Saving money with smart meters: the Liberal promise

On April 19, 2004, the Premier of Ontario, Dalton McGuinty, said in a speech to the Ontario Legislature, “Smart meters, together with more flexible pricing, would allow Ontarians to save money if they run appliances in off-peak hours.”

   A few days ago Rosemary Leclaire, CEO of the Ontario Energy Board (OEB),  delivered the following message in her speech to the  Ontario Energy Association:  “We are using data supplied by a number of utilities to analyze the impact of time-of-use pricing on peak consumption. Early results show that residential customers are cutting their consumption during high price periods and shifting their peak usage until after 7 PM.”

   The two quotes are years apart but are related.  Did we really save money by shifting usage as McGuinty claimed or was that simply political hyperbole?   Since his speech electricity rates have risen 65% and delivery rates even more.  Then, add the HST.

   The Ministry of Energy (MOE) tells us we can save moneywith smart meters:  “Shift electricity use to off-peak periods. With smart meters and time-of-use pricing, you can save money by switching some of your energy use to mid- and off-peak hours when electricity prices are lower.”

   Well, here’s the truth: the money we can save does not come, as McGuinty and the MOE suggest,  from simply adjusting our use of appliances in off-peak hours. No, to really save money, you have to leave the province for at least five months and  head south where electricity rates are much lower (See the EIA reported  all-in electricity rates here.).

   This sad truth was revealed to me in an e-mail sent by someone with an interest in my writings about the Ontario electricity sector.  He described how he and his wife save money by moving to Florida for five months every year.  In fact, he said, their travel costs are paid for with the money saved by leaving Ontario.   Here is what he said.

February in Florida the coolest month I used electric heat, electric stove, and electric water heater, plus TV, microwave, lights, computer, radio etc.  I used 479 KW at a gross cost of $48.89. That's 10 cents per kW. Meanwhile in Ontario my house at 9 degrees C with natural gas using fans, fridge on, sump pump.  Telephone and clocks on stove, microwave and radio getting power. I used 133 kW for a cost of $59.64 in an empty house. That's 44 cents a kW. When the house is occupied I use about 700 kW per month. Higher in the cooler months, I would estimate much higher in the cold ones. In April- May 2013, I used 752 kW for a gross charge of 176.00 or .234 cents a kW.
So if my winter costs were the same as April - May, my five-and-a-half-month cost is $968.  My five-and-a-half-month Florida cost averages $30.00 or $165 US.  I don't really know what my February bill would be if I stayed home--I can only assume it would be more than $176.00  If I do the Florida trip in one night, my expenses down and back are around $500 for gas, motel and food.

Florida is not the cheapest state for US electricity rates (it’s 16% under the US average) but the foregoing does highlight the cost of electricity in Ontario versus much of the US East Coast.   Those states are ones that Ontario often competes with for jobs. 

   Curiously, a side issue of the Florida story is that the principal provider of electricity is Florida Light and Power (FLP) a subsidiary of Juno, FL-based NextEra.  The company has several contracts with the Ontario Power Authority for industrial wind projects and plans to develop 600 MW in Ontario.

   One can only conclude that the Ontario Government's handling of the energy portfolio in Ontario has driven jobs south, attracted foreign companies looking for big payoffs, granted those companies carte blanche to kill, harm and harass our birds, bats and turtles, reduced our property values, caused health problems in rural communities, and, yes, driven our electricity bills up. 

   In the end it appears that McGuinty spoke the truth--he just didn't tell us we would have to leave our province for five months to “save money”. 

Parker Gallant,

September 18, 2013

PS:  NextEra contributed the maximum amount ($9,300) to the Ontario Liberal Party in both 2011 and 2012.

The opinions expressed are those of the writer and not necessarily Wind Concerns Ontario policy.

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One Sunday in August: how IESO forecasts Surplus Baseload Generation (Hint: it costs you)

Is the Independent Electricity System Operator (IESO) really forecasting power needs in Ontario? Or, simply “paying up”?

   The IESO manages the electricity grid in Ontario. That job has become much more complex since Ontario started adding intermittentrenewable energy (wind and solar) to the grid.  Complicating matters further is the stipulation, via the Green Energy Act, that both those sources of generation get “first to the grid” rights.*

  Part of this management responsibility is to forecast generation. IESO in their forecasting efforts for Surplus Baseload Generation (SBG) look forward for 10 days with revisions/updates made daily to those forecasts; the tenth day is added as the forecast period becomes reality.  IESO issues forecasts and often now even issue an “Alert”, two to four days out, which is defined as: “Forecast SBG will exceed the forecast of expected exports for four or more contiguous hours.”

