A benefit of Electricity trade - and what's reducing it

I was wrong.

I've been broadcasting a couple of messages about Ontario's electricity exports: that only the IESO can accurately report on the revenues, and that exports at negative prices are not allowed under market rules. It now seems neither of those is correct. Not only can export revenues be calculated, the analysis of export volumes, and revenues over time reveals benefits of markets, and trade. It's not at all clear Ontario's electricity powers understand the benefits.

I was recently alerted to a claim that the export revenues could be calculated from Intertie Schedule and Realtime Market Price reports. If that sounds confusing it'll gets worse before I'll try to ease off the jargon. As the Intertie Flows reporting is hourly, and the Realtime Market Price reports in 5 minute intervals some data manipulation is required to match the data sets. The IESO has posted annual files (.csv) with values from each of these reports for 2010 through 2016. To dispatch with the technical talk in one confusing swoop, I'll simply note that averaging the "ENGY" rate by delivery hour for each control area in the Realtime Market Price reports, and multiplying that by the "OFFT" value in Intertie Flows report for the same control area does result in the annual figures the IESO has released either to the Office of the Auditor General or in response to Freedom of Information Requests.
I can now extend my work from a previous post to include 2016 data.

Having worked the data down to the hourly time-frame by control area I can additionally summarize revenues, and costs, by jurisdiction. The results have some important messages about trade - as each "control area" has a separate market control price.

I won't discuss imports much in this post because there's nothing new to discuss. Most imports into Ontario are now from Quebec (over 82% since 2012 began), and those are valued in the new analysis almost exactly as the typical Hourly Ontario Energy Price (HOEP) valued them.

Messages about trade from this analysis may be hidden by the realities of communicating summaries of very large data sets. I posted some graphics on hydro(electric) generation by river system, and I received an e-mail from somebody who likely wanted to pursue a story, asking if the data was public knowledge. It was every bit as much public knowledge as what I am writing on today - summarized from hourly data captured from IESO hourly reporting since 2010. However, as most can't process the hourly information, and an official source had not published a summary, it wasn't the basis of a story. I think publication of a summary by an official source is what is required to be considered "public available".

The IESO once summarized volumes and revenues for exports and imports on a web page at www.ieso.ca/imoweb/siteshared/imports_exports.asp (long since a dead link). These monthly totals were meaningfully publicly available as they were both available and summarized by a trusted figure. Remnants of the IESO summaries remains in old government press releases, such as this from May 2012:

"Ontario's electricity market generated over $20 million in April by exporting electricity to other states and provinces, bringing total net export revenues to over $75 million this year.

That figure was, in hindsight, actually net exports ($28.6 million revenue from exporting less $8.1 million importing cost). In 2012 I noted:

[my] figures on export sales are estimates based only on the [Hourly Ontario Energy Price] ... in actuality export customers pay different rates. Because Ontario's market pricing is lower, sometimes much lower, than adjacent jurisdictions, it appears from both the ministry 'news' releases, and National Energy Board reporting, we generally export power about 10% above the HOEP  rates.

10% was the assumption I had when the IESO ceased summary reporting, but with the base data now summarized, I now know that assumption became wrong as they moved up and up, to nearly 70% above HOEP valuations by 2016.

Alberta. Bound.

The government of Alberta has a plan to "reduce carbon emissions."
Their plan restricts the ability of the province to efficiently minimize greenhouse gas emissions.

The three aspects of the Alberta's "Climate Leadership Plan" most relevant to the electricity sector are:

• implementing a new carbon price on greenhouse gas emissions
• ending pollution from coal-generated electricity by 2030
• developing more renewable energy

I've seen my province - Ontario - cited as an impediment to growing renewable energy in Alberta. This is understandable from a cost perspective, but if reducing emissions were the primary goal Ontario's example would be encouraging, as its emissions from generating electricity are a fraction of Alberta's.

I realize most Albertans are not awaiting opinions from Ontario, but I'll trust my analysis will be of interest to some in Alberta, and some elsewhere. Alberta is simply the sample case I'll use to argue specifically banning coal-fired electricity is unnecessary, and quotas for renewable sources to provide a fixed percentage of supply a little worse than that. This is not to argue for coal or little supply from renewables. Functionally, what I'll point to as better policy is likely to result in similar outcomes. I intend to demonstrate rules are being gamed to predetermine an unambitious outcome at the expense of achieving greater things.

