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Sunday, November 21, 2010

Supply Mix Impact on the Global Adjustment Mechanism


I've previously posted the graph indicating any price/MWh increase during the recession, and anemic recovery, was due to the global adjustment mechanism.

Demand decreases, so does the Hourly Ontario Energy Price (HOEP) at the system operator (IESO), but production is propped up by the guaranteed contracts at inflated rates, which are paid for by global adjustment (the difference between the contracted and market price).



Working with the IESO data, I've formatted it to show the composition of the amounts requiring the Global Adjustment Mechanism (GAM) that is included on the invoicing to Wholesale customers, and included in the retail rates for the rest of us.


Public OPG is now supplying about 60% of our electricity and is responsible for around 25% of the global adjustment.

Non Utility Generators, holding contracts with the Ontario Electricity Financial Organization, seems a niche category, but … this niche now adds as much to the GAM as OPG does. In fact, over the past 12 months, it has added more. I do not know of any data to quantify the amount of energy provided from these sources, or even a list of what the sources are (since posting this I've learned these are contracts that were held by Hydro One with external suppliers, prior to the breakup in 1998 - presumably these will all end, or be moved to be OPA contracts).

But the big unbridled growth is in the OPA contracts, which now comprise over half of the approximately $4 billion annually charged through the GAM.

Contracts with private sources are responsible for 75% of the GAM, but only 40% of supply – and 40% of that 40% is Bruce Power output which is priced around 6.4 cents/kWh. The remaining supply, which is primarily gas, with increasing amounts of solar and wind, is the big driver of both the collapse in a market price, and the increase in the combined HOEP/GA price.


Global Adjustment Dollars ($Millions)

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