How loss is actually profit: the Chiarelli principle
The Chiarelli Charade
Energy Minister, Bob Chiarelli, at question period (just after minute six) in the Ontario Legislature on December 3, 2015 once again demonstrated his ability to obfuscate was lacking as he was attacked and eventually reverted to the ridiculous suggestion once again, that selling surplus energy to our neighbours was profitable!
To call his bluff all one needs to do is review the October monthly “Market Summary” from the IESO website. Couple the October summary with the prior nine summaries and you will see that Ontario’s Class B ratepayers (average consumers and small businesses) continue to see rate increases. Those increases are partially caused by Ontario’s surplus capacity and our continuing need to either export those surpluses at a loss to our neighbours or to curtail production. Either option (as noted in the recent Auditor General’s report) will raise the cost of electricity for Ontario’s consumers and small businesses.
Once again exports in October were large at 1.5 terawatts (TWh) or enough to satisfy the needs of 800,000 average Ontario households. Total exports for the 10 months ending on October 31st now total 17.7 TWh — that’s enough to provide power for the full year to 1.8 million average Ontario ratepayers. It also represents about 13.8% of Ontario generator’s total production for those nine months. The 17.7 TWh were sold via the market for an average of $26.1 million per TWh generating about $460 million in revenue, but cost Ontario’s ratepayers $2.017 billion, generating a loss close to $1.6 billion.
If Ontario was selling that surplus at a profitable rate, the effect on ratepayers would result in favourable contributions to reduce rates but, alas, that is not what happened, despite Minister Chiarelli’s obfuscation. The cost to produce that 1.5 TWh of exported power in October set ratepayers back about $175 million and it was sold for $38 million (a “Chiarelli profit”) meaning the loss for the month was $137 million! The loss for October brings the cost of export sales to about $350.00 per “average” ratepayer for the 10 months beginning January 1, 2015.
Wind power generation played a role in both, increasing our surplus and causing the hourly Ontario electricity price (HOEP) of $25.07/MWh (2.5 cents per kWh), to remain well below the cost of “contracted rates.” That is a matter of fact and common sense but seems to escape Minister Chiarelli.
According to another IESO webpage, wind produced 1.08 TWh in October and would represent 72% of Ontario’s surplus exports. Couple that 1.08 TWh of reported generation with the DX1. (distributor generated) wind production of 139,000 MWh, curtailed production of 73,000 MWh and what do you get? Wind alone could be held responsible for 86% (1.3 TWh) of our exports. The output from wind generators in October (a low demand month) was almost equal to their production for the combined months of June, July and August all of which are higher demand months.
With wind power costing ratepayers $1.6 billion so far in the current year, it seems strange our Energy Minister still claims it generated a “profit”.
- Thanks to Scott Luft for his incredible data.