If you live in Ontario, deciphering your electricity bill is like trying to crack the encryption on a BlackBerry. It might tax even the professional snoopers at the U.S. National Security Agency.
It's not as simple as multiplying the amount of power you use each month by the market price per kilowatt-hour. Beyond your "electricity" charge, there's a "delivery" charge, a "regulatory" charge, a "debt retirement" charge and an Orwellian-sounding "clean energy benefit."
And there's a twisted political saga behind each one of them.
If you manage to unbundle it all, you'll discover that the market value of the power you consume accounts for only a tiny portion of your bill. Most of the rest of what you fork out goes to pay for decades of bungled energy policy-making. And pay you will, for years to come.
Indeed, the most important charge is the one that doesn't directly appear on most people's monthly statements. It's called the "global adjustment" fee and it's tacked on to your electricity charge to cover the government's cost of buying above-market-priced wind, solar, nuclear and gas-fired power from private operators. Oh, and part of it now goes to pay for those Toronto-area gas plants former premier Dalton McGuinty cancelled to win NIMBY votes in the 2011 election.
Ontario has managed to subvert the basic laws of supply and demand. Electricity has never been so abundant, yet Ontarians have never paid so much for it. Thousands of megawatts of new wind, solar and natural-gas generation has driven market prices to lows not seen in decades. But the cushy contracts awarded to wind and solar producers mean your monthly bill is going up.
So far this year, the average wholesale weighted price for electricity in Ontario has been about 2.8 cents per kwh. But the Independent Electricity System Operator estimates the global adjustment fee for September at a record 8.72 cents per kwh. That's the equivalent of a 200-per-cent tax on the market value of the electricity most of us consume.
With the amount of wind and solar power projected to triple to more than 5,000 megawatts by the end of 2014, consumers can expect to pay even more. Ontario pays about 11.5 cents per kwh for wind power produced in the province – whether it's needed or not. Then there's the cost of upgrades to the grid to transport wind power produced in far-flung regions.
Why Ontario taxpayers are padding the bottom line of the big corporations behind most of these wind projects – including Toronto-based Brookfield, U.S. giant NextEra or oil-sands king Suncor – is beyond most of us. Brookfield's latest financial report touts the company's virtually risk-free business model, with 90 per cent of its hydro and wind power sold "under long-term, fixed-price contracts with creditworthy counterparties." For Ontario taxpayers, the arrangement is anything but risk-free.
On Tuesday, only about a third of the province's 1,700 MW of wind turbines were turning. Often the wind blows at the most inopportune times, forcing the IESO to order nuclear reactors to shut down so the grid can accommodate the sudden breeze. As of this week, the IESO has the authority to disconnect surplus wind power from the grid. But taxpayers still have to pay to honour the government's contracts with producers.
The mess in Ontario is beginning to look like the disaster in Germany. Chancellor Angela Merkel's political decision to phase out nuclear power, combined with a feed-in tariff for renewable energy, has turned electricity into "a luxury good," according to Der Spiegel magazine. This year, German consumers will pay more than €20-billion for wind, solar and biogas-generated power that has a market value of €3-billion.
The biggest losers are the poor and the environment. Low-income Germans are paying for the solar panels on upper-middle-class homes. And the intermittent nature of wind and solar power has meant more reliance on coal to keep the lights on, leading to an increase in carbon dioxide emissions.
Germany's biggest utility planned to shut down a dirty and inefficient 50-year-old coal plant this year, but in June, regulators ordered it to keep going to "maintain grid stability." Ontario still plans to shut its remaining coal plants this year, but the province is relying more on another fossil fuel, natural gas, to back up unpredictable wind and solar.
The result is that when Ontarians read their electricity bill, they really do have reason to weep.