Hydro One 3rd Quarter Report Hints at High Costs Of Politicized Electricity System

Hydro One's Press Release on 3^rd Quarter results includes a number of sentences that leave me scratching my head and wondering how much spending is necessary to keep the lights on, and how much should be attributed to the politically motivated connection of unreliable, heavily subsidized, generation.

Curiosity  seems to be in short supply these days, as the country's most read papers continue to print that bills can't have been going up due to renewables as most contracted capacity is not yet online.  They missed years of escalating delivery charges for Ontario's residential consumers.  I had previously looked at escalating capital costs (including the chart shown here, taken from an earlier article on our smart grid).  2010's capital expenditures finally leveled off, at 2009's level, but with the smart meter spending essentially completed, the recent Hydro One results don't indicate capital expenditures will be reduced.

• “This past quarter, our employees have stepped up and worked tirelessly to respond to natural disasters in Ontario and elsewhere, while remaining focused on connecting renewable energy projects and building assets that are critical to all Ontarians," said Laura Formusa, President and CEO, Hydro One Inc.
• New assets in service include new investments to address our aging critical infrastructure and the supply mix objectives for generation, including off-coal initiatives, and investments in support of the Green Energy Act.  Higher revenues were partially offset in the first nine months and more than offset in the quarter by higher operating expenditures including those related to our work to increase short circuit and/or transformer capacity at some of our transmission stations to enable the connection of small renewable projects
• Higher revenues were partially offset in the first nine months and more than offset in the quarter by higher operating expenditures including those related to our work to increase short circuit and/or transformer capacity at some of our transmission stations to enable the connection of small renewable projects ....

The 2010 year-end management discussion and analysis document does provide some clarity on the breakdown of capital expenses: On page 21 it estimates 2011's capital expenses related to 'sustainment requirements of our aging infrastructure,” as $550 million ($700 million in both 2012 and 2013), with 'development projects' related to the politically driven supply changes being estimated as costing 70% more than the capital expenditures related to ongoing operations (at $950 million in 2011).   

I have estimated that all wind, and solar, production increased from a cost of about $300 in 2009 to approaching $600 million when 2011 wraps up.  

$1 billion a year of related grid expenses would certainly change the value proposition....

If there ever was one to change.