Selfie Power (With and Without Transmission Charges)

You run a medium-sized business. Your power bill is going up at a compound annual rate of 8%. Your competitors in many jurisdictions are seeing their rates unchanged. The cost of gas-fired generation and even solar power is getting to be an attractive option compared to some of the charges on your bill (the jargon popular among sustainablists is “grid parity”). The Ontario government has identified load-displacement generation as “conservation” and provided big businesses with massive incentives and even direct subsidies to expand investment in this type of behind-the-fence generation. A little brew-your-own power is looking like a lifeline for your business. Right?

Not so fast.

The Ontario government is instituting a rate change designed to punish those with behind-the-fence generators. Here is the government’s announcement signalling the new plan, issued this afternoon through the Ministry of Energy’s rate department.

The rate change seeking to wipe out the incentive to invest in load-displacement generation but will only apply to non-preferred smaller customers. The government’s favoured largest industrial consumers — so-called “Class A” consumers — will continue to enjoy massive incentives and direct subsidies to install and use the same types of behind-the-fence generation that the government is going to stamp out when installed by smaller Class B consumers.

If you don’t like the outcome, consider making a donation to the Ontario Liberal Party (as documented in this outstanding piece of journalism by the Star’s Martin Regg Cohn.)

Post Script (3 pm) I should have noted that the OEB’s recent move to all-fixed distribution charges is consistent with the plan to hit self-generating Class B consumers with transmission charges on their self-generation.

What the government is doing with all these changes is a chaotic form of Ramsay Pricing — indexing rates to the inverse of consumer demand elasticities. Consumers who will pay the sun and moon for power will be charged on that basis. I believe that Ontario will need properly administered Ramsay prices in future. However, proper administration of such a difficult rate philosophy will require a regulatory agency with integrity and professionalism, something Ontario now lacks. Granting rate discounts on the basis of consumer size is not the way to go.

If the cost of reliable supply for individual users with solar power coupled with batteries dropped to the cost of grid power today, the Ontario government would have to ban it.

5 Comments

  1. Check out the acquisition of ITC Holdings, Novi, MI by Fortis, Inc., Newfoundland. Big transmission acquisition that affects Ontario. Now in progress pending regulatory approvals.

    Nanticoke deal included in this.

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