A brief review of Albert's electricity system will be helpful prior to discussing the growth of renewables and elimination of coal. 

Figures are collected from AESO annual market statistic files (year 2013-2016) 

Available figures for Alberta's electricity generation include the percentage of electricity produced by generation technology. Unfortunately some categories change in 2010, but whether 2016 is compared to 2010 (the earliest year of the current categories) or 2004, coal has lost the greatest market share, and it has lost it to wind (probably the greatest change since 2004, natural gas (Combined Cycle gas turbines had the biggest 2010-2016 growth) and "Cogen" (for co-generation). Coal does continue to have 60% market share by this measure, so adding renewables until they have a 30% share seems doable - but it's more difficult depending on the definition of the market.

A gathering in Prince Edward County

Today in Picton people will assemble at a rally against what has become a 9 turbine industrial wind development in a ecologically sensitive area near Lake Ontario. I won't be attending as it's a 3-4 hour drive away, but I will contribute by arguing the existence of the contract for the location, at this time, is indicative of negligence at Ontario electricity system operator (IESO).

Details at the Prince Edward County Field Naturalists Facebook page

This rally coincides with a legal action launched by the Association to Protect Prince Edward County (APPEC). 

APPEC has commenced legal proceedings naming the Independent Electricity Operator (IESO) and WPD White Pines Wind Inc. (WPD) as respondents. APPEC alleges that the Feed-In-Tariff (FIT) contract between the IESO and WPD should have been terminated as soon as it became evident that WPD would be unable or incapable of fulfilling the FIT contract terms. These FIT contract terms have been made publicly available and are well known.
In 2010, a FIT contract for 60MW wind energy project to be operational within three (3) years was offered by the Ontario Power Authority (now the IESO) to WPD. The contract allowed for termination if the project was not able to deliver at least 75% of the contracted power.  -APPEC (on Facebook)

The inability to deliver 75% of contracted capacity is but one of the reasons WPD cannot now fulfill their end of the feed-in tariff contract.

Site C'ing: BC's electricity adventure

Site C is a hydroelectric project in British Columbia that may soon to be cancelled.

The commentary surrounding the Site C project has been driven by political posturing, and a recent change in government is therefore likely to end, at least temporarily suspend, the project. The situation is worth commenting on from afar because while it's B.C. today, in another time and other places some different - and many of the same - people will be discussing the merits of big, public, baseload power projects and small, private, sporadic power projects.

"BC Hydro’s Site C Clean Energy Project will be a third dam and hydroelectric generating station on the Peace River in northeast B.C. It will provide 1,100 megawatts (MW) of capacity, and produce about 5,100 gigawatt hours (GWh) of electricity each year..."   BC Hydro

I have 4 questions I wish to address in discussing the future of Site C:

1. Will there be a need for capacity?
2. Will there be a need for energy?
3. What are the costs and benefits of a Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs)?
4. What are the costs and benefits of publicly owned generation assets

While Site C would have a reservoir (9,300 hectares), the main energy store for the system would remain the Williston Reservoir (177,300 hectares) upstream on the same system. It's not surprising the site would generate 5,100 GWh annually as the implied 53% capacity factor[1] is essentially what the B.C. hydroelectric fleet achieves annually. [2]

Many of those claiming Site C won't be necessary comically follow that argument up with a list of alternative generation technologies. To evaluate the alternatives it is first necessary to determine the value Site C may provide.

B.C. currently has adequate supply - it's peak "load" occurred early in 2017, and the province was a net exporter of power during that peak (as it is during most peaks). BC Hydro's resource planning anticipates the ability to meet the peaks to become less certain, and disappear around 2023. The need for additional annual energy is predicted to come later. The difference between the ability to meet peaks and the ability to provide enough energy throughout the year is important.

Graphics from BC Hydro. Links to view source graphics: Capacity and Energy

Ontario Electricity Operator brags of ICI subsidy, continues spending on wind experiment

7 days after news broke of a lawsuit claiming the global adjustment charge is “an unconstitutional tax, not a valid regulatory charge,” Ontario's electricity system operator (IESO) issued a news release congratulating their generators and certain consumers:

Ontario’s peak demand days typically don’t happen at this time of the year. Yet with hot weather persisting, and in spite of summer’s end last week, the province experienced new annual peaks this week of 21,786 MW on Monday and 21,542 MW on Tuesday.
Generators did their part to help meet the peaks, as well as Ontario’s consumers participating in the Industrial Conservation Initiative (ICI) and other demand response initiatives.
According to preliminary analysis, consumers participating in the ICI are estimated to have reduced peak demand by over 1,500 MW this week. By reducing demand during peak periods, ICI participants can both reduce their electricity costs while helping to defer the need for investments in new electricity infrastructure that may otherwise be needed.

