinion on a supply mix for the province over 11 years ago:

The [Ontario Power Authority] is likely to determine that 8 Bruce units, and 4 Darlington units, will be able to supply 50%, of total electricity generation necessary to meet demand within Ontario… I would suggest the minister revise the wording of the directive to nuclear generation should be targeted to account to meet 50% of Ontario Demand. Looking back on statistics back to 1990, that is the level above which we become major exporters of electricity

During the next Ontario electricity planning cycle, in 2013, I developed planning tools to test different mixes under different assumptions on productivity and pricing. Again I found the most economic lower-emission scenario was the 10,000 megawatts (MW) of refurbished nuclear capacity (comprised of 8 Bruce units and 4 Darlington ones). In one scenario I’d run based on stagnant supply, adding another 2,000 MW of nuclear (roughly the combined capacity of the 4 Pickering B units) reduced gas use, and emissions, but about half the added nuclear would have been wasted, dumped or displacing other trivial emission supply.

A lot has changed for modeling since 2013: I would use much different pricing, I’d have to adjust my expectations of output from industrial wind turbines (they’re bigger and have higher capacity factors), sharply reduce solar pricing, review storage aspects, etc. But the biggest issue would be forecasting demand, and it is there that I’ve been convinced the tide is turning and the long period of stagnant electricity consumption in the province is ending.

Fake news and professional planning

As somebody who has observed, measured, critiqued and discussed Ontario’s electricity sector for a dozen years I feel compelled to discuss a couple of harmfully poor articles that have recently appeared in Toronto’s sleaziest newspapers.

Retiring Ontario’s natural gas-fired power plants would be cheaper than official estimates released last fall, critics say, adding that they believe the government suppressed the publication of modelled scenarios that would have supported closing the carbon-intensive facilities.

That begins an article that appeared in The Globe and Mail last month, ascribed to a Matthew McClearn who the paper’s website comically describes as, “an investigative reporter and data journalist with The Globe and Mail's Energy, Natural Resources and Environment Team.” McClean’s article, “Documents raise questions about costs to retire Ontario’s natural gas power plants”, quotes a single critic from his “investigation”. That critic is Jack Gibbons.

I’ll admit that Jack Gibbons is a critic. As am I. I’ve also thought of him as a self-promoting snake, but realize now he’s more of a chameleon. In 1998 Gibbons’ “Ontario Clean Air Alliance” (OCAA) was promoting gas as a replacement for coal, as it continued to do even beyond 2009 when Gibbons was advocating for the Oakville (gas-fired) Generating Station - which turned out to be the last major gas-fueled new-build generator contracted in the province. Emissions today are far lower than under any of the scenarios the OCAA lobbied for during it’s first decade-and-a-half of existence and, simply put, when the OCAA called for a gas phase-out it called for something that began while they were advocating for new gas plants. In the past couple of years the aging OCAA members seem to have yearned for the years they received attention and collected ignorant municipal councillors to sign on to a campaign putting an end date on gas-fired generation.

... we recommend that the Government of Ontario take the following actions to achieve: i) a complete gas plant phaseout by 2030; and ii) an interim 2.5 million tonne per year cap on the gas plants’ GHG pollution as soon as possible. - OCAA Feb. 2021

The OCAA gas phase-out campaign steals from the strategies of the McGuinty Liberals in Ontario, who seized the coal phase-out issue as their own in the election of 2003 by promising to end coal 7 years earlier than the other parties planned - which they subsequently didn’t, but still credited for the policy. No new-build gas generator has been initiated with a contract since 2009 in Ontario. The long-term energy plan of 2013 invented a "planned flexibility" category, which had exactly the same attributes as simple cycle gas turbines specifically because it was non palpable by that time. In response to the OCAA campaign to be seen as against what they promoted for well over a decade the Minister of Energy issued a moratorium on procuring what hadn't been procured for the past dozen years.

Ontario Electricity Exports: losses, benefits, and transmission charges

In 2021 Ontario’s electricity market sold exported electricity for $1.25 billion dollars less than Ontarians paid to have it supplied. That amount is calculated with a methodology I described one year ago. 2021’s $1.25 billion loss is an improvement on 5 of the past 6 years, and $563 million better than we fared in 2020.

