Six Billion Dollar Man

When Ontario’s Energy Minister, Bob Chiarelli, was appointed to his current position in February 11, 2013, it appeared that Premier Wynne was seeking a more substantive approach to the portfolio than it had received under a succession of previous ministers with no energy experience. Chiarelli had served a term on the IESO Board of Directors, in addition to serving as Mayor of the City of Ottawa which owns one of the province’s largest electricity distributors. He appeared more solid that the likes of Duguid and Bentley.

Especially in light of his experience, Minister Chiarelli’s recent claim in an interview with Steve Paikin on TVO that Ontario had earned $6 billion “profit” on power exports since ’08 suggests that the minister is not paying attention. The December 3 interview is recorded here, and the minister’s $6 billion profit claim is at 4:45.

As Scott Luft documents here, Minister Chiarelli has a long record of bloviating about massive electricity profits from exports. Scott provides a very helpful discussion of actual financial losses from Ontario’s strategy of buying expensive electricity and exporting massive amounts of it for cheap here.

As the astute electricity observer Claude Boucher notes, over the period 2008-2012 Hydro Quebec earned $6.1 billion in gross revenue from exports but only $2.8 billion in profit. In case Minister Chiarelli hasn’t noticed, Quebec’s costs for producing electricity are a little lower than Ontario.

If the minister misspoke himself once and corrected the record, there would be no reason for concern. However, for the minister to continue spewing junk about export profits indicates an inattention to facts. The minister compounds his ignorance by lecturing consumers about how one of his top priorities is to improve consumer education.

The minister is also deeply confused about how electricity pricing works. Here is one of his recent statements quoted by CTV:

“We’ve got very active programs that we’re just starting under the long term energy plan to educate the public on tools that they can use to better control their energy prices,”

He repeated the same thing on CBC Ontario Today on November 28 saying, “We are creating a number of other processes by which people will be able to get better control over their electricity rates.”

By repeating the assertion that the public can control their power rates, it is obvious that he doesn’t understand the basics about how prices are formed. Power rates for small volume consumers are formed by dividing the revenue requirement for Class B consumers by the consumption of that class. If consumers reduce their usage, the fixed revenue requirement is spread across fewer units of sales.

Electricity consumers need the opposition to be more effective in fact checking the Wynne government.

Can’t Premier Wynne find someone in her caucus more capable with arithmetic than the six billion dollar man?

Post Script December 9, 7 am: Notice that Minister Chiarelli appears to be unaware of this finding by the provincial Auditor General in his 2011 report:

Based on our analysis of net exports and
pricing data from the IESO, we estimated
that from 2005 to the end of our audit in
2011, Ontario received $1.8 billion less for
its electricity exports than what it actually
cost electricity ratepayers of Ontario.

5 Comments

  1. Scott’s calculations are IMO conservative. Rather than assuming a supply cost equal to the total basket of generation, generation and export patterns could probably be used to suggest that wind and even solar make up a good chunk of what’s being exported. That would put the export cost much higher than 10 cents/kWh and cause the analysis to show a much higher loss. This dynamic will grow worse as — according to the IESO — 4,500 MW of variable (wind and solar) generation is added to the grid over the next 18 months. Ontario will export more and then pay more generators to not run when exports hit limits. The cost will be more than a cup of coffee.

  2. “This dynamic will grow worse as — according to the IESO — 4,500 MW of variable (wind and solar”

    So how can more contracts be signed…are the approving agencies mandated to see that we have cheap AND reliable electricity?

    No math skills and no due diligence, send them all packing.

  3. Wynne is literally “scraping the bottom of her barrel” for any Minister that can even put together a full sentence.
    NOTHING coming out of Queen’s Park is believable any more!
    10+ years of outrageous scandals does that to a normal “educated citizen”!

  4. Pingback: Minister Chiarelli replies on Toronto Sun for economic research | Tom Adams Energy - ideas for a smarter grid

  5. Pingback: Electricity Propaganda in Ontario | Tom Adams Energy - ideas for a smarter grid

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