The Class A cost transfer

Parker Gallant has a new post covering the Industrial Conservation Initiative (ICI), or Class A Global Adjustment mechanism: Ontario’s class distinction stings ordinary hydro customers.
 In early 2010, then Minister of Energy Brad Duguid issued a directive to the OPA (Ontario Power Authority) instructing them to create and deliver an “industrial energy efficiency program” specifically for large transmission connected (TX) ratepayers.

That directive led to the creation of the two classes of ratepayers that now exist in Ontario.

It's an appropriate time to revisit the topic because this past week Ontario's Minister of Energy was touting the electricity cost-saving opportunities for businesses that qualify for participation in a newly expanded ICI, because those savings come from shifting costs to other consumers.

If you are unfamiliar with the topic the latest article may inspire you to learn more, I recommend some articles for doing so at the end of this short post.

One statement Parker makes is not entirely correct: "IESO did not start disclosing the consumption by ratepayer class until 2015." While they did not publish the data to their website, they did share it with those who asked.

chart (1).png



I quickly pulled some data and summarized 12-month running totals to illustrate the cost impacts on remaining consumers of saving ICI/ClassA participants costs. As Parker noted, those costs are now over 1 billion a year.

chart (2).png

The rate impact on non-ICI participants is now greater than the hated 0.7 cent/kWh ($7/megawatt-hour) Debt Retirement Charge. I estimate it added 0.9 cents/kWh over the past 12 months, but in recent months has been adding over 1 cent/kWh.

The program expanded on July 1st, so cost shifting is likely to increase both in size (more dollars from Class A to others) and scope - as others transfer the costs to ratepayers in future years.



 

Related:

"Stakeholders" destroying the viability of Ontario's electricity market, May 2015 - my major work on the topic.

Power Exports at What Cost?
How Ontario Electricity Customers Are Paying More to Dump the Province’s Excess Power , September 2016 - because the savings opportunity of the ICI demands a low market rate, the mechanism is linked to selling exports cheaply. This paper from Brady Yauch and Scott Mitchnick is a good primer.

Ontario Electricity – The Liberals Giveth and Taketh Away, October 2016. Bruce Sharp.

 

 
spreadsheet.

Comments

Post a Comment

Popular posts from this blog

Hurting Michigan

Image
Parker Gallant has called for the Ontario government to "shutdown the intertie line with Michigan" - in an article that notes some of my work. I feel I should offer some support as Michigan is being a lousy neighbour and it would feel therapeutic, if nothing else, to respond. I'll try to stick to data. The system operator in Ontario (IESO) data indicates the Michigan intertie is the most lucrative for exports - but that's not saying much: exports at that intertie were bought in Ontario for an average of just 1.2 cents/kWh ($12/MWh) in 2020 - but were in such high demand another 0.9 cents/kWh of congestion rent was paid. Over the past 5 years congestion rents comprise 46% of the revenue on the Michigan intertie. The IESO's insiders' committees are considering how much of  this revenue to share with the exporters instead allowing it to solely benefit internal Ontario consumers. Action #1: hell no. Issue a ministerial directive that congestion rents will only b...
Read more

Ontario's electricity system has not yet passed gas

Image
Ontario’s electricity system includes generators fueled by natural gas. This is suddenly a hot topic as a campaign lobbying councils to say no to this type of generation moves through municipalities. The “no gas” lobbying appeals to a desire to reduce greenhouse gas emissions, exploiting predictions of increased use of natural gas in generating electricity in the province. This article will explore what entities have been the key drivers of emissions in Ontario’s electricity system, the credibility of the body being cited predicting increased generation fueled by natural gas and, if all goes well, convince the reader they are not willing to decrease global carbon emissions at any cost. Background on the IESO’s pretend market My previous post reconstructed a method to estimate losses on electricity exports out of Ontario. The measure does not indicate Ontario would be better off if it didn’t export its excess, but that Ontario would be better off with data discipline and consistent me...
Read more