They didn't mention if the 21,783 MW remains 2017's annual peak it will be a record annual low (the 3rd one recorded in the past 4 years).

Global Adjustment mechanism again headed to court.

Jeff Zochodne reports that a,

August lawsuit filed by National Steel Car (NSC) believes the revenue the IESO collects for the global adjustment, from the company “and others,” should be declared “an unconstitutional tax, not a valid regulatory charge.”
The company gives numerous reasons, including that the global adjustment allegedly “redistributes wealth from the consumers of electricity in Ontario to, among others, the generators of renewable electricity.”

I don't like their chances, partially because I doubt the quality of Ontario's courts, but I will discuss reasons the lawsuit has a chance at succeeding to demonstrate the need for changes in Ontario's too pliable electricity pricing structures.:

• pricing includes the full cost of current supply despite the intent of the Green Energy Act to grow value outside of Ontario's electricity sector, 
• the courts have already ruled the global adjustment structure to be a subsidy of one group of consumers, at the expense of all others,
• only certain consumers were exempted, at the end of 2015, from the Debt Retirement charge, and,
• another group of consumers has now been rewarded with a "Fair Hydro Plan"

The global adjustment mechanism being challenged was introduced in 2005 to ensure the full costs of electricity supply were paid by consumers of electricity (Section 25.33 (1) of the Electricity Act 1998) - it was intended to be the difference between what suppliers were paid through contracts (or regulated prices) and what the market valued supply at. In half of the first 26 months of the global adjustment the line item was a credit on consumer bills, but it's been a charge in all but one month since 2008.

Ontario Goes to Pot

"You have to recognize the culture of the province has changed, the economic life of the province has changed, and opinion and attitudes have definitely changed."

Mississauga South's C. Sousa, announced what the government was not doing the other day.

“We are not encouraging the consumption of cannabis. That would be a mistake.”

The presumably serious statement came as the government announced a new neighbourhood drug dealer.

The press release - from the government's main legal Minister - makes it abundantly clear the provincial government is gearing up to sell cannabis to people it doesn't approve of due to the actions of the federal government.

In response to the federal government's plan to legalize cannabis by July 2018, Ontario is committing to a safe and sensible framework to govern the lawful use and retail of recreational cannabis as a carefully controlled substance within the province.

The mock press probably got this story right.

from the Beaverton

regarding Ontario Electricity Generation and Costs, 2007 - 2015

This week I was handed some data indicating, by supply type, electricity generation and costs in Ontario. The data was a hard copy response of the IESO to a freedom of information request. There's nothing in the data that will surprise readers of my work, but perhaps it's time for a refresher, as today I read one flip comment by a mainstream journalist, joking they'd like to see "Ontario families can no longer afford skyrocketing nuke costs," and an opinion piece on the public broadcaster's site which included:

...as data from the [International] Electricity System Operator clearly shows (sic), it’s nuclear and gas plants that are responsible for the lion’s share of increases. 

"Clearly."
It is time for a refresher.

Some background on the data I'll share. The 2015 Annual Report from the office of The Auditor General of Ontario included a chapter on "Electricity Power System Planning." The entire chapter contained a wealth of information and continues to be cited frequently, but for those chasing hard numbers one particular star of the work was a figure revealing the quantity, and cost, of generation from various sources, inclusive of not only the larger generators frequently reported by the IESO (the "I" is not for international, but it is the electricity system operator), but also the seldom reported distributed generation - which is where most solar exists.

The freedom-of-information requests handed to me included this request:

Breakdown of Generation Cost by Energy Sources for the years 2007, 2008, 2009, 2010, 2011, 2012, 2013 and 2015. The Breakdown for 2014, which was included in the Annual Report of the Auditor General of Ontario, is attached as reference.

The data table that follows responds fully with the request - I have only reformatted it:

Ontario may contract more imports from Quebec - badly

On the morning of Tuesday August 8th La Presse published an article reporting on a draft contract which would see Ontario pay Quebec approximately $500 million a year for the ability to import 8 terawatt-hours of electricity. By late morning the office of Ontario's energy minister denied an agreement was reached, and the ruling Liberal party's press office was slamming the opposition party for "spreading misinformation."
Perhaps nothing will come of the proposal, but it's worth noting what constituency it is designed to appease, how that appeasement impacted the draft agreement, and the concerns all Ontarians should have with the processes, and institutions, involved in the province's electricity sector.

