Ontario electricity costs 4 times inflation under Liberal rule
“Provincial benefit”: is this another one of Premier Wynne’s “stretch goals”?
Parker Gallant maps power price increases under the Ontario Liberal government
Back in February 2011, IESO announced in their publication the Electricity Insider that a line item on some electricity bills would be changed. The message was: “For all consumers that pay for electricity on market prices or who have signed a retail contract, the line item Provincial Benefit on your electricity bill will be renamed Global Adjustment starting in 2011.”
For those who relied on their local distribution company to bill them, the term “Provincial Benefit” or “Global Adjustment” never appeared on their bill. It was hidden in the “electricity” line!
Presumably as a result of the change someone at IESO went back to 2007 and changed all the monthly summary reports to read Global Adjustment rather than “Provincial Benefit”. Since then the term Global Adjustment has gained a certain infamy, commencing with the 2011 Auditor General’s report, the December 9, 2014 report and again in the December 2, 2015 report.
In 2007, the first year the GA term first appears in IESO’s annual consumption reports, one notes Ontario’s consumption was 152 terawatts (TWh). The GA was $3.95 per MWh and the HOEP (Hourly Ontario Energy Price) or market price was $50.51 bringing the average cost for the raw commodity; electricity, to $54.46/MWh or 5.4 cents per kilowatt hour (kWh) for the year. That means the cost of the raw electricity consumed was about (152 TWh X $54,460,000/TWh = $8.27 billion) $8.3 billion. Another $300 million was required to cover the cost of 5.1 TWh of imports and 12.3 TWh of exports (5.1 TWh X $50.51 million/TWh + 12.3 TWh X $3.95million/TWh = $$306 million) making the all-in costs of the commodity $8.6 billion.
Electricity used to be cheap
What that means is, even though the Liberal government had been in power for four years, the price of generating electricity was relatively cheap, increasing at a rate of about 3% annually from $47.82/MWh in 2003 to $54.46/MWh in 2007. While the increase came in higher than inflation, ratepayers were told repairing the system because of its reputed neglect under the previous government was the reason.
Fast forward to 2015 and see what the next eight years under the Liberal government brought ratepayers for the raw commodity’s cost, in comparison to the first four years.
IESO’s 2015 annual consumption report, released days ago, indicated Ontario’s consumption had dropped to 137 TWh (9.9% less than 2007). We were also informed exported electricity increased to 22.6 TWh and imports were 5.8 TWh making net generation 153.81. TWh.. Now let’s look at its cost.
For 2015 the HOEP was much less than 2007, averaging $23.60/MWh whereas the GA increased to $77.80/MWh for Class B ratepayers2. making their all-in cost $101.40/MWh). In order to compare the cost in 2015 we use the cost of the HOEP applied to the total net generation of 153.8 TWh at the HOEP value of $23.6 million/TWh to note the market value was $3.629 billion. Class B ratepayers consumed 114 TWh at a GA cost of $77.8 million/TWh which adds $8.896 billion to the cost of generation. Finally Class A ratepayers picked up $1.096 billion of the GA costs according to IESO. That brings the cost to almost $13.6 billion. If one includes the provincial portion of the HST (effective July 1, 2010) add $950 million bringing the increased costs in eight years to almost $6 billion. In percentage terms it becomes 68.7% or 8.5% per annum or more than four (4) times the inflation rate!
It would appear the label “Provincial Benefit” when applied in 2011 was the first attempt by the Liberal government to set a “stretch goal” without specifying a dollar amount or a percentage! They missed the goal with the reduction of auto insurance and in the case of the electricity sector they really blew it by contracting for industrial wind turbines and solar panels at above market prices. It’s not a stretch to say, it had nothing to do with the closing of the coal plants!
January 25 2016
IESO’s press release suggests total generation from all Ontario sources was 153.7. We attribute the difference (100,000 MWh) to rounding.
In 2007 there was only one class of ratepayer but on January 1, 2011 two rate classes were created with Class A defined as customers with an average monthly peak demand exceeding five (5) MW and every one else was a “B”. The 5 MW monthly peak has since been reduced to three (3) MW.
PS: What caused the huge increase in the basic commodity cost and a major multiple of inflation will be brought to light in the next article.
The views expressed are those of the author and do not necessarily represent Wind Concerns Ontario policy.