TomAdamsEnergy.com

Check out this interview published August 30, 2010 between the Ottawa Citizen’s Don Butler and Energy Minister Duguid as he tries to skate away from the rate tsunami now bearing down on Ontario electricity consumers. Duguid refuses to refer to consumer costs in reply to any of Butler’s pressing questions on rates.

This article (”Hydro prices ‘going up like a rocket’, August 22, Ottawa Citizen)  is an excellent piece by Don Butler about the immediate rate outlook for Ontario households and discusses Ontario rates in comparison with US power rates.

In the comments for this article, I posted the following note:

Almost all of the costs for power in Ontario for the next several years are already locked in by government contracts. Ontario consumers are paying full price for giant amounts of power deliberately spilled or sold below cost to neighbouring utilities while the government signs more long term supply deals for wind, solar and nuclear at insane prices. Total electricity sales are dropping and will keep dropping as rates rise. Conservation is doing little to cut the overall spending of Ontario consumers for electricity, although it is changing who pays what share.

The attached essay provides a brief summary of what happened to the $6.85 billion dollars collected from Ontario electricity consumers starting in 2002 — money that was earmarked to pay off a key element of Ontario Hydro’s legacy of debts. Whereas the Ontario government originally promised that the Debt Reduction Charge revenues would have eliminated the debt by 2012, the secret plan upon which this claim was based has never been revealed and an explosion of costs in the government-controlled power sector indicate that the special charge is here to stay.

Warning: The attached essay is difficult to read. The twists and turns of the story are just not that easy to make digestible.

The attached essay provides nine proposals for solutions to the growing rate crisis that I estimate will cost the average household an extra $350 per year by the end of 2011.  None of these proposals magically put the cost tooth paste back in the tube, but the proposals do minimize the scale of the mess.

Ontario’s  wasteful and imprudent Feed-In Tariff (FIT) program contains a provision whereby it is to be reviewed every 2 years. A generous optimist might say that this provides an opportunity for reason to creep into the program’s administration. However, precedents in renewable energy subsidy program administration suggest otherwise.

The same two year review rule applied to Ontario’s Renewable Energy Standard Offer Program (RESOP) which was introduced in 2006.  Like its successor, FIT, RESOP paid generators far above market price, relieved generators from any requirement to compete again each other on the basis of price, and disconnected generation procurement from any relationship with consumer demand, although in a less egregious fashion than FIT. Instead of mitigating these harms, instead the two year review rule’s result was to provide an opportunity for renewable energy lobbyists to convince the McGuinty government to drain blood faster from consumers.

In October 2009, the Ontario Power Authority offered generous contractual amendments to RESOP contract holders for proposed wind power projects that already had received a certificate of approval from Ontario’s Ministry of the Environment. The amendment provided projects with a rate increase from the 11 cent RESOP price to 13.5 cents. The amendments removed the OPA’s rights to potential ecoENERGY payments, which under RESOP might be available to off-set some consumer costs. (As of May 19th, I am reviewing the accuracy of the above statement re. ecoEnergy.)

To load up on contractual sweeteners, former RESOP developers had to commit to bringing their facilities into commercial operation by Dec. 31, 2010 and to provide performance security assurances. As a slight nod to consumers, liquidated damages could be assessed for late delivery.

As a result, consumers are paying a steep premium over the already imprudent RESOP price to accelerate the onset of electricity delivery.

Meanwhile, as discussed previously in the “Ontario Power Bill Rip-off” series, disposal costs for excess electricity supply are now costing consumers unknown  amounts. When the costs of excess supply are counted, they will be counted in the hundreds of millions of dollars — possibly billions — which may be why McGuinty is concealing the data to start adding up the costs.

McGuinty’s concealment prevents us from evaluating what may turn out to be the most painful loss to consumers arising from the RESOP-to-FIT conversions. The RESOP program did not provide for compensation to generators when Ontario was experiencing excess supply, however the FIT program does. FIT generators will be paid on the basis of “deemed generation” irrespective of whether they are feeding the grid.

The next edition of the “Power Bill Rip-Off” series will address practical solutions to Ontario’s electricity rate crisis that can be implemented immediately without freezing necessary business planning at OPG and Hydro One as McGuinty has just done.

The Ontario government is operating the province’s vastly complex power system without a plan.

Although the Ontario Power Authority was set up in 2004 with a mandate to create and update an integrated power system plan for the province, no such plan has been approved and the most recent draft is over three years old.

In the last couple of weeks, the Ontario government, which had supervised the preparation of business and rate plans at OPG and Hydro One, ordered both Crown utilities to abandon those plans just days before they were to be filed with the Ontario Energy Board for public review. Part of OPG’s plan was expected to include some of the first details made public on the extent of power spills. Hydro One’s plan was to include details on how new renewable generators will be connected to the transmission system.

Notwithstanding yawning information gaps and the curtailment of existing generation resources due to excess supply, the Ontario Power Authority is recklessly signing contracts for new generation supply at a rate of over one billion dollars per week.

(Post script: The day after this comment was originally posted, the Toronto Star made a related complaint referencing the Environmental Commissioner in this editorial.)

In this Earth Day, 2010 debate, I take on Kris Stevens of the Ontario Sustainable Energy Association on the costs of green power. I argue that the policy of promoting green jobs will cost more jobs than it gains, that Ontario’s green power program is being imprudently administered, and that  your power bill is becoming a rip-off.