Category Archives: Contracts Cancelled

Understanding the Changes in Ontario’s Electricity Markets and Their Effects

money and turbines

Source: Fraser Institute|Published: April 12, 2018

Energy consumption is a driver of economic growth. Policymakers in Ontario have made poor policy decisions, resulting in rising electricity costs, lower employment, and lower competitiveness, while achieving minimal environmental benefits. This publication presents a series of collected essays that critique the reasoning behind Ontario’s electricity policy changes and spell out the long term consequences.

Ontario’s main policy shift began around 2005 when the government made a decision to begin phasing out coal. The next major step occurred in 2009 when the government launched its Green Energy Act (GEA). The centerpiece of the GEA was a Feed-In-Tariff program, which provides long-term guaranteed contracts to generators with renewable sources (wind, solar, etc.) at a fixed price above market rates. In order to fund these commitments, as well as the cost of conservation programs, Ontario levied a non-market surcharge on electricity called the Global Adjustment (GA). Between 2008 and 2016, the GA grew more than 70 percent, causing a drastic increase in electricity prices. The high cost associated with aggressively promoting renewable sources is particularly troubling given the relatively small amount of electricity generated by these sources. In 2016, renewable sources generated less than 7 percent of electricity in Ontario while accounting for almost 30 percent of the GA.

Ontario’s decision to phase out coal contributed to rising electricity costs in the province, a decision justified at the time with claims that it would yield large environmental and health benefits. The subsequent research showed that shuttering these power plants had very little effect on air pollution. Had the province simply continued with retrofits to the coal plants then underway, the environmental benefits of the shift to renewables could have been achieved at one-tenth the cost.

The issue of rising electricity costs in Ontario can be partly attributed to the imbalances between supply and demand of electricity. Between 2005 and 2015, the province decided to increase its renewable capacity to facilitate the coal phase-out. However, since renewable sources are not as reliable as traditional sources, the government contracted for more natural gas capacity as a back-up. Meanwhile, the demand for electricity declined, partly due to rising electricity costs. The increase in the total installed capacity, coupled with lower electricity demand, has resulted in excess production being exported to other jurisdiction at a significant loss.

As a result of these structural shifts and poor governance, electricity costs have risen substantially in Ontario. Ontario now has the fastest growing electricity costs in the country and among the highest in North America. Between 2008 and 2016, Ontario’s residential electricity costs increased by 71 percent, far outpacing the 34 percent average growth in electricity prices across Canada. In 2016, Toronto residents paid $60 more per month than the average Canadian for electricity.

Ontario’s skyrocketing electricity rates also apply to the province’s industrial sector. Between 2010 and 2016, large industrial users in Toronto and Ottawa experienced cost spikes of 53 percent and 46 percent, respectively, while the average increase in electric costs for the rest of Canada was only 14 percent. In 2016, large industrial users paid almost three times more than consumers in Montreal and Calgary and almost twice the prices paid by large consumers in Vancouver. Some select large industrial consumers were granted rate reductions but still paid higher rates compared to large electricity users in Quebec, Alberta, and British Columbia.

Soaring electricity costs in Ontario have placed a significant financial burden on the manufacturing sector and hampered its competitiveness. Compared to multiple comparable American and Canadian jurisdictions, Ontario has exhibited the most substantial decline in its manufacturing sector over the past decade. Overall, Ontario’s high electricity prices are responsible for approximately 75,000 job losses in the manufacturing sector from 2008 to 2015.

Given the critically important role that affordable energy plays in economic growth and prosperity, the authors urge the Ontario government to pursue meaningful policy reforms aimed at lowering electricity costs for all Ontarians.

Authors:
Elmira Aliakbari;Kenneth P. Green;Ross McKitrick;Ashley Stedman

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NextEra renewables sale to CPP speaks volumes

Parker Gallant Energy Perspectives

April 5, 2018

Canada Pension Plan’s investment in part of a wind-solar power portfolio seems to ignore a lot of negatives, including the energy poverty rising in Ontario due to electricity bills

Canada Pension Plan contribution rates are rising again, as reported by the Financial Post December 14, 2017: “the contribution rate (i.e., the CPP tax) has increased from 3.6 per cent when the CPP was launched in 1966 to its current rate of 9.9 per cent. It will increase further to 11.9 per cent beginning in 2019.”

