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.

Independent
Power
Authority

These words the Minister extinguished.

Manning Up: A Weak Week for Ontario in the Electricity Sector, et al.

Man Up

strap on a pair, grow some balls, stop being such a complete and utter wuss.

-Urban Dictionary

There was a flurry of activity concerning Ontario’s electricity sector last week.  Following up on the previous week's budget bill's "plans to move forward with a comprehensive review of the electricity sector and its various agencies," the ministry of energy first announced a "Clean Energy Economic Development Strategy," and then an "Ontario Distribution Sector Panel."  The communications indicated some recognition that there are structural problems in Ontario's electricity sector.

Unfortunately, they actually communicated the government has no intention of facing up to the structural problems in Ontario's electricity sector.

Electricity Exports Benefit Generators - not families

As the government loses control of electricity pricing, the Ministry of Energy continues to put out a monthly press release on exports that would make Baghdad Bob blush.

2012: 2nd highest year for volume, lowest revenue in 5 years

April 12, 2012 1:00 PM
Ontario's electricity market generated over $14 million in March by exporting electricity to other states and provinces, bringing total net export revenues to over $55 million this year.
This revenue helps Ontario:
Keep costs down for families
Build and maintain a clean, reliable and modern electricity system

Record Low Hourly Ontario Energy Prices Causing Record Export Subsidies

The past 5 weeks comprise 5 of the 10 lowest weeks for the average Hourly Ontario Energy Price (HOEP) rates since the IESO data starts 10 years ago.  I've noted the decline while updating my weekly shadow reports, and this post will put the trends within the context of broader markets, and longer trends (including those Parker Gallant and I wrote about, in the Financial Post, last July).

The price of electricity on wholesale markets is very low.  While negative prices catch attention, there is only a very slight difference, in the cost to Ontario ratepayers, of -$1 and +$1.  The last time I worked out an estimate, the average price paid to Ontario's suppliers, due to contracts and regulated rates, was $68.23/MWh. With the HOEP averaging around $13.50 over the past 35 days, that means a big revenue shortfall.

Penthouse Fora: Personal thoughts on the IESO's Year

Ontario's Independent Electricity System Operator (IESO) released it's 2011 Annual Report just prior to the Easter weekend.    It didn't get much attention, because it didn't say anything.

That should be noteworthy.

Some quick estimates for an alternate 2011 Annual report:
The market the IESO is tasked with operating shrank from 157TWh to 154TWh, with the Ontario demand portion shrinking from 142.2 to 141.5.  The price drop was more severe, with the Hourly Ontario Energy Price (HOEP) dropping to $31.46/MWh from $37.85 in 2010.  Exports shrank less than imports did.  Because Ontario has a Global Adjustment mechanism that recovers the difference between the prices guaranteed to producer and the market rate, these numbers indicate Ontario's ratepayers had over $450 million added to their costs to recover the difference between the average cost power was purchased from generators at ($68 including other systems cost), and what it was dumped at in adjacent markets ($31.46).   Looking at it another way, in 2011 prices for Ontario customers rose by 10% while prices for export customers dropped by about 20%.

GA'd Awful: Duncan Must Go

"Aren't you impressed to see so many people gather to hear you speak?" ... "No – because ten times as many would come to see me hanged."

Dwight Duncan at The empire Club, April 15, 2004

"Nobody wants to create reliability problems, last of all us. I know who hangs on the lamp pole first."

Wall Street Journal Article/Interview with John Rowe, CEO of Exelon, October 22, 2011

If affordability problems are seen as reliability problems, Ontarians should be annoyed by the manner in which NDP Leader Andrea Horwath gives the Liberal government rope.