Electricity bills up, Ontario’s future down: Parker Gallant

Ontario: higher electricity prices inevitable as death and taxes


The average Ontario ratepayer today
The Ontario Energy Board (OEB) is charged with the task of determining the outcomes of the upcoming six months of costs that will accumulate in the Global Adjustment Mechanism (GAM) pot. They recently announced the continuing and inevitable conclusion—electricity prices are going up on November 1st, 2013.  
According to the Press Releaseit will cause the “average” residential user’s bill to rise by $4.00 per month and only cause a 3% increase on the total bill.  While the latter statement is meant to suggest that the increase is less than it appears as it actually raises the cost of the “electricity” line by 12.2% per annum.  The fact is, with the HST added it becomes an annual increase of 12.9%.   That 12.9% is in addition to the 2.9% increase the OEB announcedin April this year, meaning electricity rates in Ontario have (collectively) increased over 15% in just six months.  The amount extracted from the average ratepayer (800 kWh per month) over 12 months will be $100.00 each from those two increases and $500 million from all the province’s average residential ratepayers.
The principal reason for the current and past increase(s) is that the GAM pot is expected to climb over the next six months as more industrial wind and solar are added to the grid and we start paying for more “dispatched off” power including wind and solar.   Paying for power we don’t need has become a significant cost under the Liberal watch.
To put some context on the accelerating accumulation of the GAM pot the OEB provides a “Price Comparison for Residential Customers” and in that document discloses that 6.79 cents of the average price of each kilowatt hour (kWh) of 8.88 cents comes from the GAM pot.  For the next six months, the OEB calculate the GAM portion of a single kWh represents 76.5% of the cost of a kWh.  In 2009 that portion was about .64 cents of the 6.22 cents per kWh or slightly more than 10% of the cost of electricity per kWh. 
Just idling
In 2009 Ontario had less than 800 MW of wind turbines generating power meaning; we paid less for those idling gas plants backing up wind and solar, we paid less to export at a loss and less cheap clean hydro was spilled.   The refurbished reactors at Bruce (with capability to “steam off” nuclear) were not yet running so we also were not paying for that cost. 
Scott Luft (morecoldair) posted a chart he found in his travels through OEB documents, which points to what has caused that GAM pot to grow so quickly.  The chart (which Scott has marked), was prepared by Navigant and shows supplies of electricity from gas (10%), wind (6%) and solar (1%) were responsible for producing 17% of Ontario’s electricity generation, but also that their contribution to the GAM pot were, respectively, 21% for gas, 11% for wind and 11% for solar.  Gas is included as it sits idling as back-up for when the wind isn’t blowing and the sun isn’t shining.  The gas plant operators are paid a Net Revenue Requirement or NRR for just sitting in the idling position. 
So, those three “renewables” (as defined by successive Liberal energy ministers), generated only 17% of Ontario’s electricity production but added 43% to the GAM pot.  It will only get worse!
According to the Ontario Power Authority’s report of June 30, 2013, Ontario had over 2,200 MW of wind operating and 800 MW of solar.  The report states they had another 3,600 MW of wind and 1,200 MW of solar contracted for but not yet in production.   When up and running, the latter will add over $2 billion to the GAM pot without the costs of the back-up payments to gas plant generators, steaming off Bruce nuclear, the loss on exports or adding transmission infrastructure to hook them to the grid.
Wind and solar drive price up
As anyone can see, adding the contracted wind and solar to the grid will further drive up the price of electricity—the rate increases will not slow.   It is time for Ontario’s 6.79 cents per kWh GAM charge to be renamed to reflect reality. Germany calls theirs the “renewables surcharge” which, interestingly enough is 6.24 cents per kWh, and is less than Ontario’s GAM portion.
The ratepayers of Ontario should expect the $500 million they have just had extracted recently will look like small change in a couple of years.  The efforts of the Liberal government to reward their friends in the wind and solar business are affecting all who aren’t part of their grand plan.
The Wynne-led government is determined to turn Ontario into more of a charity case than it already is!
Parker Gallant,
October 18, 2013
The views expressed here are those of the author.

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