Windsor policy solutions forum energy costs how to address higher power costs
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Windsor Policy & Solutions Forum Energy Costs - How to Address Higher Power Costs. Bruce Sharp, P. Eng. Director, Electricity Aegent Energy Advisors Inc. [email protected] , 416.622.9449.112. May 15, 2014. In a nutshell. Getting it all wrong Picture is not pretty Costs largely fixed

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Windsor policy solutions forum energy costs how to address higher power costs

Windsor Policy & Solutions ForumEnergy Costs - How to Address Higher Power Costs

Bruce Sharp, P. Eng.

Director, Electricity

Aegent Energy Advisors Inc.

[email protected], 416.622.9449.112

May 15, 2014


In a nutshell

In a nutshell

  • Getting it all wrong

  • Picture is not pretty

  • Costs largely fixed

  • Lowering = transferring


Getting it all wrong

Getting it all wrong

  • Make electricity consumers – not taxpayers – pay for electricity

  • Make consumers pay the true cost of the electricity they use

  • Maintain culture of conservation

  • Depoliticize electricity policy


Commodity non commodity costs

Commodity, non-commodity costs

  • Commodity = spot price + Global Adjustment (“GA”)

  • 2013:

    • Spot price (arithmetic average) = $ 24.98/MWh

    • GA, Class A (average) = $ 33.19/MWh

    • GA, Class B = $ 59.24/MWh

  • % of total costs:


Commodity forecast

Commodity forecast

  • Total commodity cost = HOEP + GA Class B

  • (assumes zero load growth)


Costs largely fixed

Costs largely fixed

  • Capital-intensive

  • Chunky

  • Inertia

  • Overbuild

  • Bias


Lowering transferring

Lowering = transferring

  • Balloon effect

  • Shift to taxpayers

    • Ontario Clean Energy Benefit

    • Provincial portion of HST

  • Shift to other ratepayers

    • Debt Retirement Charge

    • Conservation

    • Cost allocation


Conserve or else

Conserve – or else

  • See “costs largely fixed”

  • If costs 95% fixed:


Cost allocation germany

Cost allocation - Germany

  • EEG is green-only version of Ontario Global Adjustment

  • 2014: € 62.4/MWh

  • Industrial policy decision

  • Significant avoidance (90%) at average load of ≳114 kW (also, electricity cost ≥ 14% of value added)

  • Intensity requirement can have unintended consequence


Cost allocation ontario

Cost allocation - Ontario

  • GA avoidance

  • Class A/B

    • Since January 1, 2011

    • Demand-based allocation of GA costs

    • 5,000 kW threshold, moving down to 3,000 kW

    • 2013: Average 39% reduction in GA charge

    • In theory, avoids investment

    • Benefit can be derived by doing nothing

    • Price signal ≳ 2 x generation alternative


Dos and don ts

“Dos” and Don’ts

  • Do:

    • Conserve - and more than the other guy

    • Ratepayer transfers: be transparent, recognize their impact

  • Don’t:

    • Transfer costs to taxpayers

    • Have price signals inconsistent with other options


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