A timeline surrounding the leaked draft document dated June 22, 2017:

• during May Ontario's Minister of Energy GlennThibeault and this Quebec counterpart, Pierre Arcand, discuss "the possibility of further enhancing electricity trade in order to cost-effectively improve our respective electricity systems," [source]
• La Presse's report, translated on Google Chrome, includes, "Thibeault sent a letter to his Quebec counterpart...on June 13 to explore the possibility of entering into a new long-term agreement to purchase electricity",
• June 20th Peter Gregg "takes on the role of IESO President and CEO",
• June 22nd Hydro-Quebec's Steve Demers writes a "Dear Peter" letter to the new head of Ontario's system operator introducing a written proposal valid until July 14,
• July 27 Ontario's Thibeault writes the June offer was "inconsistent with our discussions in May", notes following discussions between staffs of Premier's Couillard and Wynne HQ "would be instructed to work collaboratively with IESO on enhancing electricity trade..."

I think Thibeault's July 27th is very good. To communicate why, I will focus on a short technical quote from the leaked draft agreement which explains the shortcomings of Hydro-Quebec's proposal. 

First I'll note 8 TWh, the proposed annual import level, is only slightly higher than the total annual imports into Ontario from Quebec (much of which will be wheeled through to New York). There was some noise about whether the amounts were feasible with existing infrastructure: they are.

Premier Wynne's neglecting business

"Small business optimism in Ontario took a nosedive in June."

So begins the Ontario section of the Business Barometer from the Canadian Federation of Independent Business (CFIB). The members of the CFIB have legitimate reasons to be pessimistic. In this post I will demonstrate the indifference to the needs of employers in the current Ontario government's electricity policies, with a particular focus on the unfairness of the so-called Fair Hydro Plan.

I recently spoke with Jocelyn Bamford of the Coalition of Concerned Manufacturers. The group has been in the press due to electricity cost concerns, but other concerns are newly presented to these employers, by the provincial government. I perceive 3 primary concerns:

1. Electricity
2. Cap and Trade
3. Labour costs

I'll begin with electricity. 

As context for the following information on rates in Toronto, the U.S. Energy Information Administration (EIA). American data shows U.S. residential consumers pay 86% more for a unit of electricity than industrial consumers, and about 20% more then commercial consumers. The definitions of groups don't work well in comparing to Toronto, but note small consumers pay, on average, the most per unit, and largest the least. 

On July 1st rates dropped for Ontario consumers charged on Regulated Price Plans (RPP), due to legislation dubbed a "Fair Hydro Plan" (FHP). I pulled average consumption levels for residential and other customers of Toronto Hydro from the spreadsheet accompanying the Ontario Energy Board (OEB) 2015 Annual Yearbook of Electricity Distributors, calculated average monthly figures and fed those into the OEB's Bill Calculator for Toronto Hydro customers. For non-RPP consumers (Class A and B) I found a Toronto Hydro presentation considering monthly figures for one consumer (on slides 19 and 20). There are some issues the presentation data, but the 18 cents/kWh for Class B consumers is what I expected.

Not only do "Class B" industrial users not enjoy preferential electricity pricing, they probably pay more than the average Toronto household. This is exceptionally rare. I can find instances of American utilities charging industrial consumers more than residential ones, but nothing for a decade among utilities the size of Toronto Hydro with one notable exception: Niagara Mohawk Power Corp. [1] Ontarians might be interested in knowing the territory of that utility includes the American cousins of Niagara and St. Lawrence river power plants (in Canada, Beck and Saunders). Legal cases have established set uses for the power produced by the big public hydroelectric plants in the New York. Regardless, it's been 6 years since even that utility saw residential rates lower than industrial ones.

Solar: Ontario's Base-Value Power

What is the generation source least valued by Ontario's electricity market in 2017?

That is the question I asked on twitter the other day. I know it's not the most serious format, it's a small sample size, and my running the poll means there will be selection bias in the responses. I did invite others with different views of the energy world to share it - but they did not.

I got some feedback that the question was unclear. While there are multitudes of factors impacting/corrupting the metric, this question is precise. The IESO allegedly operates Ontario's electricity market, they do publish summaries for hourly generation by fuel (xml format) and they do publish an Hourly Ontario Energy Price (.csv format).

