12-03-2015, 11:51 AM
So G&M posts their top story about the Ontario Auditor-General's report:
http://www.theglobeandmail.com/news/nati...e27560753/
The highlight is "Ontarians paid $37-billion above market for electricity over eight years." This seemed like an awful lot of money to me (even more than the cost of the LRT!) so I was compelled to figure out how this was possible. And the news articles provided little detail on what this was all about.
$37B over eight years works out to about $300/year for every man, woman and child in Ontario, or $1200/year for a family of four. Did we really overpay for electricity by this much -- maybe by half of our electricity bills? And somehow the hydro infrastructure is still not in good shape?
I found the real source on the AG's web site; all the reports are here:
http://www.auditor.on.ca/en/reports_2015_en.htm
So it turns out that the "market price" the media refers to is the "Hourly Ontario Energy Price", which is basically the wholesale spot market price for electricity -- what bulk wholesale electricity costs at any moment in time, if we were to sell to (or buy from) our neighbouring jurisidictions. This is nothing at all like a retail "market price" for electricity for end consumers. The price goes down (and can even go negative) is there is a surplus of power at any point in time, and will go up if there is a need for more power. However, it's not realistic to build a power grid based solely on wholesale spot purchases, as often there is nothing available to be purchased, and certainly it would be exceedingly rare to be able to buy enough power for 13M people. On top of that, there are still the transmission and delivery costs that cannot be avoided.
So it seems that this price gap is more or less irrelevant, the actual production cost will be different than the spot market anywhere. And in any case, even the AG didn't focus much on this number, it was just a convenient headline for the media. What really matters is how much we pay as end consumers. According to Ontario Hydro, including all charges, it's an average of about $0.14/kWh:
http://www.ontario-hydro.com/index.php?p...y_province
Hydro-rich Quebec aside, this somewhat higher than the provincial average but not extraordinary. In the US, the average appears to be US$0.126/kWh (C$0.17/kWh), and in Europe it's €0.20/kWh (C$0.28/kWh). So if anything, we have fairly inexpensive electricity. I think we should focus on the AG's comments on the condition of the hydro infrastructure instead, even if it means slightly higher rates.
Sadly, that's not what the media focused on. I suspect they didn't even do this much homework, to figure out what the meaning of the $37B actually was.
http://www.theglobeandmail.com/news/nati...e27560753/
The highlight is "Ontarians paid $37-billion above market for electricity over eight years." This seemed like an awful lot of money to me (even more than the cost of the LRT!) so I was compelled to figure out how this was possible. And the news articles provided little detail on what this was all about.
$37B over eight years works out to about $300/year for every man, woman and child in Ontario, or $1200/year for a family of four. Did we really overpay for electricity by this much -- maybe by half of our electricity bills? And somehow the hydro infrastructure is still not in good shape?
I found the real source on the AG's web site; all the reports are here:
http://www.auditor.on.ca/en/reports_2015_en.htm
So it turns out that the "market price" the media refers to is the "Hourly Ontario Energy Price", which is basically the wholesale spot market price for electricity -- what bulk wholesale electricity costs at any moment in time, if we were to sell to (or buy from) our neighbouring jurisidictions. This is nothing at all like a retail "market price" for electricity for end consumers. The price goes down (and can even go negative) is there is a surplus of power at any point in time, and will go up if there is a need for more power. However, it's not realistic to build a power grid based solely on wholesale spot purchases, as often there is nothing available to be purchased, and certainly it would be exceedingly rare to be able to buy enough power for 13M people. On top of that, there are still the transmission and delivery costs that cannot be avoided.
So it seems that this price gap is more or less irrelevant, the actual production cost will be different than the spot market anywhere. And in any case, even the AG didn't focus much on this number, it was just a convenient headline for the media. What really matters is how much we pay as end consumers. According to Ontario Hydro, including all charges, it's an average of about $0.14/kWh:
http://www.ontario-hydro.com/index.php?p...y_province
Hydro-rich Quebec aside, this somewhat higher than the provincial average but not extraordinary. In the US, the average appears to be US$0.126/kWh (C$0.17/kWh), and in Europe it's €0.20/kWh (C$0.28/kWh). So if anything, we have fairly inexpensive electricity. I think we should focus on the AG's comments on the condition of the hydro infrastructure instead, even if it means slightly higher rates.
Sadly, that's not what the media focused on. I suspect they didn't even do this much homework, to figure out what the meaning of the $37B actually was.