   To explore their “forecasts” let’s take a look at their forecast for August 25, 2013.  IESO's outlook for that particular Sunday, made on August 23, 2013, predicted an SBG of 38,786 megawatts (MWh) and an “Alert.”  For six of the 24 hours, the anticipated SBG was in excess of the forecasted “exports” which were projected as 2,700 MW per hour.

  The August 24, 2013 forecast, however, for August 25, 2013 noted zero hours when the SBG would exceed those export forecasts (the same 2,700 MW) and the SBG for the full day had dropped to 19,485 MW—the “Alert” disappeared.  

   So the question becomes, exactly what happened in the 24 hours that changed the SBG so dramatically?  Did the weather forecast change that much, or did several of the large industrial users suddenly decide that they would run their plants on the weekend to suck up all of that SBG?

   The short answer is, neither of the above!  

   What appears to have happened is that IESO arranged to have Bruce Power steam off a huge chunk of their nuclear generation (as much as 1,600 MW), perhaps get the Ontario Power Generation to spill off clean hydro, and get those NUG-contracted generators to also shut down another 600 MW of gas generation.

   Despite the foregoing Ontario still exported 51,528 MWh(according to IESO's Market Summary of August 25, 2013) at an “average weighted price” of $20.58 per MWh (2.06 cents per kWh) while wind produced 14,304 MWh. That earned wind developers almost $2 million, with $1.6 million (the difference between earnings from the exports and what we paid the wind developers) therefore allocated to the Global Adjustment (GA) along with the monies paid to Bruce; perhaps as much as $2.5 million, the NUGs; perhaps another $1 million and a loss of revenue to OPG.  

   We are unable to determine the costs of the latter three or the monies paid to the solar generators as IESO don't provide any details on who they asked to curtail production or what we ratepayers paid them to curtail their production. 

   Any efforts to obtain the latter information under the Freedom of Information and Protection of Privacy Act would be declined as I have learned from past efforts.  The foregoing are simply the writer's efforts to reasonably calculate what that recent Sunday cost the ratepayers of Ontario.

Based on the suppositions noted above, we would estimate that the additional costs associated with those payments to not produce power and what was lost by exporting the surplus power added a minimum of 1.4 cents per kWh (double the stranded debt charges) to the average Ontario ratepayer's bill for that one day in late August 2013.

  We should all hope for fewer days like this as IESO's apparent efforts at forecasting are simply meant to determine who should be paid for the follies of the energy policies put in place by the Liberal government and its energy ministers.

   It is time that the Ontario ratepayers demand that we stop “paying up” for the mess that the Liberals have created, and for the IESO to stop claiming that what they do is “forecasting”!

Parker Gallant,

August 27, 2013

      

*(similar to nuclear, must-run hydro, and the obligation to take the NUG/non-utility generators output.  The latter consist principally of older contracted gas plants whose contracts have been recently renewed by the Ontario Power Authority/OPA)

The views expressed here are those of the author and not necessarily those of Wind Concerns Ontario.

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Coming soon to YOUR electricity bill:OEB spin

The Ontario Energy Board (OEB) is responsible for setting Ontario's time-of use (TOU) and regulated price plan (RPP) electricity rates, and it does this twice annually, in April and October.   The announcements are made slightly in advance of the effective dates of May 1^st and November 1^st and reflect what the OEB anticipates will occur in the upcoming six months.   The reset rates are based on what the OEB feels will be required to pay the generators over that period of time.  

   The OEB preface their   announcement by saying that “the increase will add [insert amount] to the average ratepayer’s bill per month or [insert percentage] of the total monthly bill.”  They never specify that it is only the cost of electricity and that other items on your bill will/or may have already gone up!  Their last announcement on TOU and RPP rates indicated an increase of 2.9% for the May 1, 2013 bills but it was actually an annual increase of 11% for many residential consumers. 

    The upcoming announcement in late October will accordingly reflect an adjustment to what has actually occurred (during the six months from May 1^st to October 31^st) and what is anticipated in the next six months.

