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We paid $37B above market?
#1
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.
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#2
Thanks, I really appreciate the brief investigation into that headline. I knew that something was funny about it, but didn't have enough time to start digging into it myself.
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#3
(12-03-2015, 11:51 AM)tomh009 Wrote: 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.

You should turn this into an OPED piece and send it to the the "news" sources who don't report the news but choose what they want and then readers believe it is the news. 

"It must be true , I read it on the Internet!"
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#4
(12-04-2015, 08:03 AM)MacBerry Wrote: You should turn this into an OPED piece and send it to the the "news" sources who don't report the news but choose what they want and then readers believe it is the news. 

"It must be true , I read it on the Internet!"

I think the only edit necessary to turn it to a publishable op-ed piece is to omit the final paragraph that directly insults the journalistic integrity of the institutions to which you'll be submitting the article :)
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#5
(12-04-2015, 10:49 AM)chutten Wrote:
(12-04-2015, 08:03 AM)MacBerry Wrote: You should turn this into an OPED piece and send it to the the "news" sources who don't report the news but choose what they want and then readers believe it is the news. 

"It must be true , I read it on the Internet!"

I think the only edit necessary to turn it to a publishable op-ed piece is to omit the final paragraph that directly insults the journalistic integrity of the institutions to which you'll be submitting the article Smile

Yeah, it's a pretty good analysis, and, with the appropriate tweaks... should be sent in.
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#6
Sounds like you're saying people shouldn't make their weekly grocery budget based on the lowest single-day sale price you might've found somewhere in the region once last year. I'd concur, please look it over, get it to 250 words and a fit for a casual audience, and you've got something I'd like to see in the paper.
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#7
(12-04-2015, 12:58 PM)Viewfromthe42 Wrote: Sounds like you're saying people shouldn't make their weekly grocery budget based on the lowest single-day sale price you might've found somewhere in the region once last year. I'd concur, please look it over, get it to 250 words and a fit for a casual audience, and you've got something I'd like to see in the paper.

Present length might be ok. send it over to jroe@therecord.com and they might well run it. You might like to add the intro from Viewfromthe41 as an opener.


p.s. For the second time I'm not at all impressed with the AG work. Last time her analysis of P3 partnership costs was equally bogus.
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#8
Had a recent discussion with AJ Beyers new CEO of Root Data Centre and former President Rogers Data Centres.  I was trying to talk him into locating his next Data Centre in RoW but unfortunately Hydro Rates make the business case impossible.  To see more background check out http://www.rootdatacenter.com/press-release/

However, hope might be on the horizon.  Patrick Brown Official Leader of the Opposition at Queen's Park and Leader of the Ontario PC Party spoke last week at the Confederation Club's 40th Anniversary Gala to an audience of over 150.  Patrick talked about 4 pillars to his platform 1) cut red tape, 2) Infrastructure, 3) affordable energy and 4) education (deep programming skills).  See https://youtu.be/cp48AmFRTcs for my two favourites.  

For more on the Confederation Club see http://www.confederationclub.ca
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#9
The day Patrick Brown, or anyone else for that matter, comes up with some concrete details of how they'll get hydro costs down, without incurring major debt or launching the Province into law-suit land, he'll be worth a look.
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#10
IEFBR14, care to elaborate on your opinion, in ways that don't look like copy/pasting from a PC Party flier?
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#11
(06-21-2016, 02:34 PM)panamaniac Wrote: The day Patrick Brown, or anyone else for that matter, comes up with some concrete details of how they'll get hydro costs down, without incurring major debt or launching the Province into law-suit land, he'll be worth a look.

Exactly.

I hear comments from businesses a lot, too. Just last week, a business operator was commenting that hydro prices will be one determinant of where he chooses to locate an expansion. He was able to list prices per kWh in several U.S. states.

But I question how electricity costs in Ontario could be brought down. The costs associated with nuclear cannot be changed now; renewables at their current miniscule share of the mix contribute far less to the costs than a lot of people suggest; and salaries are probably a small part of the problem, too.

I’m not a partisan, but the Liberal move to close our coal plants was a good one that will have significant benefits. Bringing it back (I don’t think anyone is proposing this but, hey, it is cheap) isn’t advisable, and probably wouldn’t be a huge savings, anyway. There are no realistic ways of seriously holding costs and, while there aren’t, it’s at best a distraction to talk about our high hydro prices.
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#12
(06-21-2016, 02:55 PM)MidTowner Wrote: … renewables at their current miniscule share of the mix …

Wind is undependable, but sometimes exceeds the fraction from gas.

http://www.ieso.ca/Pages/Power-Data/default.aspx#supply
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#13
It’s true that production from wind exceeds that from gas overnight sometimes. Overall, though, about 10% of our electricity is produced from wind, less than 1% from solar, and 30% from gas. Maybe 10% isn’t quite miniscule, but it’s a small piece of the pie, and it’s not a huge part of the reason our rates are what they are.
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#14
Well "BlackBerry Polisher" if you read my post you would see that Root Data centre received 25M in Private Equity Financing and decided to locate in Quebec where Electricity Rates are lower as it made the business case dead simple for them. So yes for RoW to be successful in the Tech Startups Community there are some fundamental things that the government needs to address to make it more affordable for companies to locate here. I don't really care which provincial government does it but having us over pay for electricity is a major deterrent. Not having access to a skilled workforce is another deterrent. Once you have a startup get off the ground then you need good management that continues to innovate or you end with the fate of a RIM/Blackberry.
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#15
Hard to have a fair comparison with Quebec and its oodles of hydro power.
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