Ontario Residential Electricity Rates are dropping. Bills aren't.

The Ontario Energy Board (OEB) released Regulated Price Plan (RPP) rates for the next 12 months, and they're down 10% from the current period. Other changes were not as clear from the material published along with the new rates, which I've come to realize is necessary for residential consumers to understand that their bills will change very little. I was waiting to see what the mainstream media would publish regarding the steep, and internationally rather unique, decline in rates, but I've seen nothing - which is somewhat of a blessing given the poverty of understanding demonstrated in recent reporting on Ontario electricity. I'll explain what is happening to rates, why they're dropping for one category of consumer, why it won't change individuals' bills, and the impact on other categories of consumers from recent changes in the so-called market's pricing.

I've added summary columns to the OEB's presentation of rate changes in the following tables, to demonstrate the reduction is rates. For those hoping to find information of which rate plan is best for them I'll point to my work 2 years ago as there's no real change in the mechanics: if your usage is primarily in the lower threshold of the tiered pricing plan, use that plan - if it's mostly in the upper tier, stay with the default time-of-use (TOU) rate plan.

Value lessons from Ontario electricity statistics

Data - and lots of it.

While I'll try to prevent this post from sliding into an abyss of Ontario electricity statistics, I'll be citing provincial data as the basis for discussion about public understanding being restricted by the presentation of data from official sources, and present new views of generally unreported data that would benefit literacy in valuations of electricity sources - an area where reckless ignorance blooms again and again.
but enough about academics, let's dive in!

The old standard of valuing generation sources is the Levelized Cost of Electricity (LCOE ). I was particularly pleased in late 2015 when a report from Ontario's Auditor General included a figure (5) indicating the cost and quantity of energy sources for 2014. I was more pleased a few years later when I received figures from a freedom of information (FOI) request with the same information for years 2007-2015. While I think the data is terrific, when I wrote about it I cautioned on presenting LCOE, "stressing these calculations deserve a big asterisk and lengthy footnote on the impacts of things such as curtailment and capacity payments." 

I have now done the data work required to add that lengthy footnote on curtailment and capacity payments.

I am certainly not unique in hoping for superior valuation tools to LCOE: the U.S. Energy Information Administration (EIA) has developed a  Levelized Avoided Cost of Electricity (LACE) metric, and the International Energy Agency (IEA) a Value-Adjusted Levelized Cost of Electricity (VALCOE - see pg 41). LACE is intended to value the cost (of alternatives) avoided by the generation, with the intent LACE > LCOE would signal a good project. VALCOE attempts to recognize the different capabilities of sources in providing firm capacity and flexibility. The specifics are less important than the principles: not all generation is of equal worth to systems that are intended to minimize loss-of-load situations. Concrete examples of LUEC's limitations will help conceptualize the issues that have people looking for better valuations.

Before I discuss my data I will note one other frequently cited source of Unit Cost in my province (I regard LUEC and LCOE as interchangeable terms): the Ontario regulator. Their most recent explanation of regulated rates includes a table (3) indicating hydro at 6.2 cents per kilowatt-hour, nuclear at 7.7, wind at 15.9, gas at 18.8 and solar at 51.3 c/kWh. I'll show replacing the OEB list's lower cost supply with gas is likely to lower total costs.

I have collected hourly data for the transmission-connected (Tx) generators reported by Ontario's system operator, including imports, and I've estimated (hourly) distribution-connected generation (Dx), curtailed supply, and contracted cost, either by unit generated (or curtailed), or by capacity required to be available. My base union query in working the data has over 16.4 million records. I will not repeat the word "estimate" in this post but simply note this one time it may be applied to everything (my work and the numbers from the IESO and OEB I cite).  

Here is my summary of annual generation and costs from 2008-2018:

Ontario Electricity: Backgrounder and suggestions for Premier Ford

Ontario has a new Premier. Congratulations to Doug Ford who, despite my recent quiet, is receiving a lot of free advice on addressing costs in Ontario's electricity. Some of it good, but much of it not only bad, but based on flawed views of how Ontario's residential and small business consumers came to experience rapid rate growth.[2] I also have noted some advice - from academics - is oblivious to the new political reality of Ontario. Before getting into thoughts on controlling electricity costs, I'll provide my perspective on the politics of the situations that will determine which suggestions are actionable.

I wrote very little in the run-up to the election because it struck me as a race to the bottom. I used to write on things that angered me (to some extent), and then I'd hope to edit out my annoyance based on, "Nobody cares that I'm angry. What is my point?" This election the point seemed to be people were beyond angry with Kathleen Wynne. I'd call it disgusted. There's a saying in politics that "anger is not sustainable." That's probably true but around the time her government was introducing the ridiculous [un]Fair Hydro Plan I'd wondered if the Wynne policy team had let the anger of the first half of her mandate develop into disgust. Disgust is not an emotion, it's a sense. I was curious to see if I was wrong, and a climb up in the polls was possible for Premier Wynne. I don't think I was wrong - I do think the election was about this sense of disgust, and I found it so unpleasant I voted in the first hour of advanced polling and then tried to ignore it altogether.

