Tuesday, November 22, 2016

something about electricity rates: the Premier's mistake

Premier Kathleen Wynne is calling high electricity prices her “mistake,” begins a report on her speech at the Ontario Liberal Party's annual general meeting. The statement would appear sincere if accompanied by an explanation of exactly what she thought her mistake was. As a political tactic, as I think it is, it's a good move in positioning the Liberal party for the election coming in 2018.
...a contrite Wynne told 850 Liberal delegates at the party’s annual general meeting here that her “government made a mistake” by allowing rates to soar.
“It was my mistake and I’m going to do my best to fix it,” she said...
Tactically, I think the move is based on two things:
  • the political rule that the electorate's anger is not sustainable
  • most expensive electricity contracts have now entered service and, combined with OPG's poor rate application, upward pressure on rates was, and is, planned to be less severe over the next couple of years.
These realities may allow the Premier to now position herself as responsive to people concerns. Adrian Morrow's report shows how she'd like to end up positioned for the 2018 campaign:
“I will do my very best to listen, to respond, to lead, and to serve you and the people of Ontario better,” she said. “I will be right there with you: As premier, as leader, I’ll be there with you as Kathleen, a proud mother and grandmother.”
These are the factors that put some wind in the sails of Wynne's Liberal ship. An article by Robert Benzie notes some of the content presented to the assembled Liberals by master strategist and Liberal campaign chief David Herle:
Even though [opposition leader] Brown publicly broke with social conservatives in August — saying he supports abortion rights, same-sex marriage, and the modernized health lesson plan — Herle’s findings suggest the Liberals plan to paint him as one.
Simply put, the Ontario Liberal Party is positioning the party for a culture war - with a caring grandmother running against a jerk.

It's a promising but risky tactic.

As parents, when children can gain an advantage through contrition and then acts accordingly I think it is necessary to ensure they are apologizing not because they angered their parent, but as an acknowledgement they know what they did was wrong.

What does the Premier think her mistake was?

I can see how this might be perceived as a moment for me and others that noted years ago how rates would escalate, but frankly, I don't know anybody who understands what decisions caused today's high rates thinks Wynne is apologizing for those decisions.
Nor should she be, because those decisions predate her becoming Premier.

We do know who the people making, and implementing, decisions were - but I won't dwell on these negatives. In a post I wrote early this year, Beyond expectedly High Cost, I explained Bruce Sharp's work in 2010 foresaw the costs of the policies of 2008 and 2009 - the Green Energy Act and FIT contracts. In addition to Sharps work, that blog post includes the names Tom Adams and Parker Gallant, to which I'll add myself as people years ago explaining rates would - as they subsequently did - escalate. [1]

Despite all my analysis, I can't tell you Premier Wynne's government initiated the actions mostly driving costs higher since February 2013. She did:
  • eliminate the Ontario Clean Energy Benefit, but that just shifted costs to taxpayers from ratepayers (and she's committed to shifting them back by implementing the NDP's policy on not collecting sales tax on electricity as of 2017),
  • end the Debt Retirement Charge (only on residential bills despite the justification for the charge having disappeared), 
  • expanded the Industrial Conservation Initiative (ICI), which shifts costs to households but provides an industrial pricing strategy that may be necessary to retain employers in the province (employers from which she still allows the Debt Retirement Charge to be seized)
  • allowed Large Renewable Procurement (LRP) 1 to occur, contracting 455 megawatts of capacity likely to add $100 million a year to electricity sector costs (but postponing indefinitely LRP 2)
Only the last of these (the LRP 1 contracts) is obviously a cost ratepayers will be burdened with that was initiated under Wynne's Premiership - and she should act to end those contracts now, before developers spend more money on advancing them.

I've reviewed contract data posted by the IESO and, filtering for contracts signed after Wynne became Premier, find the vast bulk of those contracts are re-contracting of existing resources. The biggest number is Bruce Nuclear; at 6,300 megawatts (MW) it's 77% of the total contracted since February 2013, with re-contracted non-utility generators and the Thunder Bay Generating Station (now operating on advanced biomass) adding another 7%; and finalizing sites under the Samsung agreement added another 300 MW, or 4%. I don't find any of these re-contracting initiatives particularly wasteful, and what's left after her LRP 1 mistake is about 400 WM of solar feed-in tariffs and a smattering of combined-heat-and-power (CHP) and hydro contracts.

The potential savings in the recent contracting is relatively minor.

If the Premier is apologizing for decisions made before she became Premier, there's a short list of obviously stupid contracts she should be terminating - not delaying or postponing. These include:
  • 300 megawatts of offshore wind contracted over 6 years ago at nearly 20 cents/kWh. A subsequent moratorium has prevented the construction, but not officially terminated a contract that is insanely expensive (~$3.5 billion over 20 years) and completely unnecessary.
  • the 300 megawatt Henvey Inlet Wind project contracted over 5 years ago with an expectation of being built within 3 years. Now with a target date of 2018, it still hasn't entered construction and is clearly a social wealth distribution scheme unrelated to providing value in electricity supply (another ~$2 billion over 20 years)
  • The contracted Amherst Island wind project may be the worst sited industrial wind project in the developed world, and the nearby White Pines project should be dead by now to - for very similar reasons. These two projects are 135 MW of a remaining 263 MW of industrial wind contracted before the end of 2011's summer. The projects are still not in service because they are contentious, and they are contentious mostly because they are poorly sited as well as expensive.
Terminating these expensive laggards inherited from a prior Premier would communicate remorse better than the Premier's words.

Perhaps the Premier is recognizing it was a mistake to take over 3 years to treat electricity costs concerns as legitimate. Having done so, it would be a bigger mistake not to figure out who made the mistakes - and it's really anybody involved in policy from 2008 to 2011. Many of those people were in the audience as the Premier addressed her party's convention. For the Minister, and Deputy Premier, that brought in exceptional rate inflation with the Green Energy Act and its related Feed-In tariffs, the renewable energy community isn't about the communities that live with industrial wind turbines:
For George Smitherman, the former Ontario cabinet minister who introduced the GEA, the idea was always to kick-start an industry that would last over the long term...
...the policies weren’t just aimed at creating manufacturing jobs, Mr. Smitherman insists. The province also wanted to build expertise in finance, engineering and project development. “We were trying to nurture the white-collar side of green energy as well. There is [now] a big cluster of renewable related jobs in the downtown core of Toronto.”
Jobs within the government, lobbying to it and generating silly faux-reports to support it.

This clique is largely the one the Premier stood before to display remorse about high electricity rates.

I believe she is sorry we, the electorate, are mad.

That's disgusting - and disgust, unlike anger, is persistent.


[1]. As one example, see the July 2011 Ontario Power Trip column written by Parker Gallant and I.

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