Others look at exports differently. Today we visit the murky world of the Ontario Energy Board (OEB) as it deals with a transmission charge for exports - which is where we find the IESO providing expert opinion.

A quick review of my work estimating losses on exports for those who haven’t memorized last year’s article: I copied (or attempted to) the methodology of the Office of the Auditor General in its 2015 annual report, which tallied up total system cost and usage to find an average cost of supply, takes revenues and volumes of exports, and does the math on how much lower the overall cost of exports was at the rate exporters paid than if they’d paid the average rate.

If I had to present a one-sentence hit on that I’d borrow from professionals on the wording and put in my calculated figures:

exports of electricity from Ontario have contributed between $1.2 and $1.8 billion of costs annually to Ontario’s Global Adjustment Charges between 2017 and 2020

2021 Ontario Electricity Data Summary and discussion

Ontario’s system operator (IESO) was tardy in publishing its “year in review” summary - and I was content to delay mine until their’s appeared. Before diving into the analysis I want to note the some challenges facing the sector as they’ve emerged in my media world:

• the role of electricity in the broader energy sector;
• the role of natural gas in the electricity sector;
• decarbonization;
• the role of Quebec supply in Ontario’s electricity mix;
• the role of pricing to encourage electrification of transportation;
• the role of nuclear and desirability of refurbishing Pickering B,
• the role of storage,
• the future supply mix,
• pricing policies to shift consumption to periods of excess supply.

An annual analysis provides metrics that have utility, but it should be kept in mind this summary level of analysis has limitations. I’ll summarize annual statistics for not only 2021 but also for the years from 2014-2020 to give a perspective on where we were as well as where we are.

If you follow me on Twitter you may have seen the first numbers in the IESO’s summary, albeit in different units, days before the IESO posted them. Whereas the IESO posts these separately I’ll show the past 8 years here:

ignore those promoting a death date for natural gas in Ontario's Electricity System

The last contracting of a new and significant natural gas-fired generating station in Ontario happened 12 years ago.

It's been 7 months since my previous post. Among the reasons for my blogging hiatus is the prominence of the future of natural gas as discussed in the mainstream media, at municipal councils, and at the province’s electricity system operator (IESO). This has put me in the uncomfortable position of advocating for Ontario’s natural gas generating capacity, which I do unenthusiastically, but responsibly must in advocating for consumers. My previous post was titled ‘Ontario’s electricity system has not yet passed gas.’ This post will provide background on the building of natural gas-fueled generating in Ontario with the intent of altering the popular perception of expertise on environmentalism and electricity.

11 years ago I began communicating that the extremely generous feed-in tariff contracts (FITs) being awarded had to result in steep increases in electricity rates. I demonstrated what must, and consequently did, happen in writing driven by my research and data work. Today most ‘experts’ say there were obvious flaws in the procurement of electricity supply in Ontario a decade ago that any idiot could see, but I assure you few idiots, and only a tiny minority of allegedly ‘expert’ ones, did at the time. My target market in writing was primarily the people working in government who had to sit around a table listening to spectacularly poor direction from a Minister or Premier to arm them with better information than the politicians and lobbyists in the hopes of allowing public servants the weaponry to resist those people and actually serve the public. Today the situation is considerably different: the IESO has produced a solid report in response to calls, from lobbyists and politicians, for natural gas to be phased out by 2030.

It’s been several years since direction from the provincial government was obnoxiously poor.

The problems today are elsewhere.

The Ontario Clean Air Alliance (OCAA), led by Jack Gibbons, has seized the opportunity to return to the limelight in Ontario’s energy discourse in calling for “a complete gas plant phase-out by 2030,” an idea it’s actively working to get municipal councils to endorse and commit to desiring. The campaign has had some success as municipalities join on, but phasing out gas has long been a desire of the provincial legislature. Want is not the issue.

Here’s how the OCAA began its response to the system operator’s report:

Yesterday the so-called “Independent” Electricity System Operator (IESO), under the helm of climate denier Joe Oliver, released a report that seems more like a pre-Halloween prank than a serious analysis of how Ontario can lower its climate pollution by phasing out gas-fired electricity generation.

Jack Gibbons is not one who should be talking about emissions in anything but an apologetic manner - as is true of many people the press considers both environmentalists and experts in Ontario electricity policy.

