Your hydro bill pays mainly for nuclear, gas; Renewable energy accounts for 17 per cent of global adjustment charge
04/19/2013
That's the conclusion of a study done for the Independent Electricity System Operator (IESO), which runs Ontario's power market.
Renewable power has frequently been the whipping boy for hydro price increases, because of the highly visible prices it commands.
It's also a political flashpoint: the provincial Progressive Conservatives have presented a bill in the legislature that would gut the renewable energy policies adopted by the Liberals.
But a study by Navigant Consulting Ltd. shows that payments to nuclear and gas-fired generators are responsible for two-thirds of the "global adjustment" charge, which is the biggest part of the "electricity" line in your hydro bill.
The global adjustment is only visible on the bills of consumers who buy their power from an energy retailer. But it's blended into the regulated price of power as well, and now makes up a far bigger part of a bill than the market price of power.
For example, so far this year, the "electricity" portion of the power bill has averaged just under 8 cents a kilowatt hour (kwh). Most of that - about 5 cents - is the global adjustment, with only about 3 cents coming from the wholesale electricity market. (A bill also includes delivery, regulatory and debt retirement charges, which are separate.)
Ontario residents and businesses paid about $10 billion for electricity in 2012. That includes both the market price and global adjustment, but not delivery, regulatory and debt charges.
Navigant calculated that the global adjustment for a year was $6.3 billion, or more than 60 per cent of the total. (Navigant used a slightly different year for its calculations - from October, 2011 to September, 2012 - but the price pattern was reasonably consistent.)
The global adjustment is the cost of paying for electricity that is produced from nonmarket agreements, including contracts with private generators; the regulated output of Ontario Power Generation; and from other arrangements, such as renewable power contracts.
Those sources now make up the vast bulk of Ontario's power supply.
The market generates only about three cents a kilowatt hour for these generators. But since they have contracts guaranteeing prices higher than that, customers have to pay an extra fee - the global adjustment - to make up the revenue.
Just how the global adjustment is calculated is murky to most, but the Navigant report lays out how the main components stack up.
"Nuclear and natural gas-fired generation were the two largest contributors to the global adjustment over the study period," Navigant concluded. Nuclear plants - both the privately operated Bruce Power and the publicly owned Ontario Power Generation - contributed 42 per cent to the global adjustment cost, Navigant found.
Natural gas-fired generators contributed another 26 per cent.
Renewable power accounted for just 17 per cent of the global adjustment, Navigant found.
The remaining 15 per was needed to cover a variety of other costs, including payments to Ontario's soon-to-be-closed coal plants.
The Ontario Conservatives have put most of the blame for power prices on renewables, and proposed a private member's bill that would eliminate the current above-market prices for renewable power.
In a release Thursday, Conservative leader Tim Hudak blamed rising electricity prices on "rich subsidies for costly industrial wind farms we don't need."
The Conservative bill, which would also give municipalities more control over wind farms, was voted down Thursday by the Liberals and NDP.
Copyright 2013 Toronto Star Newspapers Limited
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