Big electricity customers outside the province should no longer get paid to use Ontario’s surplus power, says the agency that runs the province’s power grid.
The Independent Electricity System Operator says ending the practice of paying outsiders to take Ontario power should save the system about $10 million a year.
“People won’t be paid to consume power – not outside Ontario,” said Terry Young, vice president of the IESO.
Big customers inside the province may at times still get paid to use surplus power, Young said.
The moves have been approved by the IESO’s board of directors. It will take effect Oct. 1, unless appealed to the Ontario Energy Board.
Customers occasionally get paid to use power because Ontario sometimes produces more power than it needs. Demand drops on weekends, and when temperatures are moderate.
At the same time, the province’s generators produce a minimum amount of power. Nuclear generators like to run 24 hours a day; it takes a day or two to shut them down, and another day or two to start them up again.
When demand drops below this constant level of generation, the province ends up with more electricity than the system can use. High winds, which produce a flood of wind power into the system can exacerbate the situation.
The solution is to lower the price of power.
It can go down until it hits zero. Then it goes down even lower – into “negative pricing” territory – which means big customers who buy their power on the fluctuating wholesale market are actually getting paid to use electricity for hours at a stretch.
Someone has to pick up the tab, of course. The cost of paying some customers to use power is totalled up, and then charged back to all Ontario consumers in a fee called the “global adjustment”.
But export customers don’t pay the global adjustment, so they never absorb the cost of negative pricing.
That’s the main rationale for not allowing the export price to dip below zero.
The new rule will allow the export price to sink to zero, but not below that into negative territory.
Some industry groups have argued that ending negative export pricing will only make it harder to deal with power surpluses.
But Young said the IESO board decided to go ahead: “It’s a situation we believe we can manage.”
Young said the IESO is looking at other changes to address the problem.
Currently, all wind power automatically flows into the power grid, regardless of demand. Rules have been proposed to control that flow, starting late next year, in order to link it to demand.
Another proposal is to set floor prices for certain kinds of power, at or near zero, so the price can’t sink into negative territory.
Ontario power surpluses are likely to shrink starting in 2016, when the big Darlington nuclear plant is due for a major refit that will curtail its production for years. The Pickering nuclear plants are likely to shut down for good in the early 2020s.
The IESO has also decided to block payments to energy traders who offer to import power over wires that are already at capacity. The traders then collect fees, even though no additional power can be delivered.
Bottlenecks in northwestern Ontario have prompted some traders to take advantage of the rules.
Wires that carry power between northwestern Ontario, the U.S. and Manitoba are often at capacity. Some traders have been offering to import power into Ontario when the lines are already full.
The power doesn’t get delivered, but the traders still get a fee.
Young said the IESO has paid $21 million in these fees over the past two years. More than 95 per cent of them have been paid for failed imports in northwestern Ontario, even though the region accounts for only 4 per cent of electricity consumption.
“We’ve introduced a rule that will eliminate these payments, so you don’t get that kind of behaviour,” Young said.