Can 20 year contracts be amortized over 30 years?

written by Gary Mooney, and reproduced here with permission.

I contacted the Ministry of Energy by phone to ask if 20-year electricity generation contracts – e.g. wind and solar — were going to be extended to match the government’s new 30-year amortization period for capital expenditures.

The answer that I got back was:

* There will be no negotiations to extend contracts at this time.

* But generators will be offered the opportunity to continue producing electricity beyond the 20-year point, at the market price (or a negotiated price, not sure which was mentioned).

This is consistent with Minister Thibeault’s comment, in justifying a longer amortization period, that wind turbines have a useful lifetime of 30 years.

The idea of an extension of wind contracts will be a major concern to those living with turbines, as they have been expecting that the problem will go away after 20 years. And worse, if there are no negotiations now, these folks will have to live with uncertainty for anywhere from 10 years (the earliest contracts) to 20 years.

To make an extension of the amortization period work, the province needs continued power generation over the whole period out to thirty years, either:

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Alternative (Energy) Facts – from Environmental Defence, et al.

I started receiving messages last night on a sorta report by Environmental Defence (ED), and as I am still receiving them, I thought I’d write some thoughts – if only to simply copy a link when again asked for my thoughts.

Here is how ED’s Keith Brooks begins a blog post on their latest “work”:

Electricity prices in Ontario have risen in recent years, putting the squeeze on some Ontario residents and businesses. There are many reasons for the increase in electricity prices and renewable energy is one of them.  However, the role of renewables in diving up electricity bills has been vastly exaggerated.

I wrote on a poor 2014 ED work and noted their new backgrounder contains a graphic with the same information as Figure 1 of their 2014 work. Without acknowledging any level of competency in the compilation of data for either ED graphic, here’s the elements of residential electricity bills as they report them for 2016 and 2014:

edcomp2

Perhaps the “role of renewables in driving up electricity bills” is perceived as being significant because:

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Ontario FAO misleads on electricity costs

Peter Harrison, the Chief Financial Analyst at the Financial Accountability Office Of Ontario (FAO), wrote a commentary on Home Energy Costs in Ontario.

Hours later, the Toronto Star blissfully titled its requisite sorta reporting on a sorta positive for the ruling Liberal party with, “Ontario hydro cheaper…”

StarTitle

The headline is false – and I should, and will, explain why. However, the bigger questions for me are; does the commentary fit with the intended role of the financial accountability officer and, if it does not, was this work intended to mislead people in exactly the way the poor Torstar headline writer indicates?

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