The Canada Pension Plan Investment Board (CPPIB) is an active investor, looking for good rates of return without taking “excessive risk.” So they either searched for assets that pay guaranteed above market rates, or were approached by U.S. Power giant NextEra who sold them their Ontario portfolio of 396 MW of wind and solar contracts. CPPIB paid $1.871 million per MW for a total of $741 million CAD and also assumed the debt (US$689 million) attached to the NextEra portfolio. The press release associated with the acquisition had this quote from Bruce Hogg, Managing Director, Head of Power and Renewables: “As power demand grows worldwide and with a focus on accelerating the energy transition, we will continue to seek opportunities to expand our power and renewables portfolio globally.”

Perhaps Mr. Hogg was unaware “power demand” in Ontario has actually fallen from 153.4 TWh in 2004 to 132.1 TWh in 2017 despite an increase in our population of approximately 450,000. He may also be unaware industrial wind turbines create health problems, cause property values to drop and kill birds and bats including those on the endangered species list.

What the CPP acquisition means is Ontario ratepayers will be indirectly contributing additional funds to the CPP without the benefit of reducing either their annual tax burden or increasing their future pension benefits. A “win, win” for CPP and a “lose, lose” for Ontario’s taxpayers. The sole redeeming feature is that the money will stay in Canada instead of flowing elsewhere.

Ironically, the CPP by acquiring and holding those assets will also be showing their support for energy poverty. The Ontario Energy Board (OEB) in their December 2014 report noted: “Using LIM* as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households.” At that point in time the 713,300 households represented almost 16% of residential ratepayers in the province and one should suspect that number has increased over the past three years.

So, one should also wonder why NextEra, headquartered in Florida, sold those assets and their above market returns? The press related to their announcement of the sale speaks volumes: “As discussed during our earnings call in January, we expect the sale of the Canadian portfolio to enable us to recycle capital back into U.S. assets, which benefit from a longer federal income tax shield and a lower effective corporate tax rate, allowing NextEra Energy Partners to retain more CAFD** in the future for every $1 invested.”

No doubt the NextEra sale may be a sign of the future as the Canadian economy has shown serious signs of slowing as taxes rise and foreign investment falls. The bulk of the investment in the renewable energy sector in Ontario came from offshore companies who rushed to take advantage of the above market rates and guaranteed prices offered under the Feed-in-Tariff (FIT) program available under the Green Energy Act.

Those investors will look to cash in on the sale of those assets, so we should expect to see more public and private Canadian pension funds stepping up to purchase them.

Parker Gallant

*Statistics Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income.

**Cash Available for Distribution

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pggy bank

Could Ontario cancel the wind contracts?

 

Cancelling Contracts: The Power of Governments to Unilaterally Alter Agreements

By: Bruce Pardy| Fraser Institute| Published on October 22, 2014

Government contracts are indeed contracts. In the normal course of events, their terms may be enforced and the Crown held liable for a breach. However, government contracts are not the ironclad agreements they appear to be because governments may change or cancel them by enacting legislation. This paper discusses the means by which governments can make unilateral changes to contracts by statutory enactment.

Legislative supremacy is a central feature of the Canadian system of government. The federal Parliament and provincial legislatures may pass laws of any kind, including laws that change or cancel legally binding agreements, and even if the enactment has the effect of expropriating property or causing hardship to innocent parties who negotiated with government in good faith in entering into the contract in the first place. The powers of legislatures are limited only by the bounds of their constitutional jurisdiction and the existence of constitutional rights. In Canada, there is no constitutional right to compensation for expropriated property.

Just because legislatures can enact an end to a contract does not mean that they should. Using that power erodes confidence in doing business with government, and thus impairs the credit of the Crown and economic conditions in the jurisdiction. On the other hand, if democratically elected governments are to establish their own policies, they require the ability to make unilateral changes to agreements made by previous governments. If they cannot legitimately do so, then their predecessors can control policy decisions beyond the terms of their democratic mandates….

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Cancelling Contracts: The Power of Governments to Unilaterally Alter Agreements:
(full report)

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A Holiday season spent reading ‘worthless pile’ of turbine documents

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Wind turbine blades are shown being transported by rail through Dundas County.

National Valley News| December 31st, 2017| Letter to Editor

Good morning, Ms. Wynne.

First off, thanks for taking the time to read my last letter to you and getting back to me.

That said, I still have not heard back from Mr. Ballard nor Mr. Thibeault, nor did you answer my two questions.

