My writing output seems to be inversely related to the number of calls for comments about different aspects of Ontario’s electricity sector. That’s probably not entirely accidental as I"m not motivated to work on demand for free, and the work seems much more complex than it did - hopefully as I see more connections between issues. Regardless, some thoughts have been percolating for many months and it’s time I release them into the wild. In this post I want to connect the Ontario government’s consultation on industrial electricity prices and the system operator's market renewal initiative, but if I only provide a backgrounder on the current market debacle, and how it came about, I think the reader will be rewarded for their attention.
I did write a post a year ago with 6 suggestions for the then-new Premier’s government. Reviewing the list now I see some action on 4 of the points. One exception remains “Restrict eligibility to the Industrial Conservation Initiative (ICI).” In terms of what can be done within today’s system my comments from last year remain my short-term position on industrial electricity prices:
Purging the ICI rolls of all entities with no actual exposure to trade will offer an immediate reduction in residential, and small business, electricity costs.
This would have an immediate benefit for smaller industrial consumers that are not eligible to participate in the ICI. The reality for existing industrial consumers within the ICI is that they have been largely protected from rate increases with a program promoting inefficient spending that only benefits ICI participants by adding to the burden of remaining Ontario consumers. Lowering rates further should be an outcome from lowering the electricity sector’s costs - not transferring costs to lesser consumer classes, most of which subsequently transferred costs onto future ratepayers and taxpayers.
The Market Renewal Initiative was the last government’s hope for future cost reductions, and there’s no indication today’s Ford government has changed tack. There’s a lot of fine analysis being done on different aspects of a new market design, and very informative reporting being produced. It’s just not clear, to put it very kindly, that there is a real commitment to a market system.
In the beginning (of the current structure) there was the Independent Electricity Market Operator (IMO), and its market, and maybe it was good for an hour or two but things went sideways pretty quickly.