The least valued "fuel" - or generation source - this year as the 22nd of June, is the lowest valued by a big margin, lying 29% below the next least valued.

The lease valued source is the source least expected to be the least valued.

The least valued source is solar.

Which shouldn't come as a surprise. 

I'll briefly review the theory, put Ontario's experience in a broader context, and finally cherry pick one day to examine. Cynics may be surprised the day is June 12th, which is the highest demand day of 2017.

A citizen's map of Industrial Wind Turbines in Ontario

I have produced and put online an interactive map of Industrial Wind Turbines in Ontario. Having done so feel I should explain why, and how, and invite others to participate in improving data.

The map is embedded later in this post, as is a YouTube clip of me talking to its design and functionality.  I talked for longer than I expected, and I suspect I shall write on this longer than I expect too, because I think the issues of public data availability is important, and I have a particular fascination with data mining, manipulation, presentation and technology.

There was a paper published late in 2013 titled Mapping Ontario’s Wind Turbines: Challenges and Limitations. The abstract began:

Despite rapid and vast development of wind turbines across the Canadian province of Ontario, there is no map available indicating the location of each wind turbine. A map of this nature is crucial for health and environmental risk research and has many applications in other fields.

These seem like noble goals, so it might be surprising there's not a single official source of spatial data 3-4 years later.
The scope of the desired map was described in the paper:

A map showing individual wind turbines would be a valuable resource for researchers to examine health effects, as the distance that a resident lives from a wind turbine could act as a proxy indicator of a "dose" and could be used...

This is one example, but it could be measured against a lot of things - bat counts, bird carcasses, house and farm values, household income. The possibilities need not be known, only the data requirements, and most of these were described well years ago.

Ontario electricity: How we got to here

It is the best of times, it is the worst of times.

The best: over the first five months of 2017 the reporting from Ontario's system operator (the IESO) indicates less than 2 terawatt-hours (TWh) of electricity has been generated from natural gas fueled facilities, with the remainder of 59 TWh generated on the IESO system coming from near-zero greenhouse gas emission sources. Since April 2014 coal has not been burned to produce electricity in the province. Emissions intensity of generation over the first 5 months of 2017 is approximately 14 grams of CO2 equivalency per kilowatt-hour (g CO2 eq / kWh), which is particularly low for a jurisdiction receiving less than 30% of its generation from hydro-electric sources.

Some things will be viewed as good, or bad, depending on the perspective of the observer: the last two months demand of IESO supply has been lower than in any month since 1994. If "conservation" is good, it would seem Ontario has it good. Supply is plentiful. So plentiful the IESO reported 19 per cent of of "wind energy produced in the province" was dispatched down (curtailed) in 2016, and Ontario Power Generation (OPG) reported 16% more hydroelectric generation could have occurred if not for surplus supply. The numbers on the surplus in 2016 are noteworthy: 7.6 TWh curtailed equates with 5.5% of the 137 TWh "withdrawn from the high-voltage transmission system by Ontario loads", but a further 21.8 TWh was exported meaning total supply (including imports) was 21.5% more than those loads required.

Some things are now viewed as bad, that were previously viewed by some as good. Regulated Price Plans charging residential, farms and other small business consumers what the government had longed planned to have them paying are suddenly being cut steeply through a debt scheme to be paid off whenever down the line. In order to keep cost hikes in line with previous projections the government already had to abandon first the collection of a Debt Retirement Charge and then the provincial portion of the Harmonized Sales Tax - some feel the lower government revenues a negative.

I've written often on the causes of higher rates in Ontario. I am inspired to do so again by the uncovering of documentation from a previously hidden Integrated Power System Plan in 2011. Shawn-Patrick Stensil, of Greenpeace, acquired the documents through a long Freedom-of-Information (FOI) process.

This post examines 3 long-term plans' annual forecasts of Ontario's electricity supply mix, with a focus on the capacity mixes forecast for 2016 compared to the current actual supply composition.

The current situation is not accidental.

This is how we got to here

thuggish Premiers and faked electricity rates

“You all read the newspaper, you listen to the radio and you watch television — you know the problems that families are having around the province paying for their electricity costs,” the premier told reporters...  - thestar.com

The current Premier of Ontario is Kathleen Wynne has a Fair Hydro Plan (FHP). The freshly released legislation enabling the implementation of the FHP will soon be rushed through into law - assuming there's not four decent Liberal members of the Ontario legislature to vote against it.

