What’s with the electricity system witchhunt?

UPDATE: I’m told by the Independent Electricity System Operator that surplus baseload is down significantly over last year. So far this year we’ve had roughly 60 hours of surplus baseload, versus something in the area of 1,000 hours during 2009. As we move closer to shutting down all coal plants, we’ll look back on these days of surplus with envy.

UPDATE II: This column from the SUN is over the top. The zinger comes from Energy Probe’s executive director Lawrence Solomon, who says coal is clean and should be kept, not retired. He says this because he’s a climate-change denier and doesn’t recognize the CO2 from coal plants as a concern. Also, Ontario Progressive Conservative leader Tim Hudak continues his game of deception by numbers. He said this week that the Ontario Power Authority has ballooned from 15 employees in 2005 to over 300 employees today and its budget in that time has “exploded” by a staggering 465 per cent with nothing to show for it. Without defending the OPA, let’s defend the facts instead. Comparing to 2005 is misleading since the agency was just getting started and was in ramp-up mode. Of course its employee count and budget have grown. But compare the years between 2007 and 2009, as well as 2010 projections, and you’ll find that the budget has stayed relatively stable even as OPA staff are taking on more and more. In 2007 the operating budget was $56.5 million, which rose to $67.5 million in 2008 and fell slightly to $65.1 million in 2009. That budget is expected to remain in 2010. Also, the employee count is closer to 230, not 300. I’m not entirely sure how the Conservatives would run the electricity system without an OPA-like organization. It would probably fold it into another agency or Hydro One, where it would get lost in an even larger bureaucracy. Again, all I hear is criticism; what I don’t hear are solutions or ways of doing things better.

Holy cow, Ontario can’t seem to burp out an electron without some media outlet pouncing and raising a stink about high energy prices or surplus baseload or the cost of conservation or how smart meters are driving senior citizens into poverty. The introduction of the harmonized sales tax didn’t help. Had the HST never been introduced to electricity bills, I wonder whether the other costs felt to date — smart meters, conservation, cost of adding natural gas to the system, some wind, etc… — would have caused such an uproar. The HST as applied to energy was a major Liberal fumble. Beyond that, everything else actually makes sense.

Still, it’s like after a year or two of warning people that renewing the electricity system was going to cause price increases, the press woke up and said, “Hey, what’s with these higher prices?” Anyway, ’nuff with the rant. My biggest concerns is that green energy and the FIT program is being prematurely blamed, when green energy is really just causing a sliver of what we’re seeing today (see my upcoming Monday column).

The latest witchhunt targets surplus baseload. There was a story on CTV.ca this evening pointing out that the Ontario government paid nuclear operator Bruce Power nearly $60 million to not generate electricity because the province had too much baseload power in 2009 and something had to get turned off to protect the stability of the system. What is buried at the end of the story is that in return for this agreement to pay Bruce, the Ontario Power Authority capped how much electricity ratepayers had to pay for cost overruns related to the refurbishment of two nuclear reactors. That part of the deal is expected to save ratepayers about $85 million, based on the most recent cost overrun estimates by Bruce shareholders. So, as far as 2009 goes, we’re still $25 million ahead.

The wildcard is 2010. How many surplus baseload days did we have in 2010 and what will ratepayers have to pay Bruce? Will it be $25 million, in which case we break even? Or will it be more? But even if it is more, is it worth it? I mean, the low baseload power demand is the result of an economic downturn in a year where we had a cool summer. Governments can’t predict this or control it. If we didn’t have Bruce Power there during economic boom times in the middle of a heat wave then we’d risk having blackouts and people would be screaming bloody murder. When they’re there and we don’t use them, it’s called backup. When we need them and they’re not there, it’s called trouble. I’d rather have the former and pay a little bit for it.

6 thoughts on “What’s with the electricity system witchhunt?”

  1. The fact is that fixed income seniors living in electrically heated and poorly insulated condos are going to face hardship, and come this winter, some will be dealing with a choice between eviction or lack of heat. I worked with one elderly woman who had concerns last spring, and I’m on the board of a non-profit agency that deals with these types of issues every day.

    It is also a fact that energy is going to be more and more costly, and electricity bills are going to rise.

    But where the Ontario government, its energy agencies, and the local utility companies have failed is in not creating an education campaign to spell out the bottom line to energy consumers in a more definite way or to help them prepare for a world of more expensive energy.