I realize many of the angriest were people who follow my blog and know about the Liberal party's enormously wasteful performance in the electricity sector. The waste cost most Ontarians money, but not food, or housing, or heating. With the election over, and the previous governing party embarrassed by failing to win enough seats for official party status, I am hoping many will start the new era of Ford's rule by editing out their anger and trying to find their point. This is not a kumbaya moment though. A real cost reduction of the scope promised by incoming Premier Ford will require tough choices harming real people and angering numerous constituencies, but particularly the one known in the electricity sector as "stakeholders."

Political Constraints

The political reality of the election is pricing carbon is dead: Doug Ford took the leadership in the race for leading the Progressive Conservatives by opposing the recently implemented current cap-and-trade system in Ontario and the federal government's demand province's implement some regime. I'll try to avoid the topic - and fail (but hopefully only once).

Functional Constraints

Ontario's electricity, if mine is any indication, is pretty reliable (the lights stay on) and it is exceptionally clean, with very low emissions of greenhouse gases. My views on what can be done to control costs is influenced by two concerns that I don't see noted very often:

• capacity
• industrial electricity costs

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.

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

Waste Deep in the Nipigon

Ontario increasingly wastes electricity.

Wasting electricity is nothing new. I have a recurring earworm originating in a 1970's Ontario Hydro advertising campaign; "wasting electricity turns people off." In the decades since we are often reminded we use the wrong light bulb, the phone charger wrongly, water stupidly, and on and on. But today's waste includes actually curtailing emissions-free generation, without consumer savings, simply because there aren't consumers that can use the electricity. Much of that waste is avoiding generation from the public hydro-electric generation that gave the former  public utility the name "Ontario Hydro." Ontario Hydro is gone, but it's generators survive under Ontario Power Generation (OPG). I present OPG's generators on the Nipigon river as an example of the waste occurring in today's IESO administered electricity system.

The Nipigon river was in the news this winter as a new and unique, to the climate, cable-stayed bridge heaved, closing the TransCanada highway to all traffic for days, and requiring heaving loads to drive around Lake Superior for a much longer period. The bridge design was selected, at least in part, as it "eliminates the need for in-water structures in the Nipigon River."

15 kilometers (km) away, the Alexander Generating Station is an in-water structure that first started producing power in 1930. The current capacity is 69 megawatts (MW).

2 km upriver of that is the older Cameron Falls Generating Station, with a capacity of 92 MW.

OPG's Pine Portage Generating Station

17 km upriver of that is the newest, and largest of OPG's Nipigon River system generators, the 144 MW capacity Pine Portage Generating Station. A substantial reservoir exists behind Pine Portage:

Forgan Lake, south of Lake Nipigon, was created when Pine Portage was built. Forgan Lake was named by a decision of the Canadian Board of Geographic names on November 3, 1949. The lake comprises Hannah Lake and Creek, Eva Lake, Pine Point, Devil Rapids, Victoria Rapids, Emma Lake and others.

Conceptually, the same water provides electrical power 3 times, with it's journey through all three generators controlled at Pine Portage.

I've been tracking hourly generation reported by the IESO since September 2010.[1] To eliminate the typical monthly variations over the course of a year, I've graphed the moving 12-month total of each of OPG's 3 Nipigon River generators:

The decline of production at the Pine Portage generating station is obvious, and so dramatic in recent months I asked OPG on twitter if they, "would like to comment on reduced production at Pine Portage GS before I speculate." OPG responded, "Pine Portage GS is available to run if required. Suggest you contact @IESO_Tweets for demand information."

Behind the OEB's latest rate hike

Yesterday the Ontario Energy Board (OEB) announced rates for the May 1- Oct 31, 2015 period. The rates are going up, on average, around 10.3% over last summer - as is the trend. Since 2007 summer rates have averaged 9.4% a year. 10.3% is a weighted average increase as each time-of-use (TOU) period is going up differently. The difference in TOU increases exhibits an ignorance about the factors driving pricing in Ontario's market, and the consistency of the increases over the past 7 years eliminates the uncertainty about why rates are going up.

There are few more capable of breaking down cost components that I. Last summer's rate hikes were all due to renewables. This year much of the boost is due to some of the delayed costs OPG has now applied for (see Bruce Sharp's Invisible Gorilla).
I suspect that when the government contracts of unnecessary supply drive the price up more than 10%, OPG is strangled; when there might be a brief pause in those costs, OPG gets some funding for it's variance accounts. Always, however, the costs are being driven by policy. Rates are going up because the powers that be want them to. They go up 10% because that's what they figure people will tolerate.  

