Wind farm contracts add to Ontario electricity costs
Costly contracts from the OPA add to consumer bills
Are the agencies of the Ontario government doing all they can to contain electricity bill increases and costs of power generation in Ontario? The answer is “no,” and here’s why.
During the first six months of 2014, the Ontario demand for electricity, according to the Independent Electricity System Operator (IESO) monthly summary sheets, was 71 terawatts (TWh). Total demand was 79.1 TWh. Looking at who generated the power shows that 40.3 Twh1 was generated by OPG (Ontario Power Generation); however ,they included 1.6 TWh generated by two jointly owned gas plants, Brighton and Portlands, making their actual production 38.7 TWh. The balance of 40.4 TWh came from OPA-contracted generators and non-utility generators (NUG). The OPA as of June 30, 2014 had contracts for 22,522 megawatts (MW) with 16,704 MW in operation and the balance under development.
Coincidentally, the OPG’s quarterly report for the six months ending June 30, 2014, stated they had 16,931 MW operating, including their 50% of the two jointly owned gas plants. Extracting the 565 MW from the two gas plants puts OPG’s claimed capacity at 13,366 MW. As the two provincially owned entities had similar capacity, it is worth comparing them on generation and cost. IESO doesn’t break out the specific generation or capacity provided by NUG-contracted parties, so we estimated NUG capacity at 1650 MW (from the Association of Power Producers of Ontario/APPrO) adding it to the OPA capacity for comparison purposes.
The results show OPG produced 48.9% of Total demand for the January/June period and the OPA/NUG combination produced 51.1%, despite the latter having 53% of total Ontario capacity versus the 47% held by OPG. If one looks at Ontario demand (70.1 TWh), OPG produced 54.5% of all Ontario consumption.
Ontario exported more than 10% of total demand
In the six months ending June 30, 2014, Ontario exported 8.4 TWh or 10.6% of Total demand and generated revenue of $447 million for those export sales. The “bare bones” cost of that production to Ontario’s ratepayers was: Global Adjustment (GA) + Hourly Ontario Energy Price (HOEP). The cost to ratepayers in the six months for the exports was in excess of $275 million. The latter dollar amount doesn’t include costs associated with: hydro spillage, wind power generation curtailment, paying for idling gas plants, meteorological stations, conservation spending, etc. which all find their way into the GA pot.
For the six months to June 30, 2014 the HOEP “weighted average” was $53.24 million per TWh. The HOEP had not seen such lofty prices in the first six months of the year since 2005 when it actually equalled the average rate levied on Ontario’s ratepayers. Nine years ago HOEP reached 6.3 cents per kWh in the first six months, equal to the average charge to ratepayers. Since then we have the GA to contend with; its “weighted average” for the first six months of 2014 was $32.65 per megawatt hour or 3.3 cents per kWh. The last time we saw the GA lower was 2010 when the weighted average was $29.30 per MWh (2.9 cents/kWh) for the six months ended June 30, 2010 and it ended the year close to that amount.
Now the foregoing is not overly upsetting until you look at the total GA for the first six months of 2014 and apply it to the generation delivered by the three categories of OPG, OPA and NUG that find their way to the GA pot. To wit: The total GA reported by IESO for the first six months of 2014 was $2,159 million and OPG’s share was 2 % or $42 million, the OPA’s costs were $1,774 million (82%) and NUG contracted parties represented the remaining $343 million or 16%.
Measurement of the GA generally reflects on individual costs of the generating components which feeds the claim that wind and solar costs are falling in relation to consumer based electricity costs which are rising. Consumers know those “commodity” costs increase every six months when updated by the Ontario Energy Board.
The following looks at those GA costs in a different light—by capacity rather than contracted rates or actual generation source! Using the above dollar values indicates the GA costs to Ontario’s ratepayers per MW of capacity2 for the six months was:
For OPG: $42 million/16,366 MW = $ 2,600
For OPA: $1,774,000,000/16,704 MW =$106,000
For NUGNB:: $343,000,000/1,650 MW =$208,000
(NB: The OPA renegotiated the NUG contracts following a directive of November 23, 2010 they received from Brad Duguid3 when he sat in the Energy Minister’s chair.)
Wind power contracts among costs to OPA
It is worth noting the Bruce Nuclear contracts are in the OPA totals which considerably lower than the overall OPA costs per MW of capacity. The bulk of the costs related to the OPA are attributable to contracts with wind and solar developers, embedded and curtailed generation, conservation spending, the NRR (net revenue requirement) for idling gas plants, etc.
As a consumer in Ontario my view is IESO should be doing all they can to ensure OPG’s capacity is utilized to the greatest extent possible in order to contain rate increases. Those rate increases appear to have been caused by the obvious difficulties the OPA had in negotiating generation that provides value for Ontario’s ratepayers perhaps because they simply do the bidding of the Liberal government’s energy minister regardless of the impact on consumers or the provincial economy!
Merry Christmas to all and please don’t forget to renew (or join) Wind Concerns Ontario so we can keep up the fight to bring sanity back to electricity planning in the Province.
December 20, 2014
- OPG 2nd Quarter report 2014 on Page 2.
- Rounded to the nearest hundred dollars.
- The H.J.Heinz plant was one of the NUGs in Duguid’s directive but they left the province anyway.
Parker Gallant will be on leave for the holidays, returning in the New Year.