I acknowledge that my last letter was a tad long and that you may not have had the time to read the whole thing, and as such I am re-asking my two questions and await your response.

1. Given that the timing of the Notice of Posting to the Environmental Registry is completely inappropriate, will you repost the 45-day period to start January 1, 2018?

2. Who is ultimately accountable to the citizens of North Stormont when problems arise during the construction and 20-40 year operational period of the Nation Rise Wind Farm Project? Do we send our bills to the Premier of Ontario, the project developer/owner or to the participating land owners who invited the foreign owned wind developer into the township in the first place?

While waiting for you to answer my two questions, I spent numerous hours between field and office work reading the thousands of pages of EDPR prepared documentation in the off chance that you will not move the end of Christmas Day deadline to submit comments into the MOECC Registry.

What are my conclusions to date, you may ask?

Well, the EDPR-prepared documents are generously sprinkled with hundreds if not thousands of promises to the people, birds and bats and the environment of North Stormont.

For example, EDPR is promising that each turbine will not kill more than 10 bats and 14 birds per year, they will keep turbine noise within the old (not new) MOECC noise guidelines (we’ll hardly hear them like a soft whisper at most) and they will “lightly grade“ the areas where the access roads and lay down areas will go in.

There are two problems with this.

1. EDPR seems to have problems “keeping promises” at least to my wife and me. Perhaps others on my distribution list have had better experiences. EDPR made one promise to me and another to my wife during the so called “consultation meetings” with citizens of North Stormont, and sadly they are zero for two in keeping their promises with us;

2. Your Ministry of Environment and Climate Change (MOECC) does not appear to have the tools, resources, and/or interest to strictly enforce wind turbine companies’ promises. The most recent example of this came to light this past week in the Kincardine area where citizens have lodged numerous complaints about noise emanating from the Enbridge Underwood Wind Project. The turbines have been in place since 2007 and given the number of complaints received since the project start up the MOECC and Enbridge decided to perform a noise audit in 2011. Here comes the head scratcher, we are on the verge of the end of 2017 and the noise audit is still not completed. The MOECC confirmed that the MOECC and the wind project developer have been going back and forth with each other for over six years and they still can’t figure out whether there is a problem or not with noise levels emanating from the turbines. In the meantime citizens within the project area continue to have their lives disrupted because of the turbines.

This is unconscionable in 2018 Ontario.

Ontario is blessed to have an Auditor General that is absolutely committed to rooting out waste and mismanagement in Ontario. An example of this happened again this past week where Ms. Lysyk dropped another bombshell on the Energy File where she reported out that private electricity generators fleeced the rate and taxpayers of Ontario to the tune of some $260 million over the past few years.

The Energy File seems to be in complete and utter disarray.

Again Ms. Wynne I urge you to cancel the Nation Rise Wind Project to avoid further embarrassment to your government and if that is not possible just yet, please allow us to enjoy our Christmas season without the need to continue reading the worthless pile of turbine documents.

I look forward to hearing your answers to my two questions soonest.

Thanks for your time and attention.

Raymond Grady,
Crysler

Fully and Finally Resolving Falmouth’s Wind Debacle

Falmouth's Firetower Wind

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Closure rides on the Elder et al v. Town of Falmouth Case

This pending case appeals the building commissioner and the ZBA’s decision wherein both are claimed to have incorrectly interpreted the by-law to allow the issuance of a building permit (Mar 2010) for Wind 2.

The Eilder group’s defense is grounded in a related action by the Court (Drummey v. Falmouth, 87 Mass. App. Ct. 127 (Feb 2015)), wherein Wind 1 required a special permit as part of a comprehensive bylaw scheme to control wind turbine placement and impact in the town.  Drummey v. Falmouth was the definitive case forcing then Building Commissioner Eladio Gore to order the town to apply for a special permit for Wind 1. Building Commissioner Gore claimed Wind 2 was not addressed in Drummey v. Falmouth, and was thus exempt from his Wind 1 order.

In light of recent events (Falmouth…

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End of procurement of new contracts

“As a result of the province’s robust supply situation and flat yearly demand for electricity, the procurement phases of the IESO’s Feed-in-Tariff (FIT) and microFIT programs have come to an end. These programs have been instrumental in helping Ontario establish the clean energy supply mix it has today.”
IESO December 12th, 2017: Ontario’s electricity system ready for winter

Rays of light through the open white door on orange wall
Door closes on procurement of  new FIT & microFIT contracts for renewable energy in Ontario

Good riddance and don’t let the door hit you on your way out!   Now to move onto the next order of business-canceling existing wind power contracts and halting construction of additional projects.

