Power companies paid millions NOT to generate electricity

By John Spears, Toronto Star

If you’ve paid a steep hydro bill lately, you might want to take a deep breath before reading this.

Here’s what Ontario electricity market’s official watchdog has turned up in its latest report:

• Since Ontario’s electricity market opened in 2002, electricity generators have been paid millions for not producing power;

• Traders have been paid millions more for not importing power;

• One generator has reaped millions by repeatedly switching itself off, then back on.

And consumers have paid the tab.

Consider this sentence from the panel’s report, outlining payments called CMSC credits that have been awarded to a handful of market players in northwestern Ontario:

“Of the $360 million in CMSC payments, $161 million (45 per cent) was paid for not generating, and $146 million (40 per cent) was paid for not importing . . .” the panel says.

It notes deadpan: “This design has a few fundamental defects.”

The panel doesn’t stop there.

It says one unnamed generator has discovered a loophole allowing it to wring nearly $19 million in extra payments out of the system by unnecessarily switching on and off during the day — the equivalent of a working stiff earning a bonus every time he makes a coffee run to Timmy’s.

The Independent Electricity System Operator says that it has been working to curb the expensive practices. And the Ontario Energy Board has asked for a report next months on what steps are being taken.

Here’s how the panel says some players have been working the system:

Some generators, especially in northwestern Ontario, have exploited the fact that transmission lines can only carry so much power. That’s called “congestion.”

A few smart operators have figured out how to anticipate when congestion is likely, and to offer to sell power at an attractive price during that time.

The bid is accepted, but when the time comes to send the power, there’s no room on the transmission line. Nonetheless, the generator still receives what’s called a “constrained off” payment because originally the bid had been booked.

Power importers in the northwest playing the same strategy do even better than generators. The panel figures they get paid more than three times as much as importers elsewhere in the province by collecting congestion payments.

Money for the extra payments is built into the price paid by every electricity user in the province.

Overall, the panel says market players in the northwest area of the province have scooped up 33 per cent of the congestion payments since 2002, although they account for only 4 per cent of generating capacity and 10 per cent of import capacity.

It does not name any of the players.

A second strategy has been exploited more recently largely by an unnamed generator, which has discovered there’s money to be made by switching off and on.

Under some circumstances, fossil fuel generators can qualify for guaranteed payments that recognize the costs a unit incurs when it starts up.

Not only do those who qualify get a guaranteed cost payment; they get a guaranteed floor price for their output for a certain length of time. And there’s no ceiling; if the market price happens to go higher, they get the improved price.

The panel gives the example of a generator that shuts down for two hours, then restarts. By staying online, the generator would have collected $10,000 in revenue. But by shutting off, then back on, a qualifying generator gets about $50,000 in revenue, which all ultimately comes from the pockets of consumers.

In a six-month period last year, the panel found 426 occasions when generators had shut down, then restarted in two hours or less. One generator was responsible for 336 of the shut-downs.

It figures that cost the marketplace about $19 million — 95 per cent of which went to a single player.

Terry Young, vice-president of the IESO, said in an interview that the agency is aware of the issues and has started a consultation process with market participants about changing some rules.

But it will take some time, he said: “You’re talking about a complex situation; you’re not going to get this done by lunch.”

He noted that the province’s long term energy plan calls for more north-south transmission capacity, which would make it easier for power to flow from northwestern Ontario and trigger fewer congestion payments.

Young said the agency’s compliance staff monitors the market, and are talking to some of the players whose actions were highlighted by the panel, such as frequently switching on and off.

“We do recognize this is an area that needs to be dealt with,” he said.

The panel has suggested that generators should be able to qualify for the shut-down and start-up program only once per day. The IESO will study that option and others, he said.

Also read:

Average bill to rise

21 thoughts on “Power companies paid millions NOT to generate electricity

  1. Let’s send in the RCMP and the OPP and see if they can get it done by lunch. These people are nothing more than common (actually uncommon) criminals and they should be arrested for this despicable, fraudulent behaviour!

    And if Terry Young can’t figure out how to stop being sodomized by these miscreants – kick his backside out of the IESO before lunch and get someone in there who will set things straight!

  2. Federally appointed Commissioners can investigate and shut them down! Charges should be laid. Home owners should be given a rebate of the same % as the fraud.
    My Aunt just told me that her hydro bill in Toronto, small house, 2 people was $560.00 this month!!! She is 83 years old on a fixed income!!!

    Where is Andre Marin, our ombudsman on this fraud???

