Fun with numbers on your monthly hydro bill
The “global adjustment” on your hydro bill may be the most globally incomprehensible form of consumer pricing ever.

thestar.com
Jan. 10, 2016
By Martin Regg Cohn

Ontarians get jolted monthly by hydro bills that generate electricity price shocks.

It’s not just that costs are rising inexorably.

Confusion keeps growing about how those prices are calculated, starting with that incomprehensible “global adjustment” that gets bigger with every bill.

Auditor general Bonnie Lysyk made headlines last month by telling ratepayers they were hit up for $37 billion “over the market price” of electricity from 2006-14. She warned that Ontarians faced an astonishing $133 billion in “excess payments” through 2032.

It gets worse. Ontario suffers from an oversupply of electricity much of the time, hence Lysyk’s suggestion that it’s not cost-effective to invest in conservation.

“We are concerned that the ministry continues to invest in conservation efforts when Ontario already has significant surplus power,” the auditor’s report concludes ominously. During a surplus, “reducing electricity consumption through conservation efforts is of little value.”

Right. But wrong, oh so wrong.

According to the auditor, conservation costs us money, so we’d best keep burning fossil fuels up in smoke? No thanks, especially when she knows our electricity surplus is partly due to the economic downturn and that the oversupply won’t last forever.

The auditor isn’t alone in having fun with numbers. While our chief bean counter gets bogged down in the beans, energy wonks also get so down in the weeds that it’s hard for the rest of us to make sense of an electricity debate that is more about polarization than polarity.

Brace yourself for more political static on Monday, when Ontario Power Generation lays the groundwork for a multibillion refurbishment of its aging nuclear reactors at Darlington, reviving memories of spectacular cost overruns when the plants were first built.

Opponents of wind turbines and their Tory-blue allies see red over the Liberals’ green energy policies, echoing the auditor’s arguments about overpaying recklessly for renewables. But when you look at the fine print, the auditor’s math gets mischievous yet again.

Her calculations suggest $9.2 billion in excessive spending on renewables over 20 years - a figure that is, ah, 73.5 per cent higher than what the Independent Electricity System Operator (IESO) came up with. That’s a pretty big spread, plus or minus.

Apart from the computational dispute, there’s a conceptual margin of error that jumps out of the auditor’s report. Lysyk tells us we are paying a massive premium - averaging more than $6 billion a year - over the “market price” of energy generated daily by the IESO.

Inside its sprawling operations centre, the (arm’s-length) IESO matches supply to demand at any instant in time - acting as a clearing house for electricity generation across the province. Excess supply is sold at the going price, sometimes at a loss, to out-of-province utilities.

It would be more accurate for the auditor - and all of us in the media - to describe that so-called “market price” as a kind of spot market. Or more precisely, a clearing house akin to the Last Minute Club where you can snag a dirt cheap getaway the day before departure, online and off-season - unlike booking a vacation during spring break.

If you want to fly at peak periods, you’ll have to pay peak prices to get a booking from an airline that invests in its fleet, fuel and staff to get you airborne (and charges extra for food, baggage, blankets, pillows, fuel surcharges and taxes). That’s the analogy to the spot price for electricity. For the auditor to cite it as a reference point seems utterly pointless.

The “global adjustment” on your electricity bill may be the most globally incomprehensible form of consumer pricing ever invented, but it is not a made-up number. As the auditor knows full well, it relates to the long-term contracts with electricity suppliers who use that money to build gas-fired power plants or nuclear reactors to ensure a reliable long-term supply for everyone.

It’s one thing to argue that governments have mismanaged the planning process with costly solar and wind power, expensive relocations of gas-fired power plants and nuclear cost overruns. But if the energy debate keeps generating pointless numbers - if we can’t even agree on electricity price points - how can we make any useful points that would improve the mix in our already mixed-up energy sector?

Bad enough that governments of all stripes keep bungling energy. Mangling the numbers will only make it harder to make sense of the nonsense.

Ontarians support electricity conservation, even if it comes at a cost - especially when carbon pricing is coming. They voted to get rid of coal-fired power plants. And they want a reliable electricity supply.

Yes, electricity prices are going sky high. But we can’t fly away from them by joining the Last Minute Club.