We are closer to paying the real cost of energy than we have been in the past. 

This isn't an educated opinion, but a statement to identify one's tribe.

Rates are going up because in this instance the quote comes from the Premier and she wants the rates to go up.

Whatever the people are paying it isn't the real cost.

This is a first principle of the tribe including Ontario's Wynne - and McGuinty.    

The unique stupidity in this latest rate hike is the distribution of the increase across time-of-use periods.

Smart - or not: Ontario's Regulator calls for more new meters

I looked into an Ontario Energy Board (OEB) Notice of Proposal after seeing a tweet:

The Board is of the view that, given the current metering infrastructure and pricing environment, it is appropriate to ... require a distributor to install a MIST [Metering Inside the Settlement Timeframe] meter on any installation that is forecast by the distributor to have a monthly average peak demand during a calendar year of over 50 kW.

The comments the OEB has received on the proposal are informative - as is the omission of comments from a couple of well-paid government organizations that should have an opinion.

This is, I assume, a complex subject - particularly for people under the impression all of Ontario's electricity consumers already have "smart" meters.

They don't.
The OEB proposal addresses, for better or worse, a gap in policy.

Essentially all residential consumers should now have "smart" meters reporting through designed protocols and networks.  According to the most recent OEB Annual Yearbook of Electricity Distributors, about 90% of all customers fall into the residential category, but they don't account for even 30% of overall demand.

Not the News: The Toronto Star's Electricity Sector Coverage

On the day Ontario's official opposition party, Tim Hudak's Progressive Conservative Party, released a white paper on energy policy, the Toronto Star published, as front page news, a story that seemed to be about the expensive nuclear generation in Ontario – although it didn't actually provide a price figure. The Star report is structured as if it was built around the Power Advisory report cited in the article; a report created for the Ontario Energy Board. That report is dated April 20th, 2012 – and contains no information created after 2010.

The report provides figures for nuclear units operated by OPG for 2008-2010, and those figures show declining performance. The report does note that OPG's reporting had attributed the reduced performance factors in 2009 and 2010 to Vacuum Buildign Outages (VBO – 2009 at Darlington and 2010 at Pickering). The Power Advisory report didn't note that any idiot could confirm that ... nor did it confirm it.

Ontario replaces Independent: Weakly Electricity Sector Downgrades

I posted the latest weekly reporting figures this afternoon, and the data, fittingly, indicates a new record.  Week 16 is notable as the first week with Ontario demand growth over the previous year (Easter weekend was in 2011's week 16) - but the growth average for Ontario's demand was only 305MW/h, whereas the growth in net exports was 828MW/h.  The increase in net exports, combined with pricing remaining a third lower than in 2011, caused the export subsidies, by my estimation, to surge to record levels - for the third week in a row.

The Canadian Press shared this important bit of news this week:

TORONTO - Energy Minister Chris Bentley hasn't abandoned the idea of having a "real name" for the merger of the Ontario Power Authority and the Independent Electricity System Operator after all.
Bentley complained the energy sector is full of agencies known by acronyms like the OPA and IESO when he announced the planned merger of the two electricity planning agencies.
The minister said at the time he wanted the new agency to have a real name, but in legislation introduced today, it is known as the Ontario Electricity System Operator, or OESO.

In rearranging the Ontario Power Authority and the Independent Electricity System Operator,  Minister Bentley kept on 4 of the words: Ontario Electricity System Operator (OESO) is the working title.

Independent
Power
Authority

These words the Minister extinguished.

Class A Absurdity

My previous blog entry described the government's creation of a separate class of customer, which I put in the context of the need to get electricity pricing for industry competitive with other jurisdictions. I carefully referred to that methodology as 'absurd.' Today a review of why it is absurd, why it is bad that it is absurd, and why Ontario is worse off because absurd is tolerable in our electricity system.

The creation of the Class A customer, one with "average monthly peak demand in excess of 5 MW," and the methodology for setting their rates - " the five hours, occurring on different days, in which the greatest number of Megawatts (MW) of electricity were withdrawn by all market participants" - are set out in the Environmental Registry entry for the change to the global adjustment mechanism:  

The proposed changes to the global adjustment mechanism would provide large consumers with a strong incentive to reduce consumption at critical times, consistent with the government’s commitment to creating a culture of conservation. By reducing peak demand, the proposal is expected to avoid costly investments in new peaking generation resources and imports of electricity from jurisdictions reliant on coal-fired generation.

Absurdity #1:  There is an Environmental Registry entry for the change (greenwashing).