     Based on the first three months (May through July 2013) of the current period, Ontario's ratepayers should expect another significant increase.  Data from the Independent Electricity System Operator (IESO) indicates this period has seen a drop in Ontario's demand of 4.7% or 1.7 terawatts (TWh)  which is equal to 1.7 billion kilowatts (kWh).  In any sane industry, a drop in demand normally signals the providers that the product/service needs a price reduction, or suppliers to exit the market, but the electricity sector is not ruled by “sane” individuals. It is a instead a centrally mismanaged industry run by the McGuinty/Wynne Liberal government with support from the NDP.

   The cost of electricity to Ontario's ratepayers consists of: the Hourly Ontario Electricity Price (HOEP) plus the Global Adjustment (GA).  While the former reflects a trading market for electricity, functionally only the profitability of the “unregulated” hydro production from provincially owned Ontario Power Generation (OPG) is affected by the HOEP.

   The GA on the other hand is loaded with costs that bear no relevance to the generation of electricity-items like the cost of picking up your neighbour's old fridge, the monies handed out to gain aboriginal involvement in “wind” and “solar” production (referred to as “price adders”),  the costs of the “conservation” initiatives, the costs of paying for the non-production of electricity generation from gas, and nuclear, plants, the costs of erecting meteorological stations at wind turbine developments so ratepayers can pay the developers for not producing power. And of course, there is the cost of supporting wind and solar production when it actually produces power at prices that are well above market, and five to six times what we sell that power for to our neighbours in New York, Michigan, Quebec, etc.

(NB:  Not included in the GA is the cost of erecting and connecting transmission lines, adding transformers, etc. for the wind and solar generators.   Those costs reflect themselves in the “delivery” line of your bills and they too keep increasing to pay for the billions that Hydro One has spent, and will continue to spend as more of these go into commercial operation.)

   While the market value (at HOEP) increased nominally  from the three comparative months in 2012 to 2013, the GA increased by over $400 million—a 26% rise.  With demand also down, the per-unit impact should be ~32%, or 1.4 cents per kilowatt-hour (twice the debt retirement charge).  The $135 million per month increase in the GA, if extended for a full year, will add almost $1.6 billion annually to the GA pot and would almost equal three “gas plant scandals” each year for the next 20 years.

   The other factor playing into the continuing rise in our electricity bills is the unalterable fact that the $135 million per month increase only reflects about one-third of what the Ontario Power Authority (OPA) has already contracted for in respect to wind and solar generation.  According to the OPA, wind power in commercial operation as of March 31, 2013 was 2,059 MW, representing 36% of the contracted supply of 5,797 MW  and 764 MW of solar represented 38% of the 1,996 MW contracted for.

  Despite the fact that only about one-third of contracted wind and solar are in commercial operation they are already driving up the costs of electricity.  Independent Electricity System Operator (IESO) data shows that over the three-month period in 2013, wind produced 2.5% of Ontario's total generation.  At a price of $135 per megawatt hour wind production would be directly responsible for approximately 5.4% of the total GA. There is no comparable data from the IESO for solar, which can be seen as a huge shortcoming as our estimates range from solar producing from 0.7%-1.2% of all generation, but contributing from 6.5-11% of the global adjustment.  Wind and solar generation together likely produced 3-4% of generation and directly accounted for around 15% of the global adjustment charges.

   Indirectly the cost is higher:  natural gas-fired plants have been contracted, guaranteeing Net Revenue Requirement (NRR) that make them profitable whether or not they produce power (the hope being they are used only for backing up low/no carbon emission sources).

   The conclusion one can draw from the foregoing is that renewable energy (wind and solar) producing intermittent electricity (80% of the time when we don't need it) costs ratepayers four times what it costs for conventional sources and when those remaining contracted 3,739 MW of wind and 1,232 of solar are in commercial operation, we should expect they will produce (on average but 80% of the time when it’s not needed) 10.5% of Ontario's demand and represent about 40% of the GA costs.  Those GA costs have climbed to the point where they now represent in excess of 65% of our electricity costs.

   At that point it will be interesting to see how the OEB spins the increases that will be trotted out in the spring and fall announcements.  For starters we should expect an interesting announcement in October as it is now appearing they missed the mark with their 2.9% in April 2013 (actual 11%) by a pretty wide margin if the following three months are similar to those just past.  The OEB announcement will need to include the 20% plus they missed to simply catch up and whatever is expected in the six months, November 1, 2013 to April 30, 2014, when a further chunk of those wind and solar contracts will suddenly impact our electricity prices.

   Ontario's ratepayers should expect to be dazzled by the “spin”!

Scott Luft  and Parker Gallant

August 22, 2013

The views expressed here are those of the authors and do not necessarily represent Wind Concerns Ontario.

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