Ontarians taking it on the chin (& wallet)

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Ontario Auditor zaps power firm charges

THE CANADIAN PRESS
Wednesday, December 6, 2017

TORONTO  – Soaring power prices, wind farms imposed on places that don’t want them and now this: Ontario consumers being dinged by power companies for things such as raccoon traps, scuba gear and staff car washes.

Zapped before by the province’s spending watchdog for its handling of the energy file, Ontario’s Liberal government — heading into an election year — took it on the chin again Wednesday in Auditor General Bonnie Lysyk’s annual report, which found ratepayers have footed the bill for up to $260 million in ineligible expenses under a provincial program that puts the producers on standby to generate power.

She also found ratepayers are paying the cost for large industrial companies’ electricity savings, and that Ontario’s Independent Electricity System Operator (IESO) hasn’t implemented repeated recommendations from the Ontario Energy Board, including one that could save ratepayers $30 million a year.

Lysyk’s latest report looked at a program that pays power generators for fuel, maintenance and operating costs when the IESO puts them on standby to supply energy. Nine generators claimed up to $260 million in ineligible costs between 2006 and 2015, Lysyk said.

About two-thirds of that has been paid back.

One natural gas plant in Brampton “gamed” the system for about $100 million, the energy board, the province’s regulator, has reported.

Generators claimed thousands of dollars a year for staff car washes, carpet cleaning, road repairs, landscaping, scuba gear and raccoon traps, “which have nothing to do with running power equipment on standby,” Lysyk wrote.

One company claimed about $175,000 for coveralls and parkas over two years, she said.

“The program was such that bills could be submitted but without any support for the bills and the bills were being paid, and it wasn’t until more requests were made for detailed information that (the IESO) became aware that there were costs behind that bill that probably shouldn’t be reimbursed,” Lysyk said.

Lysyk had previously skewered the Liberals over electricity, concluding customers paid $37 billion for the government’s decisions to ignore its own planning process for new power projects, and that a $2-billion smart meter program spent double its projected costs and didn’t ensure conservation goals were met.

Her conclusions about the smart meter program led then-energy minister Bob Chiarelli to say the auditor’s numbers were less credible than his because the electricity system is complex and difficult to understand. Lysyk spent 10 years working at Manitoba Hydro.

The program to pay costs when energy suppliers are put on standby began in 2003, when Ontario’s electricity grid had supply issues, but now the province has surplus power.

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Wind Overbuild- Downloaded Billions of Debt to our Children

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Enercon E101 industrial wind turbine Niagara Wind project

The production for the West Lincoln NRWF Industrial Wind Turbine project for the first year of production (2017), can now be calculated using the information provided by the IESO.

(The IESO publishes the hourly output of each wind generator in Ontario, from March 1, 2006 to the present in a spreadsheet on their website Hourly Wind Generator Output, 2006-present (1)

The production for West Lincoln NRWF is in column AN

The production from Nov. 2, 2016 to Nov. 2, 2017 was 492,051 MW

To calculate the hourly production divide 492,051 by 8760 hours in a year = 56.17 MW/hr.

The production for the first year of operation for the West Lincoln NRWF is 56.17/230 (name plate capacity) = 24.42%

So the over build for industrial wind turbines as an energy generator is 400%. In other words you either accept that the production is ¼ of the nameplate capacity or you need 4 times the number of industrial wind turbines. You still have an intermittent energy source that will only produce energy when the wind blows and frequently produces energy out of sync with demand.

A key question for the decision makers becomes – are industrial wind turbines financial viable at 25%? When you consider that we have already down loaded 330 billion dollars of debt on our children and grandchildren in Ontario.

The government did not conduct a cost benefit analysis of the renewable energy initiative http://www.auditor.on.ca/en/content/annualreports/arreports/en11/2011ar_en.pdf (2)-Page 97. Hindsight always provides better vision, but the money would have been better spent on other initiatives. Eg: Saskatchewan operates a zero emission coal plant. http://www.cbc.ca/news/canada/calgary/carbon-capture-history-made-in-saskatchewan-besting-once-ambitious-alberta-1.2786478(3)

Catherine Mitchell – a concerned citizen

Welland, Ontario

The above article represents the personal opinions of the the author informed by the cited sources.