    With the general rate increases, HST, and time-of-use implementation, electricity prices here (Ottawa) have gone up 45% since April. That’s not trivial. Yet there is no plan from anyone to help out consumers except: do your laundry and set your dishwasher to run at night or on weekends. Trials have shown that kind of puffy advice nets about 2% savings – hardly enough to counter the increase.

  2. hi John, I totally agree with you. My listing of the media reports was more to illustrate the variety of stories that have appeared. These are stories that need to be covered, but a poor job is being done telling both sides. I have been protesting the fact that for a while now the government has done a pathetic job of helping support low-income and fix-income electricity users.

    When you say electricity prices have gone up by 45 per cent since April, do you mean electricity rates or electricity bills? Bills have certainly shot up, but we did have a record-hot summer. The problem is that folks who stay home during the day were forced to run aircon, and that at-peak cost was quite shocking for some. I’m sympathetic. I disagree with you, however, that TOU load shifting only nets 2 per cent…

    Still, it was an unwise move for the gov to impose HST and all this stuff at the same time without having appropriate support programs in place. It wasn’t just unwise, it was irresponsible. They keep talking about helping fund energy retrofits for low-income households, or coming out with programs to help fixed-income folks pay their bills, but I haven’t seen anything yet. The need for this support has become critical, and by neglecting these folks the Liberals will pay dearly at the polls.

    At the same time, I don’t think that’s an argument against the programs that have been introduced. We’re moving away from coal. All new energy is going to cost more, and green energy — when it begins to have a meaningful impact (it hasn’t yet) — will add even more. The smart meters, despite what people think, are actually an important infrastructure expensive that will pay off in the long run. They just haven’t done a good job, as you say, of explaining why it is important. As for higher prices, aside from the impact on low-income and fixed-income folks, which I believe can and should be supported, I think as a society they are valuable. We waste A LOT of energy in Ontario, and to eliminate that waste means taking away the incentive to waste. There’s a big part of the population that can substantially reduce their power bills by better using TOU load shifting and investing in energy retrofits. For this reason, I’m not sympathetic to that vast majority of the popoulation. My bills are going up too, and I’m doing what I can to minimize the impact and reprioritize my spending.

  3. “do you mean electricity rates or electricity bills?”

    My posts here have a link to my web site where I track the costs and compute the ‘all-in’ price (transmission fees, debt retirement, taxes…) of each kWh consumed for the Ottawa market (Toronto is quite close). ( low: 11.408¢/kWh mid: 14.564¢/kWh peak: 16.785¢/kWh) Most people consume in the peak periods (by definition) so when you weight their usage by time and use the all-in numbers, you’re comparing about 15.6¢ on average to April’s price of 10.8¢ (+45%).

    “I disagree with you, however, that TOU load shifting only nets 2 per cent…”

    There were trials here in Ottawa and elsewhere that document a reduction of only about 2%. This was for families who were actually keen to participate, which is why the number is quite disappointing.

    I have spent many hours canvassing people about how they’re going to change their habits, and the only two things people can rhyme off immediately are laundry and dishwasher. Then there’s lots of head scratching and grimaced looks. Without some help by governments creating standards for appliances and other loads that can shift usage patterns, we’re battling human nature and the realities of families.

    I fully agree that with the proper tools, you can significantly reduce and shift your loads. With the average household using 26 to 32 kWh per day (the number has come down in recent years), I’ve been able to reduce my usage to about 8 kWh per day, which includes about 3 kWh for computers in the home office, one being used as an internet server 24/7. But most of the savings was from identifying phantom loads and switching them off, converting to LED lights, and permanently unplugging the dryer (just to name the top few). Once you’ve reduced consumption, time shifting isn’t as big a factor.

    “green energy — when it begins to have a meaningful impact (it hasn’t yet) — will add even more.”

    In the context of other energy prices going up, renewable energy will eventually be a bargain. Those of us trying to get renewable energy to be more of the mix are just trying to get things started and that takes a bit of seed money in the form of ‘prematurely’ raising energy costs to prepare. As we can see by the processes started by Duncan, Cansfield, . . . Duguid, building new capacity takes a very long time and spans more than one or two energy ministers. We can’t just wait for oil, gas, nuclear to balloon in cost and then start trying to switch to renewables. So while in the meantime renewables are adding to the cost over non-renewables, the long-game is a cost saving over maintaining the current mix.

