Parker Gallant on the problem of expensive, surplus power
When you do a little research on the issue of energy in Ontario, it becomes obvious that the problem is surplus and very expensive electricity. Ontario companies who use a lot of electricity and compete across the U.S.-Canada border are finding they are under siege from their U.S. competitors—their clients are getting better prices from U.S.-based border companies.
Two companies mentioned in the speech by Minister Chiarelli at Giant Tiger last week were held up as examples of a change to one of the programs that former Energy Minister Chris Bentley brought in. That program was the Industrial Electricity Incentive (IEI) program. …
Let’s look at the two companies that Chiarelli is asking us all to support, and the many more that may follow now that the bar has been lowered to increase consumption! Before going there, however, I should explain that one objective of the IEI is to reduce our export volumes. For 2013 that was 18.3 TWh at the average HOEP of 2.65 cents per kWh. At one point Minister Chiarelli mistakenly suggested Ontario had earned a profit of $6 billion on exports but since his discovery of that mistake he perhaps believes it is better to at least keep some of the jobs at home. The cheap electricity was Ontario exported was creating jobs elsewhere like New York and Michigan.
One of the companies that Minister Chiarelli mentioned was Detour Gold, a relatively new gold producer located in Northeastern Ontario south of James Bay. The following was found in their latest annual report: “In January 2014, the Company was accepted into the Industrial Electricity Incentive Program for a 6-year fixed rate electricity contract at CAD $0.05/kWh with the Ontario Power Authority which is estimated to reduce power costs by approximately CAD $20,000 annually.”* Now if you run the numbers on the savings at, say, 4 cents a kWh, it works out to consumption of 500 MWh annually or enough to power about 50 average homes, or less than 1% of a TWh.
The other interesting fact about this is that Elections Ontario reports that Detour Gold in 2012 contributed $9,300 to the Ontario Liberal Party—about 50 % of their reported annual savings. Makes you wonder…
Read Parker’s full article here: Minister Chiarelli surplus electricity production
*Addendum to Post of April 29, 2014:
While Detour Gold claim a savings of only $20,000 annually in their annual report as a result of their IEI six (6) year contract the actual amount that they will save is probably closer to $20 million or $120 million over the 6 years. We base those calculations on the information recorded on the Environment Ministry website where they record their approval in 2010 of an application for a 230 kilovolt (KV) transmission line to supply the mine with 120 megawatts (MW) of power. On that basis 120 MW could supply Detour Gold with in excess of 1 million MW hours annually and at a price of $50 a MWh would produce annual savings of $20 million. That is a much better pay-back on the $9,300 contribution they made to the Liberal Party and it will be extracted from all the other ratepayers in the province! Kind of sounds like a new way of creating one of Premier Wynne’s “Revenue Tools”.