Trends in Ontario Electricity rates by Consumer Segments

The graphic illustrating trends in electricity pricing in Ontario will be more impactful with some explanation. First I'll deal with the terminology housekeeping, allowing for some discussion of the trends.

Definitions/Terminology

• Regulated Price Plan (RPP) consumers are most residential and small business consumers whose rates are set by the Ontario Energy Board (OEB), essentially on a forecast of supply costs over the next 12 months;
• Class B consumers pay the flow-through cost of supply on their monthly bills (although usually as an estimate);
• Class A consumers were the very largest consumers in the province - as of 2011 they could lower their bills by lowering their consumption during 5 peak hours;
• Exporters pay only a real-time market price (RTP) for supply.

The Class A commodity rate is calculated as the statistical average Hourly Ontario Energy Price (HOEP) plus the average global adjustment for the class (total Class A charges divided by consumption). The Class B commodity rate is calculated as the weighted average HOEP plus the average global adjustment rate for the class. The global adjustment in my estimates differs slightly from figures reported by the IESO as global adjustment figures are publicly disclosed at gigawatt-hour level (GWh), while I expect the IESO calculated at a finer level of detail.

Exporters do not pay the global adjustment, and they settle at the real-time price (RTP) for particular jurisdictional interties, not the HOEP. As I only have RTP data from 2010 on, the figures from 2005 to 2010 are based on the HOEP which effectively underestimates the average cost. From other data (including this) it is known the actual average intertie-specific RTP value realized on exports was about 10% higher than the HOEP value during those years.

Two average rates are shown: the average for Class A and B (or, prior to the introduction of the classes in 2011, simply the Ontario average) is shown as the "Average Ontario Commodity Rate", and the "Average Commodity Rate" which also includes exports. Those averages are all weighted according to the consumption of each consumer class. Notably, RPP rates are not in the average calculations (as they should simply be a different type of Class B rate).

Discussion and Analysis

Carbon-Con: ECO communication

A couple of weeks I was asked about potential ways to collaborate with reputable sites. I put some thought into that before responding that simply an association with me could bring a site to disrepute, but my thoughts on communication persist. From the belligerent uttering of a federal Minister on a Sunday talk show, to a media blitz from an organization marketing itself as expert on economic tools to reduce carbon emissions, to the Ontario report I'll feature in this commentary, it's been as if a convention of climate change alarm is occurring.

A Climate convention.

Comic Con (short for convention) is a really big event now, which makes some sense in this era of communication. Text is a low impact medium - the sites adding audio and video, integrating with podcasts, have a huge advantage. As the comic and related genres (science fiction, fantasy and superhero) grew from print to screens of all sizes, the graphics and sound growth has simply piled success onto success. The term "simply" recognized almost all characters can be grouped into good or bad.

Perhaps due only to my musing about communication, collaboration and branding, I thought the polarized nature of climate, and energy discussions, make Comic Con a model for communication and promotion in the 'clean tech' industry.

I'd prefer to be a hero, but realize the model needs villains too.

What I hope will be found in my little section of this Carbon Con is data-driven iconoclasm delivered through research, competent data handling, pointed if not visually appealing graphics, and full contact criticism of those blissfully unaware they deserve to be blisteringly opposed.

What many will find is villainy - I've been accused as anti-wind, anti-renewable, anti-conservation, pro-nuclear, disrespect and misogyny. I don't agree with that entire list, but I'm okay with being the villain if it makes for better heroes.

My concern with the profession of professing concern about carbon emissions begins, as most things do, with religion.

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).

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:

Ontario Electricity – The Liberals Giveth and Taketh Away

This is a guest post, by Bruce Sharp.

The post first appeared on Linkedin.

Ontario Electricity – The Liberals Giveth and Taketh Away

The big energy splash in the Ontario Government’s September 12 throne speech was rebating the provincial portion of the HST to certain electricity users. This group will include mainly voters and is estimated to cost about $ 1 billion per year, with the cost being born by provincial taxpayers. In a September 14 Linkedin post, I commented on the merits of the move.

Another electricity move announced that same day was the expansion of the Industrial Conservation Initiative (ICI), otherwise known as the Global Adjustment (GA) Class A.

Ontario’s GA is the electricity market mechanism for collecting and allocating above-market generation and conservation and demand management costs. Prior to 2011, there was a single GA class, with all consumers paying for GA costs based on a uniform, postage-stamp rate. Starting in 2011, we had two classes: A and B, with the classes’ shares of GA costs determined in different ways. This program did not initially have a name but at some point was dubbed the Industrial Conservation Initiative. Class A now pays significantly less than they would have, had we still had one GA class. The result is a transfer of costs from Class A to Class B, i.e. a cost decrease for Class A’s mostly large industrial consumers and a cost increase for Class B -- residential and most other Ontario electricity consumers.

In an April 14 Linkedin post, I provided an update on that cost transfer. Given the recent news, I thought I’d provide another update, estimate the additional transfer that will occur as a result of the expansion of Class A and look at the economics of the initiative.

For the period of October 2015 through September 2016, total GA costs were $12.1 billion. If there had still been a single GA class, the uniform rate would have been $ 86.20/MWh.

With the two classes, there was a cost transfer from Class A to B of $ 940 million. Class A paid an average of $ 52.50/MWh or 39% less than they would have had we still had a single GA class. Class B -- by virtue of its larger total energy consumption -- paid $ 94.60/MWh or 9.7% more. For the residential consumer with losses-inclusive, annual consumption of 9.5 MWh, that represents an added cost (inclusive of HST) of $ 90/year.

The expansion of Class A will take place either July 1, 2017 or July 1, 2018. One source I’ve spoken to says the government will want to do this sooner rather than later. It will likely involve removing baffling restrictions to the 3 – 5 MW eligibility and a reduction of the overall average monthly demand threshold to 1 MW. A thousand businesses are to be newly eligible,

The result will be an additional cost transfer – from the new Class A consumers to the remaining Class B consumers.

How much will it be?