In the few days since the legislation the Financial Accountability Office of Ontario produced An Assessment of the Fiscal Impact of the Province’s Fair Hydro Plan:

The Financial Accountability Office (FAO) estimates that the proposed Fair Hydro Plan (FHP), consisting of the provincial HST rebate, electricity cost refinancing, and changes to electricity relief programs, will cost the Province $45 billion over 29 years while providing overall savings to eligible electricity ratepayers of $24 billion. This results in a net cost to Ontarians of $21 billion.

That doesn't seem "Fair". While polling suggests the vote buying scheme is working, there is growing evidence that sleazy disregard for responsibility is corrupting the public sector entities involved in the electricity system.t.

Rates were escalated to the point the current Premier felt action had to be taken quite deliberately, by the Premier's office meddling in the sector. Long-Term Energy Plans (LTEPs) are government policy documents that were originally intended to provide parameters to professional electricity sector planners. The following graph shows the forecast nominal rates from 2010 and 2013 LTEPs, as well as the pricing shown in a recently leaked cabinet document [1]

The graphic shows the average monthly costs exactly as reported without attempting adjustments for differences introduced to keep the rate in 2016 below what was planned, which include calculating at 750 kilowatt-hours (kWh) per month instead of 800, and ending the Debt Retirement Charge.  These small differences don't change the message families around the province should take from looking at government intervention in the sector since 2008: the people offering you a hand up are the people who knocked you down - and the hand they are offering is not their own.

This is thuggish

India's government approves construction of 10 nuclear reactors

India's government has approved construction of 10 nuclear reactors that will have a combined capacity of 7 GWe - essentially doubling the country's current nuclear capacity.

Cabinet approves construction of 10 units of India’s indigenous Pressurized Heavy Water Reactors (PHWR):

Boost to transform domestic nuclear industry 

In a significant decision to fast-track India’s domestic nuclear power programme, and give a push to country’s nuclear industry, the Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for construction of 10 units of India’s indigenous Pressurized Heavy Water Reactors (PHWR). The total installed capacity of the Plants will be 7000 MW. The 10 PHWR project will result in a significant augmentation of nuclear power generation capacity.

India has current installed nuclear power capacity of 6780 MW from 22 operational plants. Another 6700 MWs of nuclear power is expected to come onstream by 2021-22 through projects presently under construction. 

As the government marks three years of its nation and people centric governnace, in a first of its kind project for India’s nuclear power sector, the ten new units will come up in fleet mode as a fully homegrown initiative. It would be one of the flagship “Make in India” projects in this sector.

Fairly perverted: Ontario's "Fair Hydro Plan"

On March 2nd the Premier of Ontario introduced the "extend and pretend" plan to lower electricity rates for voters prior to the next election; on May 11th the government introduced its "Fair Hydro Act" bill shortly after the opposition Progressive Conservative's released an allegedly leaked cabinet document. The general content revealed contains some interesting details confirming what was suspected: the Premier's plan is cynical and irresponsible.

A quick refresher on events to date:

• people are angered by electricity rates
• there is an election in 2018
• the Premier is unpopular
• the Premier promised a 25% cut in rates.

Background:
On the original announcement in March: Extend and pretend: Ontario government acts to lower electricity bills 

This post will use some of the new material to emphasize why rates are high, what extending the payment period implies, and how the government intends on keeping the costs of the program off of the Province's balance sheet.

The Premier's "fair" plan isn't entirely about the cost of generation, although I'll concentrate on that. It includes moving some social costs off of ratepayers' bills and onto government expenditures, and abandons the provincial taxation share of the HST.  My reading of the new bill is that it mandates the reduction of Regulated Price Plan (RPP) rates be 25%. [1]

Now that we know the commodity portion of the bill is being reduced 25%, we can be more definitive about what is being subsidized, by whom, and the fairness of the policy.

Ontario government acting like small manufacturers' bad boyfriend

We are tripling the size of the cut we're making to people's hydro bills from 8% to an average of 25%. - Ontario Premier Kathleen Wynne

On March 2nd the Premier of Ontario announced "Fair Hydro Plan" actions "cutting electricity bills by 25 per cent." The announced actions cut no actual costs. To the contrary, interest expenses are expected to climb to $1.4 billion annually, perhaps totaling $25 billion in the fullness of time. Perhaps $40 billion.

