Midway into 2014, a lull in Ontario's electricity price hikes

There are a lot of lessons that might be learned from Ontario electricity system data for the first half of 2014. This post will show what I suspect are the most surprising numbers from the period.

Pricing

The Independent Electricity System Operator (IESO) June Monthly Market report that the year-to-date (YTD) weighted average Hourly Ontario Energy Price (HOEP) was $53.24/megawatt-hour (MWh).

That is up 89% from the $28.15/MWh in the June 2013 report.

The increase in the HOEP sounds expensive, but most Ontario ratepayers will see little inflation in the rate they pay for the commodity portion of their electricity bill. This is because Ontario applies another charge in addition to the HOEP, currently called the Global Adjustment (GA) charge. The GA exists to ensure the full cost of procuring supply is recovered by electricity consumers.

The GA is collected by different rates for different classes of customers and, for some classes, depending on where their billing cycle dates falls into the dates of the global adjustment process, but the most relevant rate is the "Class B" Rate: that rate averaged $32.65 for the first half of 2014, down 42.5% from the $56.86/MWh in 2013.

The Class B total "Commodity Charge" (the HOEP plus the GA) thus averaged $85.89 over the first half of 2014, up only 1% from the $85.01 for the first half of 2013.

The explanation for how an 89% rise in market pricing occurred concurrent with the lowest inflation in the actual commodity price in many years is not an easy one.

A Class A Crap Shoot

Under the summer's sun, Ontario's complicated electricity pricing mechanisms are increasingly causing functionally arbitrary pricing in the province.

A very brief review:

• Ontario introduced a competitive market for electricity supply in May 2002
• Ontario soon after froze prices for most consumers
• For 2005 Ontario regulated the pricing of it's legacy generation assets and introduced the "global adjustment" charge to recover the full cost of supply from consumers (essentially the cost of purchasing supply less the revenues recovered by sale in the market)
• For 2011 Ontario introduced a second global adjustment category, class A, intended to lower the cost of power to large users.

Prior to winning a majority in this year's election, the Liberal government initiated the expansion of the Industrial Conservation Initiative, which is the program where the "class A" global adjustment customer can lower their electricity costs by lowering their share of generation during 5 peak demand hours.

It is increasingly clear that Ontario's system operator can't determine Ontario's actual peak demand hours.

Estimating production from Ontario's solar panels.

When the Ontario Power Authority (OPA) released data projections made in supporting the development of Ontario's latest Long Term Energy Plan (LTEP) they showed the cost of purchasing generation from solar would grow about $280 million in 2014 (in 2012 dollars), and $443 million in 2015. The OPA anticipated that 45% of the growth in in generation costs from 2013 through 2015 would be due to the costs of purchasing production from solar panels.

45%

45% of the cost increase over a 2 year period puts solar, in 2015, as about 1% of supply but 10% of total supply cost (according to the OPA work for the LTEP).

I've spent some time trying to incorporate hourly estimates of solar input into my tracking of Ontario electricity data. It's not easy, and it's dynamic, so I'm writing this post to explain how I'm estimating solar production, why my estimates change, why they are better than anything else most, if not all, will see - and what the estimates show.

wasted on the traditional territory of the Mississaugas

"Ahnee, Bon Soir, Bojoo.

We’re gathering on the traditional territory of the Mississaugas of the New Credit."

So begins speeches in Toronto by Toronto's Premier, Kathleen Wynne. [1]

___

In March, 2013, Ontario Power Generation (OPG) announced, "Ontario’s new Niagara Tunnel is producing more clean, renewable, low-cost electricity at the Sir Adam Beck generating complex." The project had seen delays and early budget overruns which pushed the project cost up to $1.5 billion. The payoff for the work was to be "about 1.6 billion kilowatt-hours."

It hasn't been.

OPG announced the project complete and in service in March 2013. The growth in annual (12-month) production was ~600million kilowatt-hours, or 0.6 terawatt-hours (TWh). While this is less than 40% of the promised 1.6TWh, it is still presents far too favourable a picture of what happened after the tunnel entered service.

Ontario's electricity future isn't this Quebec Diversion

Importing electricity from Quebec is in the mainstream media again.
There are reasons the option appears attractive. Quebec has an abundant supply of hydroelectric power, so there is the appearance of an opportunity.  Additionally, the demand profiles of Quebec and Ontario could be considered complimentary: Quebec has a winter peak, and Ontario has had, in recent years, a summer peak.

