Ontario Electricity Rate Increases 38% since December

Ontario''s Independent Electricity System Operator (IESO) posted the estimate for the May 2013 Global Adjustment (GA), and it is $66.36/MWh. Coupled with my estimate of the Hourly Ontario Energy Price (HOEP) of $25.22, the monthly wholesale commodity rate in Ontario in May is estimated to be $91.58.

In December 2012, the HOEP was similar, at $25.51, but the GA was $40.64 - for a total of $66.15.

If you are a "class B" customer exposed to the market rate, the increase in your rate is therefore 38% in the past 5 months. Regulated price plans (including residential ones) will reflect the same costs, but not in the same months.

The last time prices approached this height, a government''s panicked rate freeze failed to prevent it''s electoral defeat. May''s commodity charge is the highest since Ontario''s market opened, and in reality it is much higher. While the HOEP exceeded $80/MWh early in 2003, it wasn''t meaningful for customers as there was a price freeze at $43/MWh introduced (with retroactive payments) after prices peaked in September 2002 at $83.14.

The IESO will eventually report May''s Ontario demand average just over 14,000MW per hour in May 2013, which is lower than they''ve reported for any month except May 2009. Don''t panic that the low total indicates we''ve returned to the depths of the recession; the IESO''s reporting is increasingly less indicative of actual supply, and actual demand, in the province.


Supply from generators less than 10MW is not captured in IESO reporting as supply - it is referenced as "embedded" generation and it impacts IESO reporting as negative demand. While the IESO reports on many wind generators, there''s probably another 20-25% of the reported capacity operating as embedded generators, in addition to all solar.

The lack of transparency in reporting the production, and costs, of solar is increasingly problematic in estimating cost, and also demand, in Ontario. As I noted in a post during May, it''s apparent sunny hours show much less demand, in IESO reporting, than comparable days in the past. What''s not apparent is that the IESO, even as it discusses integrating renewable generation and altering HOEP and Global Adjustment policies, has collected the necessary data, without which it cannot intelligently consider the implications of the data.

It is, I think, likely that solar peaks in May, concurrent with hydro, concurrent with a relatively productive period for wind generators, and concurrent with the weakest demand period of the year. If solar capacity is at 800MW (plausible), and if May 2013 was very sunny and those generators operated at a 20% capacity factor for the month, "Ontario Demand" was actually about 120GWh higher - coupled with with embedded wind 226GWh higher ...meaning May 2013 had a fairly typical demand for a May, but the costs of procuring generation was ~$75 million higher than anticipated.

That would show in the global adjustment.

Ontario has essentially instituted capacity payments for it''s coal and natural gas plants that recover all non-fuel costs for the operators - a starting point, before the generation of any electricity, I have estimated at approximately $145 million a month. For generation, the cost benefit is that the incremental cost of generation - largely the fuel cost - is the only cost of generation. For May, this design is particularly expensive because May didn't see very high output from fossil fueled generators: in fact, it probably saw the lowest combined generation from the combined sources of natural gas, coal, and oil than the market has experienced.

Great stuff for emissions - but not a lot of generation to distribute the $145 million capacity cost across... and with natural gas prices continuing to be at low levels, it's simply true that each MWh produced by Ontarians with large acreage and solar panels, at a cost to consumers exceeding $500/MWh, replaces a MWh that would have cost maybe $30.

Of course much of our generation is not replacing gas generation or meeting Ontario's demand.

While demand is recording near the record low of 2009, net exports for May 2013 will also be near record levels; approximately 1893MW was exported (net) each hour in May, a figure higher than all months but December 2010. In December 2010 the cost of procuring supply was lower, and the price received for exports was much higher.

Exports don't recover any portion of the global adjustment charge, so every hour an average of 1893 MW was sold to export customers for $125, 619 less than Ontarians would paying for 1893 MW.

Which is $93.4 million over the month of May.

There are other costs not captured in the regular reporting. The IESO released an outlook on May 24th that showed approximately 170,000MWh of nuclear curtailment in May.  I assume this figure ended the month higher, pushing another 10-15 million dollars into the global adjustment charges needing to be recovered.

Notes:

Hydro output has been up, compared to the same week in 2012, each of the past 4 weeks - or in all weeks since I said it had been down every one of the first 17 weeks of 2013

Yes, I saw the cancellation of the FIT program - I''ll have some comments later.  What I worked on so far impacted this post, as there is an argument that the government is burying the big projects for political reasons/optics, while ignoring the costs of smaller capacity projects numbering in the thousands.

On the data site (works with a fast connection and Chrome browser - not sure about other situations)
I updated the weekly shadow report for the IESO week ended May 29th
I updated supply cost estimate tables to include May 2013
I update the preliminary monthly shadow report, which is now for May 2013