the harmful denial of the subsidy label

On May 12th the leader of Ontario’s official opposition party asked the government:

Why should Ontario’s businesses and families be subsidizing our competition in New York and Michigan?

In response, Ontario’s Minister of Energy, Bob Chiarelli said:

“…Any power we sell to the US, to Quebec, to Manitoba, or power they sell us, is surplus power. It’s opportunity power. It’s pure profit…

…The IESO will confirm that, last year, we made a net profit of $350 million—”

That perspective might be defensible in Mr. Chiarelli’s lobbyist-populated world, but it’s a harmful one for Ontario ratepayers.
The Minister might be communicating that with net revenue on net exports of 16.85 million megawatt-hours (MWh), the province netted $350 million of proceeds.[1]
That calculates out to $20.77/MWh.
“[T]he average price of electricity generation in Ontario… in 2015 was $83/MWh,” according to a December 2015 news release from Chiarelli’s Ministry of Energy.

To rephrase the original question with awkward precision, in units residential consumers will be familiar with:
Can the Minister admit selling power purchased at over 8 cents per kilowatt hour for only 2 cents per kilowatt-hour, to exporters with clients in Michigan and New York, is forcing a subsidy on Ontario ratepayers?

The answer is important because if the government could admit to costs, it could have made far better arguments in a recent court case that ended up costing Ontario’s ratepayers over half a billion dollars. That judgement rested on a finding that a change in the obscure global adjustment mechanism, adding a Class A mechanism for consumers with a monthly peak over 5 MW, “was designed by the government to provide a subsidy to large consumers of electricity to promote various government policies.”

What did the Class A consumers, that the courts ruled were subsidized, pay for electricity in 2015?
$63.30/MWh according to the Ontario Energy report. [2]
As the consumer has been hit with another half billion dollars in charges because of subsidy claims, the Minister should have an explanation for how $20.77/MWh is not subsidized and $63.30/MWh is.
He might also explain how the average cost of supply in 2015 was, according to his department, $83/MWh, but class B consumers, which include regulated price plan residential consumers, paid $101.4/MWh. [3]
While it would be really nice for Mr. Chiarelli to explain that to the people, in honestly answering questions in the legislature, it would be even better if he could explain it in court. His government’s tendency to obfuscate seems to have blocked its ability to communicate in a coherent matter – which may sit well with the constituents opting to elect them, but has been of no benefit in court.

 

End-notes:

  1. The IESO shows 22,618 gigawatt-hours exported and 5,763.5 gigawatt-hours imported.
  2. The figure is shown in the report  as 6.33 cents/kilowatt-hour, which is the same as $63.3/MWh
  3. Regulated Price Plan rates are set based on a forecast of what the Class B costs will be – and adjusted each rate-setting period (every 6 months) to adjust for the variance to the forecasts.

The featured graphic is from data in the [r51a_segmentRate] tab of this weekly reporting spreadsheet – the rates are my estimates, and the format is somewhat explained on my weekly reporting page.

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