New Report Demonstrates The Market Impact of Renewable Energy Policies

The press release for the OntarioEnergy Board's Market Surveillance Panel (MSP) Monitoring Report on Ontario'sElectricity Markets  noted four recommendations, including: “an increase in the frequency with which interties are scheduled, and the associated frequency of demand and intermittent generation forecasts as well as pre-dispatch schedules” and; "accelerating efforts to make wind generators dispatchable ...”  The MSP report's information supports the claims (argued previously here), that the depressed market prices, and dumping of excess generation, will not simply continue, but grow over the next decade if Ontario's supply procurement policies persist.

The Market Surveillance Panel (MSP) report delivers an analysis of “low-price” hours (defined as the Hourly Ontario Energy Price – or HOEP – being below $20/MWh).  In comparing the Ontario Energy Board (OEB) seasons, where winter begins November 1^st and summer begins May 1^st, the report notes; 

“The greater frequency of low-price hours in this year and in the past two years mirrors the general trend of lower Ontario demand and also reflects the increase to Ontario baseload supply, or generation that is offered like baseload supply (i.e. generators with fixed price contracts per MWh delivered). “

Ontario’s Electricity Policies Bite Into Municipal Budgets

I read an article in the newspaper the other day that began; “The skyrocketing cost of lighting city streets is the result of Ontario Energy Board (OEB) rate changes, city councillors were told Monday.”  The previous week the same council had heard of $130,000 associated with annual electricity bills for the new local twin-rink.  I hadn’t dwelled on it until I read it out loud to a visiting relative; “Street lighting costs are budgeted to increase to $645,500 next year, an increase of 41% since 2009.”  Then the nickel dropped – duh!  I’d written, a week earlier, “OEB Hikes Electricity Rate … 41% in the Past 2 years.”  

Winter 'Years' starting Nov. 1 (ie. 2011 is Nov. 1, 2010, to April 30, 2011)

The two figures shouldn't match.  My understanding was that the Municipalities, Universities, Schools and Hospitals, known as the MUSH sector, were no longer offered regulated rate plans.  They are to pay the actual rates (Hourly Ontario Energy Price -HOEP), with the global adjustment (GA) mechanism applied to ensure recovery of all generation costs (plus a couple of  other things).  The story I read claimed the that, "the number of connections, not the amount of power used, has the greatest impact on cost..."  Regardless of the reason for streetlight costs escalating at the same rate as residential off-peak rates,  some investigating shows rampant contracting of supply, facilitated by the global adjustment mechanism, is destroying the attempt to differentiate off-peak rates in both the regulated consumer market, and the wholesale market.

OEB Hikes Electricity Rate ... 41% In The Past 2 years.

Today the Ontario Energy Board (OEB) announced new electricity regulated price plan (RPP) rates for the coming winter. In the winter of 2009-2010, the Off-Peak Time-Of-Use Rate was 4.4 cents/kWh. It will be 6.2 cents/kWh for the winter of 2011-12, which is an increase of 41% over the past 2 years; the single-year increase is 21.6%.  In only 4 years the off-peak price, in winter, has doubled through consecutive annual, increases of 33%, 10%, 15.9%, and 21.6% (figures are here).

Is the OEB regulating electricity pricing or selling gas furnaces?

April 19th: Electricity Stupidity Day in Ontario ... Again

Yesterday price hikes were announced by the Ontario Energy Board (OEB). You'll likely average about 7.28 cents/kWh after May 1^st.

Yesterday the Ontario government issued a press release beginning “Ontario families can expect stable electricity bills this summer and fall due to the new Ontario Clean Energy Benefit (OCEB), which is taking 10 per cent off monthly bills for families, farms and small businesses.”

Yesterday, the IESO posted it's daily Surplus Baseload Generation Report.

Draft Response To Regulator's Consultation on TOU Pricing

2010-11 Time-of-Use Consultation (EB-2010-0364)

I’ve prepared some remarks as I consider a response to the Ontario Energy Board (OEB) review of the Retail Pricing Plan (RPP), and specifically the Time Of Use (TOU) pricing. 

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. 

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.

Time-Of-Use Pricing

Time-of-Use (TOU) pricing is being implemented in Ontario.  This should provide the personal benefits of Ontario’s spending on smart meters.  More likely, it will result in the same efficiency gains we’ve seen on our bills from the rest of the smart grid initiatives (higher line loss factors added to our usage, and higher delivery charges in general).    Electricity policy encompasses issues of security, social responsibility, economics, politics, and environmental concerns.  TOU billing has implications for all of these things.   I won’t revisit the role of the OEB in protecting, or neglecting, the Ontario consumer – it’s in the smart meter column.  I will show TOU is limited in it's ability to alter Ontario's electricity supply - a supply that is being altered in a way incompatible with the intent of TOU as a demand management tool.

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!