    A quick back-of-the-envelope calculation shows that the renewable generation actually logged and the higher prices we’re paying to put it on the grid has raised bills by about 1 to 2% so far (2009 numbers).

    “The smart meters, despite what people think, are actually an important infrastructure expensive that will pay off in the long run.”

    My estimates are that about $2 billion has been spent on the smart meter program for installation. Since every utility must create a billing system, there are hidden costs at the local level not accounted for in that $2 billion.

    The system that is being built only reports to the consumer the next day, and gives consumption per hour. This falls short of providing consumers with the real tools they need to manage their consumption, which is instant real-time feedback and costing.

    The example I use to illustrate the effectiveness of feedback is the Woodstock, Ontario program which (according to their numbers) reduced participating household consumption overnight by an average of about 15%. The simpliciity of it was pay-as-you go billing where you had a readout of not only how much was being consumed right now, but what it cost. The so-called smart meters can’t do that. (At least nothing so far has been configured to duplicate that ability.)

    If the smart meter implementation does not produce $2 billion in savings for consumers, it’s a failure.

    The real saving for Ontarians will be when we ditch our high-consumption life style, and I agree with you that raising prices is the way to accomplish that. However, energy consumers must be given the tools to get there, and that’s what is still missing.

  4. John Ford, that’s interesting stuff.
    But there is a problem with “Most people consume in the peak periods (by definition) so when you weight their usage by time and use the all-in numbers” – that is only sort of true.
    Ontario consumption – inclusive of all the businesses and MUSH sectors on wholesale rates already, consumes about the same total for off-peak as mid and On-peak combined, because over 55% of the hours are off-peak hours. For residences, the off-peak use is surely higher (ie. weekends).

    Mr. Ford’s experience, and his website, are the argument for TOU – bringing to people’s consciousness how energy is used does cause efficiencies to be found and phantom usage to be reduced. And I’m sure is website has helped people cut their individual costs, but not by ‘shifting’ consumption – only by eliminating it.

    Secondly, TOU’s 3 rates replace 2. The old RPP averages just under 7 cents on historical usage patterns, and the new TOU rates applied to that work out to slightly over 7 cents/kWh. Without serious claims to quantify consumption pattern impact from TOU pricing, the math is very clear. If you are a low volume user your rates (6.5 cents/KwH) will increase disproportionately to high volume consumers.
    So Mr. Ford would see the greatest increase, as he is entirely in the 6.5 cent range.

    Related to the article . I reviewed the last IPSP submitted in 2008 (and not accepted for implementation), and I’d note our Base Load supply, without wind (which of course is not, but is contracted as such) exceeds our base load needs forecast straight through 2015. The next 28 days of surplus baseload generation is always on the IESO site, and currently we are projected to have surplus supply 22% of the time.

    We exported 15GWh last year when the average HOEP rate was $30.55/MWh. Using the average wholesale rate of $62.17, this would make an estimated $478 million subsidy on exporting electricity. The volume is down about 15% this year, and the price up about 25%, but its still an enormous sum to subsidize Michigan and New York. That isn’t a cost of green supply, but it is a costs of not even feigning an attempt to match supply and demand.
    Trying in vain to switch the consumption pattern is another.

  5. @Tyler:
    I agree with you for the most part, but I think it’s a bit misleading to quote an $85 million savings for cost overruns for reactor refurbishments. Yes, I trust you have real numbers, but it is only real because the government made a bad deal in agreeing to pay for those overruns in the first place. To now go back and claim credit for negotiating a deal that they signed is rather ironic, at best.

    I’m liking your analysis, but I would not be so quick to use the debt retirement charge in the current rate calculations. That charge is paying for electricity and infrastructure that should have been bourne by previous users decades ago, so applying it to new rates and not to those old rates is double dipping the impact.

    Also, have you seriously reduced your consumption that much? Seems I need to spend some time on your web site getting advice! Well done! Once idea that I have implemented is to place my freezer on a timer so that it is only powered during off peak hours. Things take days to thaw, so I’m at no risk and am shifting the freezer load 100% to off peak. I’d love to be able to do the same with the fridge, but for that I think manufacturers need to build the function in so that we still have a light when we open the door.

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