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.

Wynne deserves no credit for dumbly selling Hydro One

Most of Ontario realizes they are losing a valued asset in the government's sale of a majority stake of the publicly owned Hydro One. The topic is so complicated most just don't realize exactly how they are losing, making it equally difficult to determine who is winning

Ontario's Premier outsourced evaluating the optimal use of public assets to an unelected council led by former retail banker and Bay Street titan Ed Clark. Clark's council reported, in April:

...the integrated Hydro One transmission and distribution business would likely command a fully distributed equity valuation of between $13.5 billion and $15 billion in a public offering, excluding Hydro One Brampton. We believe this valuation is a conservative range in the context of today’s market.

In the spring Clark envisioned $9 billion of cash from a share sale (60% of $15 billion), "with $5 billion going to pay the utility's debt and $4 billion being channelled into infrastructure projects."

The revised prospectus came out last week anticipating a share offer at $19 and $21- making the value of Hydro One's 595 million common shares $11.3 -$12.5 billion - but this valuation comes only after the government gives $2.6 billion to Hydro One, and Hydro One gives the government $800 million. [1] Adjusted for cash exchanges prior to the closing of the deal:

• the valuation of Hydro One is more realistically $9.5-$10.7 billion
• the valuation of the 60% of the company to be sold is therefore $5.7 to $6.4 billion

The revenue from the sale of Hydro One is anticipated to be positive for the provincial balance sheet, but not significantly. The government's 2014-15 Financial Statement carried Hydro One as an $8.072 billion asset, so selling off 60% requires writing down the asset $4.84 billion dollars. On the balance sheet the share sale is anticipated to have a benefit of $800 million to $1.6 billion.

“We are going to be able to track the projects that we are building. People are going to be able to look at how much money is coming in and where that money is being spent.”   Premier Kathleen Wynne

The Wynne government remains committed to spending $4 billion of the ~$6 billion share issue on transit, while using $5 billion (of the remaining $2 billion) to pay down debt. All from a transaction having a $1 billion impact on the government's $285 billion net debt - only enough for 34 days of payments on the province's existing debt.

There's a con here.

Hydro One 3rd Quarter Report Hints at High Costs Of Politicized Electricity System

Hydro One's Press Release on 3^rd Quarter results includes a number of sentences that leave me scratching my head and wondering how much spending is necessary to keep the lights on, and how much should be attributed to the politically motivated connection of unreliable, heavily subsidized, generation.

Curiosity  seems to be in short supply these days, as the country's most read papers continue to print that bills can't have been going up due to renewables as most contracted capacity is not yet online.  They missed years of escalating delivery charges for Ontario's residential consumers.  I had previously looked at escalating capital costs (including the chart shown here, taken from an earlier article on our smart grid).  2010's capital expenditures finally leveled off, at 2009's level, but with the smart meter spending essentially completed, the recent Hydro One results don't indicate capital expenditures will be reduced.

Note to the OEB: Benchmarker, Benchmark Thy Self

I was intrigued by the news that Chancellor Merkel created an ethics commission to study the use of nuclear power in Germany.  It’s an interesting challenge, and not just for nuclear energy.   Merkel’s creation of an ethics commission to investigate nuclear generation struck me as a second cynical act (the first being simply removing older reactors from service for 3 months).  Voters in regional elections weren’t inspired, as her party lost power this past weekend anyway. 

The morality issue seems increasingly involved in electricity policy everywhere.  My main focus is Ontario, and I am a fan of an appropriate amount of nuclear generation in a supply mix.    CBC news just said the government of Japan is now considering putting TEPCO out of it’s misery, and nationalizing.  That could be interesting.  I noticed yesterday some flak in the American industry about demonstrating their structure, of private ownership with public oversight, provided the safest, and cheapest, industry.

Here at home we have a regulator deciding against the public generator being paid 6% more - for not meeting private sector measurements from a recent benchmarking effort. 

New Records of Interest Only to CANWEA

At 7 pm on Friday February 18th, 2011, Ontario wind generators hit a new record high, with the IESO reporting 1350MW of wind output.

For the entire day, wind production was 30,492MW (also a new record).

This is enough electricity to power a gazillion homes like mine - because my home just has a ghost power supply at the moment. 

Ontario’s Government’s Final Act in Electricity System Planning Farce

Less than one week after saying there wasn’t enough research to proceed with off-shore wind, reinstating the moratorium lifted 2 years ago, and returning to a time when there wasn’t enough research, the government issued a release today stating ”Long-Term Energy Plan Takes Another Step Forward.”    The off-shore wind is now simply planned for on-shore - most probably very near the shores of Erie, Huron, and, Pickle Lake.

Smartiness: Smart Meters and Smart Grids Without Smarts

An article in Vancouver begins; “BC Hydro is proceeding on the premise that its $930-million plan to install so-called smart electricity meters for its 1.5 million customers will pay for itself through cost savings and not a rate increase, according to its business plan.”  The article explains, “savings are expected to come from the elimination of manual meter reading, reduction in electricity theft and more efficient usage,” and notes “savings are expected to come from the elimination of manual meter reading, reduction in electricity theft and more efficient usage."

My Ontario eyes were shocked.

They have business plans!