Ontario's electricity system has not yet passed gas

Ontario's electricity system has not yet passed gas 1 Ontario’s electricity system includes generators fueled by natural gas. This is suddenly a hot topic as a campaign lobbying councils to say no to this type of generation moves through municipalities. The “no gas” lobbying appeals to a desire to reduce greenhouse gas emissions, exploiting predictions of increased use of natural gas in generating electricity in the province. This article will explore what entities have been the key drivers of emissions in Ontario’s electricity system, the credibility of the body being cited predicting increased generation fueled by natural gas and, if all goes well, convince the reader they are not willing to decrease global carbon emissions at any cost.

Background on the IESO’s pretend market

My previous post reconstructed a method to estimate losses on electricity exports out of Ontario. The measure does not indicate Ontario would be better off if it didn’t export its excess, but that Ontario would be better off with data discipline and consistent metrics capable of informing, and influencing, the managers of the system. Most years we pay more, per unit of electricity, and receive less from exporters of that electricity. It’s a bad trend, but not one Ontario’s electricity system has been structured to notice.

In Ontario the system is operated by the IESO. The IESO’s system includes what should be called a pretend market - it was called a hybrid market when introduced in 2005 after a collapsed attempt at a real market, but it’s deteriorated significantly since then. From a recent report:

...Over 98% of Ontario’s generation costs are controlled through either regulation or contracts, and even the fixed costs of most of the assets that trade on the market are contracted. As a result, less than 2% of the total system costs are actually price-exposed and influenced by the market (the dark blue area)

The creation of a market for electricity in Ontario revealed itself as a fantasy in four acts:

1. the freezing of the market price shortly after its birth in 2002 killed any chance of merchant generation getting built;
2. the introduction of the global adjustment mechanism (2005) separated the contracting of new generation from a need for revenue from sales into the market, and was accompanied by regulating rates for public Ontario Power Generation (OPG) nuclear and very large hydroelectric generators;
3. the introduction of contingency payments to keep coal generators operating after the market collapse of 2008, and,
4. Regulating the rates for the remainder of OPG’s hydro-electric facilities for 2015.

Ontario lost a record $1.8 billion dumping excess electricity in 2020

$1.8 billion dollars: that’s how much Ontarians lost selling electricity to neighbours in 2020 once the revenues earned from the sale are subtracted from the cost of producing the power.

By one accounting, which I’ll show is an Auditor General’s.

It’s been a while since my last post, during which period this blog turned 10. A decade ago, this month, a Premier noted some people think discussing losses on exports is fun, and at the same time lectured, “what you want to do of course is try to manage your system as best as you can so that there's as little extra electricity as possible.” Looking at the longer trend with the benefit of hindsight will be fun (of course), and as an added benefit it will provide a measure of the quality of the system’s managers.

Last month I was contacted by a friend looking to update claims from the 2015 Annual Report of the Office of the Auditor General of Ontario (the Auditor), including:

From 2009 to 2014...Ontario exported 95.1 million MWh of power to other jurisdictions, but the amount it was paid was $3.1 billion less than what it cost to produce that power

From a statistics viewpoint the biggest part of this challenge is figuring out what that $3.1 billion claim was based on. It turns out it’s demonstrated by Figure 10 in that 2015 report - and now we descend into the sordid world of Ontario’s electricity data to determine the origins of the numbers visualized in that graphic. 

I’ve added a tabular table which shows the figures I transcribed from the Auditor’s Figure 10 - not a precise process but one that provides valuable estimates for what is visualized. The difference between the cost of production and revenues in the graphic equal $3.1 billion. Before discussing the “cost of producing Exported Power...as estimated by [Office of the Auditor General of Ontario]” I will note both figure 5 and figure 10 in the 2015 Auditor’s report cite the IESO (Ontario’s hybrid electricity system operator) as the source of revenue from exports: figure 5 prints the figure for 2014 as $636 million while my transposition of the graphics - -done as it’s clearly not that - puts the figure a little below $750 million.

Same source, same measure, same year: two numbers. I’ll revisit this after I discuss a methodology behind the cost of producing exported power that reproduces the results graphed in the Auditor’s Report.