Electrical Madness in Green Ontario

Consumer Price Index: Ontario Electricity compared to all items, from 2004. Chart: Bank of Montreal.

Rising electricity rates in Ontario are hitting residents and businesses hard. They have gone “out of control” as the Liberal provincial government followed through on eliminating coal-fired power stations.

Brian Hill at Global News provides the back story, a frightening and cautionary tale of “fighting climate change” by pricing away your affordable power grid.

Energy Mix, Electrical Sector

The energy mix in Ontario’s electrical sector is dominated by hydro and nuclear, so getting off coal seemed doable.  But in the provincial government’s drive to reduce CO2 emissions and join the California Emissions Trading Scheme, they have hardwired costly energy contracts that Ontarians will pay for through their noses for decades. Meet the Global Adjustment Fee (covering a multitude of sins and mismanagement).

What is the Global Adjustment fee? The mysterious cost Ontario hydro customers must pay by Brian Hill of Global News

A product of Ontario’s 2009 Green Energy Act, the Global Adjustment fee is a charge billed to all hydro customers in the province.

For major manufacturers and large businesses, the fee appears separately on electricity bills. But for residential customers and small businesses, the fee is hidden – appearing on your electricity bill as a part of the per kilowatt hour charge.

According to data obtained by Global News from the Independent Electricity System Operator (IESO), the organization responsible for managing Ontario’s energy system, residential customers and small businesses in Ontario paid an average of 7.9 cents per kilowatt hour in Global Adjustment fees last year.

So for every $100 in usage that appears on your electricity bill, $77 of that is the Global Adjustment fee. Meaning the cost of electricity use is only $23.

What exactly is included in the Global Adjustment fee?

First, there’s the difference between what the IESO pays energy producers for the electricity they produce, known as the contracted rate, and the actual fair market value of this electricity, known as the Hourly Ontario Energy Price, or HOEP.

In 2015, the average HOEP was 2.36 cents per kilowatt hour, while the IESO paid wind producers as much as 13 cents per kilowatt hour. The remaining 11-cent difference was then passed on to the consumer in the form of the Global Adjustment fee.

Solar producers, many of which signed contracts with the government for as long as 20 or 30 years, were paid as much as 80 cents per kilowatt hour for the energy they produced, despite the fact that fair market value for this energy was the same 2.36 cents per kilowatt hour. Here, too, the 78-cent difference was passed on to consumers.

And while the argument can be made that the Global Adjustment fee simply reflects the true cost of producing reliable, green electricity in the province, this ignores the fact that, in 2015 alone, Ontario sold more than 22.6 billion kilowatt hours of electricity – enough to power 2.5 million homes – to places like New York and Michigan at the fair market price of 2.3 cents per kilowatt hour – generating a loss of more than $1.7 billion for Ontario hydro customers.

So while Ontario customers are required to pay for producing green electricity, utility providers in the United States are able to access this same energy source for a fraction of the cost.

In other words, Ontarians pay the Global Adjustment fee, delivery fees, administration fees and HST, while American utility providers pay for the electricity alone.

The Global Adjustment fee also includes what’s known as “curtailing,” when the IESO pays energy producers not to produce electricity out of fear too much production could cause stress on the system and result in a blackout.

But when asked not to generate power, electricity producers must still be paid because the Government of Ontario initially agreed to purchase everything the energy producer’s facilities were capable of putting out.

The Global Adjustment fee also includes certain government conservation programs.

For example, when you receive a tax credit for purchasing new high-efficiency appliances or LED light-bulbs, that’s included within the Global Adjustment fee. When a delivery man takes away an old refrigerator for free, or when they recycle your old computer parts, the cost of these services are all part of the Global Adjustment fee.

Why conservation won’t make a difference

Over the past seven years, Ontario has signed numerous agreements with energy producers guaranteeing minimum levels of revenue regardless of how much energy they produce.

TransCanada, set to open their Napanee Generating Station later this year, signed an agreement with the Ontario Power Authority in 2012 that guaranteed the company would receive a minimum of $13.7 million per month once the plant comes online – even if they produce zero electricity.

“Essentially… TransCanada is being paid nearly $165 million a year to leave their power generating station running on idle,” said Parker Gallant, former vice president of TD Bank and an outspoken critic of the province’s green energy strategy.

With agreements similar to this in place across the province, Gallant thinks it’s no wonder hydro rates in Ontario continue to rise.

The easiest way to explain it, said Gallant, is that when energy consumption drops due to conservation, the Global Adjustment fee must be increased to make up the difference. So the less power Ontarians use, the higher their electricity costs must be in order to cover the minimum revenues energy producers are guaranteed.