Quebec figures from HQ document (Dec. estimated)

The peaks aren't as complimentary as they sound. Ontario acually has a winter energy consumption peak too. The peak use of electricity is usually in the summer as the province heats mainly with natural gas in the winter. That is not the case in Quebec, where the winter energy peak is an electricity peak.

Ontario has only had local calls for conservation over the past couple of years (Toronto area), but Hydro Quebec called for conservation during winter demand peaks in both 2013 and 2014.

Ontario's first (and only public) Integrated Power System Plan (IPSP), released in 2007, noted an additional 1250MW of "Quebec Interconnection" as part of supply intended to meet the desired "Renewable Resources Goal." That interconnection has since entered service.  I have been tracking hourly intertie data back to April 2011; connecting that data with Ontario's top 25 winter, and summer, demand peaks shows that the flow of electricity between the provinces is exactly as logic dictates it should be.

Ontario's next expense scandal: Endorsement and Condemnation

Tomorrow, Ontario votes to elect its next government.

It's been an interesting campaign for me, particularly because of some thoughts on the province's electoral politics I worked through writing on the last election, in 2011, and an ongoing interest in the relationship of numbers and narratives.

election results -
 as share of possible votes

My perception of provincial election campaigns are shaped by statistics on the share of possible votes (registered voters) achieved by parties. After 2011's election I began Lessons From Ontario's Record Low Election Turnout with:

One of Ontario’s 3 main political parties had a lower percentage of eligible voters opt for their party than had been the case since 1943.
That party won.

My premise has been that Ontario elections have been more about attracting voters, not moving the votes of voters from one candidate to another. This hasn't been true at the federal level, where the split in the Conservative movement returned successive majorities to the Liberal party, and it's not entirely true provincially, but the provincial conservatives should be able to win an election only by getting most of the people who vote Conservative federally to show up and do so provincially.

Not Honouring Ontarians: Wynne's Green Energy Contracts

I sent some numbers to Parker Gallant the other day, along with a question on political donations, and within days the prolific Mr. Gallant produced, "Constraining wind power in Ontario: Making your head spin..."

Before I introduce the figures behind that column, I'll provide some background on the Ontario Liberal party's approach to contracts.

Another election campaign in Ontario is underway, and some of it is a repeat of the previous election campaign; the Progressive Conservatives (PC) claiming they can better control costs and the incumbent Liberals claiming the PCs will renege on contracts. Contracts bind participants to obligations: the Liberal government has failed to protect the people's side of green energy contracts a couple of times since 2011's election - where there is a benefit to their party to do so.

First, there was the Korean Consortium (KC, aka Samsung). In April  2013 I wrote on how they weren't meeting contract requirements, or investing significant amounts of their own funds.  The KC deal, which PC leader Tim Hudak had stated, in 2011, he would kill, was re-written 2 months after I pointed out the Koreans weren't honouring the contract, but not killed.

The government claimed savings of $3.7 billion - money that they'd campaigned on not being possible to save in 2011.  Worse, the contract renegotiated - because the proponent had not kept it's initial contract commitments - guaranteed the KC a base price of 29.5 cents per kWh for the still contracted solar capacity; that's a price far exceeding what it would cost for, as one example, the public generator to provide grid-scale solar capacity.

So it looks like I saved Ontario $3.7 billion, but I could have saved far more if the Liberals had the decency to cancel a contract because contract obligations were not fulfilled by the proponent - instead of providing expensive plums to the negligent proponents in order to avoid having Tim Hudak be shown to be correct.

Hudak's numbers and the MSM's biased suspicion

I understand fact-checking political statements but let's be fair...

I'd read Maclean's "Infographic: Where the jobs are in Ontario", and was struck by a couple of things in the opening paragraph:

Ontario PC leader Tim Hudak is staking his electoral changes [chances] on a promise to create one million new jobs if elected, even while cutting 100,000 public sector positions. That may be a challenge since the provincial economy has created just 667,000 new jobs since the Liberals came into power in 2003. Nearly half of those jobs have been in the public sector.

Two things:

1. what is Hudak staking his electoral chances on? 
2. what message might the press be broadcasting? 

I think THE message here is that for a decade every time somebody got a job in the private sector another person was hired in the public sector. I'm going to discount the possibility those private sector jobs paid spectacularly well, and assume this is a big part of the $130 billion increase in Ontario's debt during the same period.