Galloping Global Adjustment
As noted in the previous posting, over the past eight years (2007 to 2015) Ontario electricity ratepayers have seen the charge for the basic commodity increase by $6 billion dollars every year — that’s like the cost of moving 12 gas plants, every year. This huge jump happened without a clear indication from our political leaders as to the cause, other than blaming neglect of the system on their predecessors and the objective to save the world from climate change.
So what is the real story?
The following estimates may provide the reader some clarity as to the source of most of those costs. Please bear in mind that some of these are estimates as the information is not readily available from our less than transparent government entities.
- The provincial portion of the HST obviously added a lot to the costs and represents about $950 million of the $6 billion.
- The addition of over 2,000 MW of solar power generation added about $1.4 billion to the annual costs
- The addition of about 4,000 MW of wind power generation added around $1 billion to annual costs.
- Agreeing to allow previously unregulated hydro owned by Ontario Power Generation (OPG) to be regulated added $250/350 million.
- Granting a rate increase to cover OPG pension and benefit shortfalls added $300 million
- Directing the conversion of two OPG coal plants to biomass added $150 million annually
- Creating a surplus of generation that is exported without the GA being included added $1.7 billion in costs.
- Paying OPG for spilled hydro, Bruce Nuclear for steaming off nuclear, wind generators for constraining, etc. probably cost $300 to $400 million
- Moving two gas plants amortized over, say, 20 years would cost about $50 million.
- Spending $4.1 billion on Big Becky and Mattagami amortized over 50 years added about $75 million
- Paying idling gas plants as much as $15,000 per month per MW of capacity to back up wind turbines probably added $500 million per annum.
While this actually doesn’t include all of the actions directed by the Energy Minister and also indicates a total that exceeds the $6 billion in increased costs from 2007 to 2015, some of the costs listed above have not yet entered the billing system.
Electricity rates are forecast to increase in excess of 10% in 2016 by the end of the year, meaning the cost of the raw commodity, electricity, will reflect the galloping “Global Adjustment” going forward.