Growing the Global Adjustment

By Parker Gallant

January 10, 2012

 

The Independent Electricity System Operator (IESO) issued a news release January 6, 2012 in which they disclose how much electricity Ontario produced and consumed in 2011. They also included the supply mix of that production. During 2011 we produced 149.5 terawatts (TWh) or put another way 149.5 billion kWh (kilowatts) and we consumed 141.5 TWh of that production, down slightly from 2010 when we consumed 142 TWh. The most dramatic shift was in our production of electricity from coal which fell from 12.6 TWh in 2010 to 4.1 TWh which was partially offset by increased production from nuclear, (+2.4TWh) hydro (+2.6 TWh) and wind (up by 1.1 TWh)

 

Year	Nuclear	Hydro	Coal	Gas	Wind	Other
2011	85.3 TWh	33.3 TWh	4.1 TWh	22.0 TWh	3.9 TWh	1.2 TWh
	56.9 %	22.2 %	2.7 %	14.7 %	2.6 %	0.8 %
2010	82.9 TWh	30.7 TWh	12.6 TWh	20.5 TWh	2.8 TWh	1.3 TWh
	55.0 %	20.4 %	8.3 %	13.6 %	1.9 %	0.8 %
2009	82.5 TWh	38.1 TWh	9.8 TWh	15.4 TWh	2.3 TWh	1.2 TWh
	55.2 %	25.5 %	6.6 %	10.3 %	1.6 %	0.8 %
2008	84.4 TWh	38.3 TWh	23.2 TWh	11.0 TWh	1.4 TWh	1.0 TWh
	53.0 %	24.1 %	14.5 %	6.9 %	0.9 %	0.6 %

 

The most alarming aspect of the one page media release however is not contained in the chart above, and is instead found in the penultimate paragraph where IESO tell us that the total cost of power in 2011 was 7.16 cents per kWh up 9.8% from 6.52 cents per kWh in 2010. IESO further break that down into the two categories that make up this price; the hourly Ontario energy price (HOEP) commonly referred to as the “market price” and the Global Adjustment (GA). The HOEP dropped 16.9 % from 3.79 cents a kWh to 3.15 cents a kWh but the GA went up 46.9% as it increased from 2.73 cents a kWh to 4.01 cents a kWh.

 

The increase per kWh in the GA may not seem big but the difference of 1.28 cents a kWh added $1.471 billion to the GA. In just three years the GA has grown from about $590 million for 2008 to $5.1 billion for 2011. The GA includes all of the new FIT and MicroFIT renewables, the spending on conservation, various programs for the Aboriginals, Co-operatives and Municipalities, costs of OPG keeping the coal plants available as peaking power, gas generators idlying payments, constrained power for certain generators and many other spending programs that are unrelated to the actual production of electricity.

 

Based on the IESO increase in the cost of electricity of 9.8 % from 2010 to 2011 we should anticipate rates to rise May 1^st and November 1^st sufficient to cover that increase.

 

It didn`t take long for the clawback of that 10% Ontario Clean Energy Benefit!