Brown, Wynne, share ignorance of $500+ million ratepayer hit

The Ontario PC party put out some tweets that tweeked my interest yesterday, on payments due to a court ruling.

"This $95 million court case isn’t new to this government. The OEFC and Northland have been battling it out in court for years" @brownbarrie

— Ontario PC (@OntarioPCParty) October 26, 2016

The parties in the case included those in a ruling I wrote about in May’s Ontario appeals court upholds sentence of higher costs for ratepayers – but the hit on ratepayers in the case I wrote about IS estimated at over half a billion dollars.

After watching an exchange between Premier Kathleen Wynne and Leader of the Official Opposition Brown, I decided to see what they were on about.

It turns out I knew most of what they were on about, it was just hard to be certain as neither of them did.

Two new pieces of information since I wrote on the court case in May:

1. the case was appealed to the Supreme Court
2. additional payments/penalties were paid to compensate for more months of generation. [1]

The Ontario PC party seems totally unaware what the nature of the case is, and it seems blissfully oblivious to the fact the latest $94.7 million payout was not the first payment, nor will it be the last if the court case fails – and Northland is only one supplier getting the payouts as a result of the court case against the Ontario Electricity Financial Corporation (OEFC).

The exchange in the legislature doesn’t reveal:

1. the payment is less than 20% of the cost impact of the court judgement
2. the OEFC is a shell corporation
3. the control of the OEFC is essentially under the Minister of Finance [2]
4. the contracts involved in the court case originate prior to 1995, under Premiers Peterson (Liberal) and Rae (New Democratic Party) [3]
5. the court case is due to changes in payments due to calculations changed with the introduction, for 2011, of the Industrial Conservation Initiative (ICI – or Class A global adjustment mechanism)

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Electricity rates held steady by Ontario’s inept energy regulator

The Ontario Energy Board (OEB) released regulated price plan (RPP) rates for Winter 2016-17 on October 19th, leaving rates unchanged from summer 2016 rates. The lateness of the news had me expecting they were being politicized, so maintaining existing rates didn’t surprise me. Reading the report rationalizing the prices, there is some good news for consumers as rate pressures decrease (as predicted in the government’s Long Term Energy Plan forecasts). There’s also some very bad news for consumers, as the OEB has negligently punted costs down the road – again.

Reviewing and setting prices every six months protects consumers from fluctuating commodity prices and provides stability and predictability on the electricity line of their bills. It also ensures supply costs are fully recovered so that the system continues to operate effectively.   – OEB news release

The goals of rate setting are to recover the full costs of supply with “stability and predictability.” The rate setting methodology for accomplishing this is set out in Regulated Price Plan Price Reports – I’ll call these RPPPR.

Essentially these reports forecast all supply cost, how much of that cost is to be recovered from Regulated Price Plan (RPP) consumers (while the vast majority of consumers in Ontario are charged this way, the exclusion of larger consumers from the plans means only a little over 40% of all provincial consumption). The RPPPR is very much a forecast of what the market rate, plus the “class B” global adjustment rate, will average over the next 12 months (although rates only apply for 6 months, when the process repeats). For those familiar with the sector’s jargon, the RPP is a forecast of the Class B commodity rate.

Part of the RPPPR process is recognizing a variance account tracking the extent to which the RPP fails to recover the full costs, or recovers too much. Ignoring the variance account, the newly released Winter 2016-17 RPPPR calculates a rate of $110.13 per megawatt-hour (MWh), or 11.013 cents/kWh. One year ago the RPPR calculated a rate of $109.49, but the variance account provided a reduction of $2.22/MWh a year ago, whereas the recent report included a charge of $2.26/MWh reflecting rates not recovering the full cost of supply over the past year. This is curious – keeping rates down despite the variance account growing indicating rates were too low to recover all supply costs.

“[Ensuring] supply costs are fully recovered,” is a stated goal of the regulator.

Can this light bulb go off

Here’s a thought: How much should your electricity bill go up because of people employed to save stupid people money?

Respected energy economist Severin Borenstein is advising readers to Trash those incandescent bulbs today!

A standard LED bulb now costs only about $3, less if you buy in bulk or live in an area where they are subsidized by the local utility.  And the LED uses 8.5 watts to produce the same amount of light as a 60-watt incandescent.  The Department of Energy generally calculates costs based on assuming a light bulb is used 3 hours per day, but let’s be super conservative and assume it’s only used one hour a day. And let’s assume you pay the average residential retail rate for electricity in the U.S., 12.73 cents per kilowatt-hour. If that’s the case, then in the first year you would save $2.39, 80% of the purchase cost.

Better if you live in Ontario (Canada that is) – because the IESO and its couponing:

So the IESO will assure you get a full return on your LED lightbulb – don’t worry if you’ve got specialty bulbs that cost a little more, because the IESO gives you a little more for those.

Except, in the IESO’s world, you’ll likely end up down on the deal anyway.

Borenstein writes:

Replacing all of the incandescents in your house is likely to save you $50 per year or more.

That may be true in California (where he is located), but in Ontario it isn’t enough to guarantee saving you anything.

Because Ontario has committed to purchase far more power than it consumes, there is no collective saving in conservation. What there can be is cost transfers.

Revising Borenstein’s statement above:

Replacing all of the incandescents in your house, and installing them in your neighbour’s house, is likely to save you…

Slide 26 from Bruce Sharp’s presentation 

It seems impossible to convince most people that the IESO’s wasting $400 million a year on conservation can only increase the total charged to consumers by $400 million because of today’s surplus.

Anybody know how to get that light bulb to go off?

Curtailment of contracted electricity supply still rising in Ontario

October 1st is here, so the third quarter of 2016 is now history. Seems like a good time to review some things – like Ontario’s move towards world leader status in the curtailment of potential supply from wind turbines – mostly paid whether or not their output can be handled by the grid.

Over the first 3 quarters, I estimate curtailment of supply from industrial wind turbines is three and a half times greater than the same period in 2015 – and 14 times higher than in 2014.

The kicker here is that the greatest period for curtailment in the past has been the fourth quarter.

Curtailment data is difficult to find (which is why I produce it), but increasingly of interest across the world. China is often noted for high curtailment – one report shows 21% of all potential generation in that country curtailed in the first half of 2016.

It’s difficult to compare jurisdictions, but Ontario seems to be chasing China for lowest utilization of potential wind output. Depending on whether or not calculations included estimated distribution-connected turbines (which we have little reporting on in Ontario, but expect can’t be curtailed), I have the 12-month running average curtailment levels at 16-18.3%, and I expect that to rise rapidly until cold sets in.

A warm December and Ontario could set a record for annual wind curtailment levels.