My two previous posts have looked at rate components from a residential bill perspective, and an overall system supply cost perspective. I hope I have communicated that rates have risen substantially due to one small set of recently contracted supply, while nuclear and hydro provided the bulk of supply but little of the cost increases - and that not all consumer groups shared the burden of the rate increases. In this post I'll review the politics of recent electricity pricing policy decisions.

"We feel that a lot of manufacturers are the middle child that are completely left out...They saw almost nothing in the recent announcements." 

Jocelyn Bamford - Coalition of Concerned Manufacturers

It's been over 6 weeks since the government announced it's so-called "Fair Hydro Plan", and while some details will remain sketchy until enabling legislation/regulation is introduced, the overall intent is clear. Ontario governments reacting to increases in electricity prices with rash programs to calm the populace are nothing new, but the current government's targeting of rate reductions is.

Graphic originally from Ontario’s perceived electricity cost inflation

Significant previous actions include the rate freeze introduced in the early 1990's by the NDP government headed by Bob Rae, and a rate freeze introduced a decade later by the Progressive Conservative (PC) government headed by Ernie Eves. An article from November 2002 puts into perspective the long duration of the rate freeze:

ON Electricity pricing 2: the ugly other

The recent release of annual 2016 financial results for Ontario Power Generation (OPG) completed data requirements for updating one of my favourite, and I suspect most impactful, spreadsheets.

I was particularly curious to find out which generator was the lowest priced of them all in 2016.

By my measurements, it is Bruce Power.

While I was anxious to see the annual figures in this old format, what impacted me the most from the graphic is that 10 years ago there was some consistency in pricing. Since that time there's been some movement in public OPG's pricing of its traditional hydro-electric and nuclear assets, even less change at nuclear Bruce Power, but enormous changes in the average cost of "other Ontario" generation.

Explaining the changes required some explanation of the data, my methodology, and the changes in the composition of "other" generators. Upon creating the explanations, I realized I could improve my original spreadsheet. If you see some variations to my previous posts, it's because this is the improved version.

ON electricity pricing 1: retail math and green tales

It's not uncommon to hear a claim made that green energy can't be responsible for the steep increase in Ontario residential electricity rates because it's only around 10% of the total bill. This post could demonstrate calculations using 10%, but it is nearer reality to start with 15% in demonstrating why the argument deceives.

I disputed some claims by Environmental Defence a month ago, but I've used their figures in calculating 15% of the total bill. I did this by simply adding "conservation" in the calculations - while the report I criticized underestimated the cost of solar and (less so) wind, it overestimated the cost of conservation. Together these 3 would have been about 0% of bills a decade ago (2006), and in 2016 they were about 30% of the global adjustment, 28% of all Ontario supply costs (by the ED reports numbers), and since ED has that supply cost as 54% of a residential bill, they claim about 15% of the bill. 

Let's ease into some primitive math using figures we already know. How much does 54% of your bill need to increase for the total to move up 15%?

0.15 divided by 0.54 = .28.

There's the 28% increase in supply cost I noted in ED's figures. There's an assumption, probably incorrect, that supply was always 54% of the bill, but I'll keep things as simple as possible: a 15% increase in the total bill, all other things being equal, required a 28% increase in costs.

As wind, solar and conservation added negligible cost a decade ago, it's worthwhile asking how much spending in these areas increased overall electricity generation cost (ignoring the rest of the bill). It's not 28%:

1 divided by 0.72 (which is 1-.28) = 1.38888....

Costs are increased by 39% when adding new spending that then equals 28% of the new total.

Not another Long-Term Energy Plan

The Minister of Energy will produce a Long-Term Energy Plan (LTEP) in the not too distant future. I've offered commentary during the planning period of two earlier LTEPs, in 2011 and 2014, but my advice this time didn't require complying with any official input period because it would be officially rejected anyway.

My advice on preparing 2017's Long-Term Energy Plan is simply this: don't.

I've been asked for thoughts on the new LTEP a couple of times, so I'll present some here primarily for the frequent readers of my work, including some authentic public servants, and hopefully also for a Minister of Energy - although probably not today's.

