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XYLENE POWER LTD.

ELECTRICITY RATE LETTER TO PREMIER WYNNE AND MINISTER OF ENERGY GLENN THIBEAULT

The following is the text from a December 4, 2016 letter to the Premier of Ontario and to the Minister of Energy of Ontario relating to mitigation of electricity rates.

XYLENE POWER LTD.
20190 Kennedy Road,
Sharon, Ontario
L0G 1V0
Tel: (905) 473-1704
www.xylenepower.com
Charles.Rhodes@xylenepower.com

December 4, 2016

Ministry of Energy,
900 Bay Street, 4th Floor
Hearst Block
Toronto, ON
M7A 2E1

VIA EMAIL AND LETTER MAIL

RE: ELECTRICITY RATE MITIGATION

Attention: Premier Kathleen Wynne:
 
Attention: Minister of Energy Glenn Thibeault:

I am writing to you today regarding mitigation of the blended cost per kWh of electricity in Ontario. In this matter I have 43 years of relevant engineering and rate intervention experience, so I urge you to pay careful attention.

The real costs of owning, operating and maintaining the Ontario non-fossil electricity system are approximately proportional to the total consumer peak demand measured in kVA. However, for historical reasons related to use of coal, electricity system costs are today allocated to consumers primarily in proportion to their individual kWh consumptions.

Approximately 15 years ago this cost allocation error was aggravated by a legislated allocation of the Global Adjustment to consumers in proportion to their individual kWh consumption instead of in proportion to their peak kVA. In recent years the Global Adjustment as a fraction of the total has substantially grown, amplifying this problem.

During the last decade use of coal for electricity generation in Ontario was eliminated which further amplified the cost allocation error.

Some consequences of the cost allocation error are:
a) Behind the meter energy storage, which is required for economic use of wind, solar and off-peak generation, is financially impossible;
b) Displacement of fossil fuel consumption in Ontario with surplus off-peak non-fossil electricity is financially impossible;
c) Wind and solar transmission/distribution are heavily subsidized by nuclear and hydraulic transmission/distribution charges;
d) Non-fossil electricity paid for in full by Ontario ratepayers is being constrained (wasted) or exported at a very low price;
e) Many Ontario businesses have been rendered uncompetitive;
f) Many people living near the poverty threshold are finding life extremely difficult;
g) Today the gross rural rate for marginal electrical energy is about $0.27 / kWh which is above the cost of self generation using fossil fuels. This issue threatens the financial solvency of the electricity system due to loss of load similar to the loss of load that occurred in the early 1990s.

The fixed cost of the electricity system is presently spread over too few kWh. The only practical route to blended per kWh price mitigation is to increase the number of kWh sold without significantly increasing electricity system costs, which implies a drastic reduction of the marginal per kWh energy price. To substantially lower the per kWh energy price while maintaining electricity system revenue it is necessary to charge all consumers for their peak demand which is measured in kVA or kW.

The present blended retail electricity rate of about $0.25 / kWh should be replaced by a new retail electricity rate of about: $60.00 / kW / month + $0.02 / kWh.

The issue that your government or its immediate successor must face is changing the basis of Ontario retail electricity billing from kWh to peak kVA or to peak kW as applicable. Absent that change the blended cost per kWh will continue to rapidly rise and energy storage and displacement of fossil fuels by electricity will remain financially impossible, even with a very high fossil carbon emissions tax.

In order to enable the contemplated new electricity rate an act of the legislature is required to re-allocate the Global Adjustment in proportion to consumer's peak demand in kVA or kW instead of in proportion to kWh. Other fixed electricity system costs, including transmission and distribution costs, must also be re-allocated in proportion to peak kVA or peak kW demand as applicable, not kWh of energy consumption.

The present cost allocation assumption that the delivery costs of wind and solar energy are the same as for hydraulic and nuclear energy must also be abandoned. In reality the delivery cost of wind per kWh-km is about 3X the cost of nuclear and the average transmission distance for wind is about 4X the average transmission distance for nuclear.

Wind and solar also trigger further costs related to energy storage, storage losses and transmission losses.

On this matter the Ontario Energy Board (OEB) can do nothing until the legislature acts to give the OEB the flexibility to recover the Global Adjustment and small consumers transmission and distribution costs via a charge per kVA or per kW instead of via a charge per kWh.

There is another legislative issue where the McGuinty government made a serious error. Individual metering in high rise buildings such as condominium towers was implemented as primary metering rather than as sub-metering. The result was to remove from the condominium corporation or the rental landlord any financial motivation for peak kVA reduction. Increased peak kVA causes increasing electricity system costs but does not show up in kWh performance records. Remember that real electricity system costs are proportional to peak kVA, not kWh. The government has been deluding itself by thinking that by reducing kWh it will limit electricity system costs. All that kWh reduction has achieved is reducing the number of kWh per kVA, which has driven up the blended cost per kWh.

These issues are explored in much more technical detail at www.xylenepower.com > Electricity > Electricity Rates > (9 web pages)

The root of the problem has been a succession of Ministers of Energy who are technically incompetent and who have chosen to be guided by political advisers rather than by professional engineers who understand the complexity of the energy system. I strongly recommend that the government give much more weight to advice from OSPE (Ontario Society of Professional Engineers). In fact, it would be helpful for the government to fund OSPE at the OEB for electricity rate structure intervention and modification.

Unless your government promptly addresses these complex rate matters the blended cost per kWh of electricity in Ontario will continue to rise until the voters are fed up. The public may not understand what a kVA is but they clearly understand that the blended price per kWh that they are paying today is more than three times the rate received by OPG and Bruce power for nuclear generation.

If your government is willing to act promptly on this matter I am ready, willing and able to assist. In addition to over 43 years of electrical engineering experience I have multiple years of experience with intervention at the OEB.

Please confirm receipt of this letter by return email.

Sincerely,

Charles Rhodes, P. Eng., Ph.D.
Xylene Power Ltd.
Tel:905 473 1704
www.xylenepower.com

This web page last updated December 21, 2016.

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