Wednesday, February 15, 2012

Drummond Report - On Electricity, it's worthless

Officially titled, the Don Drummond led "Commission on the Reform of Ontario's Public Services" devotes a section to electricity.  Here's the recommendation - along with my initial reaction to each of them:

Recommendation 12-10: Eliminate the Ontario Clean Energy Benefit as quickly as possible.
I guess that would be now – the vote buying worked already

Recommendation 12-11: Review all other energy subsidy programs against measures of value for money and achievement of specific policy goals.
Bureaucrat paid to control expenses recommends more reviewing; empty-headed twaddle.

Recommendation 12-12: Produce an Integrated Power System Plan (IPSP) built on the foundation of the province’s Long-Term Energy Plan.
The LTEP is a political document. None of the comments invited are on the public record and it’s universally acknowledged to be idiotic.  The LTEP can't be the foundation of anything of value.
The experts paid to produce an IPSP, at the OPA, should do so only if the LTEP is ignored.

Recommendation 12-13: Consolidate Ontario’s 80 local distribution companies (LDCs) along regional lines to create economies of scale.
Everybody knows consolidation is overdue - having provincial overlords enforcing it wouldn't be helpful though.

Recommendation 12-14: As part of the review of the feed-in tariff (FIT) program, take steps to mitigate its impact on electricity prices by
Only a poor economist would accept any form of the FIT program in today’s over-supplied Ontario.

Recommendation 12-15: Procure larger generation facilities through a request for proposal (RFP) process.
Why large? How large is large? 
 Large is cheaper – why not only large? 
 See above comment on FIT program. MicroFIT rewards people for being better than other people (I'd say it rewards them for being politically correct AND well connected, but that itself would be PC).

Recommendation 12-16: Review the roles of various electricity sector agencies to identify areas for economies in administration. This could include investigating the potential to co-ordinate back-office functions.
That bureaucratic self-preservation instinct is one ugly tick.
Hopefully suggesting nothing when you have nothing to suggest is recommended elsewhere in the report.

Recommendation 12-17: Make wholesale electricity prices inclusive of transmission costs such as capacity limitations and congestion as part of a comprehensive restructuring of the wholesale electricity market.
Another minor note from a bureaucrat’s fiddle.
The government is spending billions on the Lower Mattagami project, which isn’t likely to produce much more output, required signing over part of the ownership to the local First Nations, requires probably another billion on transmission - as far as Wawa- and is taking place in a zone of Ontario where the wholesale market price has been negative, on average, for years. 
I don't see moving about line items as really addressing anything.

Recommendation 12-18: Make regulated prices more reflective of wholesale prices by increasing the on-peak to off-peak price ratio of time-of-use pricing and by making critical peak pricing available on an opt-in basis.
12-17 suggests improvements in the market one moment, and 12-18 is the ravings of a micro-managing bureaucrat wishing to enforce his opinion on a market   Peak demand is collapsing, leaving generators providing cheaper and cheaper pricing to meet the rare upticks in demand.

Recommendation 12-19: Co-ordinate a comprehensive, proactive electricity education strategy across sector participants that at a minimum covers:
Indoctrinate, indoctrinate, indoctrinate …

Recommendation 12-20: Strategically promote Ontario’s strengths in the energy sector, capitalizing on export opportunities for domestic goods and services.
Please don't strategize.


  1. Kind of how I read the energy recommendation also. I was surprised that an economist would waffle as much as Drummond has on the energy file. He must be spending too much time hanging around politicians.

  2. Scott,

    Love your insights. Keep it up !


  3. Scott, I feel like I felt when I crashed the Ozzy Osbourne concert back in 1982 -- totally let down. I should have just run a marathon.

    So much buildup, and the upshot is to get rid of the CEB? He's an economist, and he thinks we have to study FIT to see if there's value for money?

    Gaaahhhhhhddddd. So that's what top-level thinking looks like.

  4. This comment has been removed by the author.

  5. Scott,

    I'm surprised you missed the biggest whopper in Mr. Drummond's report. I'm still scratching my head at the last sentence of page 47:

    Among other measures, the government should seek administrative efficiencies in various electricity sector agencies and restructure the wholesale electricity market so consumers located closer to generation stations can benefit from lower electricity prices. (italics are mine)

    It just doesn't make any sense at all. In Ontario, the unit cost of electricity at a wind farm in my backyard will be much higher than the cost of legacy hydropower or nuclear generated 200 or 1,000 km away, even if you factor the cost of transmission (we'll use 1¢/kWh as a ballpark figure). Different generation technologies have their intrinsic costs and they work within a grid framework. I'm surprised Drummond ignored that.

  6. I'm sure experts in all areas that Drummond-Chubais* report touched upon will impress upon the government the unlikelihood that a non-expert will know more than they on how to go about solving any problem.

    The press are loving this report though. Scary. I know why too. It is because every editorialist dreams about getting unaccountable Czar like power, and are vicariously living their dream through Drummond. He makes the solving of problems seem so easy!

    * (Who. if this report isn't put in the dustbin where it belongs, will be known as co-author in spirit)

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