The primary reason for individuals to avoid the LTEP process is it's been a gimmick - a tool to present Ontario Liberal Party (OLP) policy to the electorate as if it was professionally and independently developed. The connection of professionally developed policy and elections began in 2007. The OLP had come to power in 2003 aided by displeasure over the handling of the electricity file by the previous Progressive Conservative (PC) government. It worked quickly in redesigning the sector to include a professional planning body, the Ontario Power Authority (OPA), which was tasked with producing an Integrated Power System Plan (IPSP):

1. The initial IPSP was submitted to the Ontario Energy Board for consideration in August 2007, just in time for the OLP to campaign on the document for the October 2007 election,
2. the first LTEP was put out early in 2011 to be the basis for an IPSP, and the OPA did have a draft IPSP on the minister's desk prior to the election in October 2011, although the OLP never did let that draft into public view,
3. the next LTEP came out late in 2013, and served as the basis for OLP electioneering on energy in the election that followed in June 2014.

Participating in the development of an LTEP is participation in developing an OLP election platform.

The occupant of the office of the Minister of Energy is currently Glen Thibeault, signalling this LTEP will be as politicized as ever. Last May a report indicated then Minister of Energy Bob Chiarelli, "at loggerheads" with "Environment Minister Glen Murray ...over the possible effect [of carbon costs due to the Climate Action Plan] on electricity prices." At the time Glenn Thibeault was Murray's Parliamentary Assistant, so the introduction of Thibeault as Minister of Energy, in June 2016, was confirmation Chiarelli's concern for electricity pricing had lost the battle. During his first 6 weeks as Minister of Energy Thibeault directed the construction of a $1.4 billion hydro line to service 10,000 distant consumers and refused to recognize electricity pricing as a crisis.

Eight months later, Thibeault sat with the Premier at a press conference due to a crisis. It's unclear if the crisis was electricity pricing or their party's polling numbers, but the actions taken to resolve the crisis don't address the fundamental factors that drove prices higher - so it's probably the polling.

Ontario's next Long-Term Energy Plan is to be produced by a rookie minister three-quarters of the way through his first year in the office, during which he's moved from not seeing a problem with costs to burdening a future generation in order to offer 25% off electricity pricing to 2018's voters.

enough of experts: The End of the IESO

“I think people in this country have had enough of experts...
enough of experts from organisations with acronyms saying that they know what is best and getting it consistently wrong.”  -Michael Gove, June 3, 2016

Gove's "enough of experts" was one of 2016's most mocked phrases. Those considering themselves on the side of angels/experts ignored the nuance, but perhaps the public did not as Gove's side won the referendum to separate the United Kingdom from the European Union, and later in the year the ultimate establishment candidate failed to be elected President of the United States despite the obvious flaws of her opponent. When people stop to examine if they've had enough of experts from organizations with acronyms, like IESO, many discover they really have.

Perhaps the people have a point, and modern "so-called experts" are simply those who benefited from the current situation. As "the victors write the history", the profiteers win the title of "expert".

It has been an eventful few months for Ontario's electricity system mandarins.

On September 1st the IESO delivered an Ontario Planning Outlook (OPO) to a rookie Minister (of Energy) - a report they were directed to produce by the former, veteran, Minister of Energy. Surging electricity rates were considered the main issue in a by-election held the same day, in which the government lost a seat that had been a traditional stronghold.
Before September was over the government suspended its Large Renewable Energy procurement, justifying the decision with, "The IESO has has advised that Ontario will benefit from a robust supply of electricity over the coming decade to meet projected demand." 
Before November was over the novice Minister of Energy was sketching out themes for a long-term energy plan built upon market concepts the IESO frequently enunciates.

By the end of November the Premier had stood before her Liberal Party and referred to high electricity prices as "her mistake."

It's important to review what created the current situation in Ontario - as I've been doing on this blog - but it's also pertinent to ask "who" did this. An old saying implores commentary to "play the ball and not the player," but eventually everything is about people.

The failure of the global adjustment: a renewables story

I recently was asked about the cost of buying out one group of Ontario solar contracts. The microFIT (feed-in tariff) contract exposure I estimated at $3.9 billion. This is the eventual cost of all your neighbours' panels, but not the larger arrays, which I estimate will cost another $33.9 billion. Call it a $38 billion liability which matches the most famous liability in Ontario's electricity sector history: the $38 billion attributed to Ontario Hydro at dissolution in 1998 - liabilities attained in building almost all of the province's generation, its transmission infrastructure, and much of its distribution infrastructure.

The solar contracts that carry the $38 billion total will produce about 4.3 terawatt-hours (TWh) of electricity a year, which is roughly 3 percent of Ontario's demand.

This solar story is about the failure of the global adjustment mechanism.