What Cost to Reduce CO2

“When it comes to fighting climate change, Ontario has already been at war with the provincial economy, devastating consumers and undermining growth. In a burst of regulatory overkill, the province ordered a shutdown of its coal plants and orchestrated a massive overhaul of the provincial electricity market, at massive cost to consumers. When the plant shutdowns began around 2009, Ontario industry and individual consumers used 139 TWh (trillions of watt hours) of electricity. In 2014, the province used the same amount of electricity coal free, but the total cost has increased from $8.6 billion in 2009 to $12.7 billion in 2014, a jump of $4 billion.”

“That’s expensive carbon reduction. Much of the increased spending comes from Ontario’s feed-in-tariff and other subsidies to allow the installation of wind and solar power and construction of new gas-powered plants. According to government figures, closing the Ontario coal plants reduced annual carbon emissions by maybe 10-million tonnes between 2009 and 2014. Let’s see, back of the envelope, $4 billion divided by 10-million tonnes of carbon, works out to about $400 per tonne of carbon per year. ”
http://business.financialpost.com/fp-comment/terence-corcoran-manufacturing-carbon-hobgoblins

Summary

it really is quite remarkable. Ontario is not trying to do something crazy like South Australia, chasing the dream of 100% renewable energy. No, Ontario energy is cheap, coming from installed nuclear and hydro plants, along with stations fired by gas, quite cheap these days. They only wanted to swap out the sliver of coal electricity for more renewables. And look at the mess they created in pursuing that very limited green energy objective.

No wonder the new UK administration is reconsidering their 30-year price agreement for Hinkley Point electricity.  Going ahead means following Ontario and others down the rabbit hole into Not-So-Wonderland.

A world-wide look at damage from green energy policies is here:  Clean, Green and Catastrophic

Update August 2

A closer reading of Hillary’s energy platform shows the Democrats want to go over the cliff with the others. http://dailycaller.com/2016/07/31/5-problems-with-hillarys-energy-platform-that-could-leave-you-in-the-dark/

 

Climate Lemmings h/t Beth

Update August 18 2016

In a recent followup article Global News reports on the increasingly unpaid Ontario electricity bills.

The OEB data shows Hydro One’s total amount of ‘write offs’ for eligible low income customer accounts jumped from $327,230 in 2013 to $1,798,531 in 2015, a 450 per cent increase in the utility’s write off totals in those two years.  . . The total amount owing for Hydro One customers behind on their energy bills rose from nearly $54 million in 2013 to $105.5 million in 2015, according to the OEB. The average amount owing for people in arrears was $292 in 2013 and $467 in 2015, representing a 60 per cent increase.

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8 comments

  1. Bob Greene · August 1

    It’s sort of in the weeds, but are these payments for running at idle similar to capacity payments in the US? One of the ways the US grid maintains capacity to meet peak demands is through what are known as capacity payments, or being paid to be there and not operate except during high demand periods.

    https://learn.pjm.com/three-priorities/buying-and-selling-energy/capacity-markets.aspx

    Like

    • Ron Clutz · August 1

      Bob, apparently curtailing applies both to producers refraining from running at capacity, and also to large energy users (industries) lowering demand by scheduling their usage away from peak demand hours. Since they are rewarded by a reduced Global Adjustment Fee, there is cost shifting onto other users.

      Like

  2. Climatism · August 1

    Reblogged this on Climatism and commented:
    ‘Green’ energy insanity update …

    Like

  3. manicbeancounter · August 1

    I am wondering how the HOEP is so low at 2.36 cents. With £1=C$1.73 that is 1.36p per kWh. In the UK the equivalent wholesale price has recently fallen to 4p, having been in the 4-5p range for the last few years. The proposed Hinkley Point nuclear power station has an index-linked guaranteed price of 9.25p or 16 cents.
    Consumer prices are currently about 15p or 26 cents in the UK.

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    • Ron Clutz · August 1

      Look at the pie chart: Half of the power comes from nuclear (from some years ago), and another 1/4 from hydro dams built years ago.

      Like

    • Ron Clutz · August 1

      Manic, it really is quite remarkable. Ontario is not trying to do something crazy like South Australia, chasing the dream of 100% renewable energy. No, Ontario energy is cheap, coming from installed nuclear and hydro plants, along with stations fired by gas, quite cheap these days. They only wanted to swap out the sliver of coal electricity for more renewables. And look at the mess they created in pursuing that very limited green energy objective.

      Like

  4. Pingback: Electrical Madness in Green Ontario | sunshine hours
  5. Jack Broughton · August 18

    Fascinating and exceptionally clear exposition of how the costs escalate in the real world. In the UK these cannot be accessed among the penalties and bonuses that are applied to confuse and confound us all, but eventually, as Chaucer said ” murder will out, foul murder will out”.

    Like

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