  3. No wonder McGuinty doesn’t have the “guts” to show his face in the Legislature…………… but then he has a whole raft of “weasels” to do his talking for him, even if they don’t know what to say they still have someone like Sussex to write non coherent answers for this out and out “thievery of the public’s purse!”.

  4. These generators need to be named! What kind of transparency is this? Where does the Attorney General stand on this?

  5. The IESO has know about this very issue for over 3 years – http://www.ieso.ca/imoweb/consult/consult_se10.asphttp://www.ieso.ca/imoweb/consult/consult_se10.asp
    and …
    The article says the suppliers are selling the contracts knowing the lines can’t handle the load. Why would the system operator not know that when taking the contracts – for over 3 years?
    They’ve known about it, and done nothing, since contracts for power added $900 million to our bills (over market HOEP price). Now it’s over $4 billion – and still climbing.

  6. Perhaps the best way is to have Ontarians look into IESO themselves. Maybe the best way to make sure the job gets done right.

  7. Isn’t manipulation of a system to generate funds by a Government agency a “criminal act”?

    Or was this legislated by McGuinty like the GEA so he can break the law?

    What the hell is wrong here?…………we are being ROBBED!!!!!

  8. BTW Scott ..that link you provided has now been pulled!…….is there something up at IESO?………….there should be!!!!!!!!!!!!!!!!!

  9. I just wrote the IESO and asked for the names of the generators who are doing this…………I suggest others do the same!

  10. Even the Star is questioning Liberal Energy policy, McGuinty must really be in trouble.

  11. Here is the beginning of an exercise in determining the “real meaning” behind the “Green Buzz Words” we have had to endure for years now as this Energy scheme has been employed on the hard working and honest people of Ontario. Please “add” or “edit” as you see fit.

    Green = Money
    Sustainability = never ending supply of money
    Green Energy = Ponzi Scheme
    Carbon Capture = Just one strategy in Ponzi Scheme
    Smart = Dumb
    Electric Cars = “Poster Child” for “Smart Cars”
    Stakeholder = Ponzi Investor
    Wind Turbine = “Phallic Symbol” for Eco Zealots
    Solar Energy = Landscape Killer
    Renewable = Ever increasing return on Investment $$$$
    Global Warming = “fake” crisis for Green Energy
    Climate Change = “Revised Politically Correct” term for Global Warming ideology failure
    Civil Justice = another “fake” crisis for “Global Governance”
    Biodiversity = Obscure name for all species that needs “Governance”
    United Nations = “Elitists Club House”
    Green Conference = “Ponzi Scheme Investors” meetings
    Green Energy Act = removal of Democracy in Ontario
    Non Governmental Organizations = “Foot Soldiers” for Ponzi Investors
    Feed in Tariffs = Bribes

  12. And read this article and come up with a new term for “Google Search Engine”…

    http://solveclimatenews.com/news/20110318/google-climate-change-fellows-science-new-media

    Google.org, the technology giant’s philanthropic arm, has hand-picked a team of 21 fellows working in climate research to improve the way the science of global warming is communicated to the public and lawmakers through new media.

    Following a workshop in June, fellows will have the chance to apply for grants to support projects fostering scientific dialogue. Future participants will take on other socially relevant topics tied to science and the environment.

    I wonder how they will explain wind turbines….

    Maybe they can cosy up to the Trilliums in our midst….

    WordPress is google owned isn’t it?

  13. If anyone wants to dig deep and try and find “Green” connections between groups and agendas by using “Google” will find out how “filtered” Google’s results will be by using bing.com for the very same search.

    Compare search results and you will see how Google has sold out to the Green Propaganda Machine!

    Green Jobs = Unemployed Private Sector workers

    Wind Industry Public Consultation = “One sided” exercise in BS!

  14. March 18th 2011, 4:23pm
    John, I would like to hear your comments and perhaps a indepth article on the why OPG is paying for power never generated. See the STAR today, business… You are on the McGuinty trail of devastation … how about this. Plus the STAR doesn’t name the power generation unit that is gouging and using a loophole to make incredible profits. Gee, a little digging brought me to Northland Power with the lead director named… JOHN TURNER QC, the ex-PM… now if anyone knows how to get around and thru the loopholes to gouge the public… hmmmmm

    Comment above from this article http://www.torontosun.com/comment/columnists/jim_merriam/2011/03/18/17669911.html

  15. So there we have it!…..isn’t that just bloody “ducky”…….an old Politician (ex P.M.) pocketing all the citizens hard earned dollars for producing absolutely nothing!

    Sounds about right doesn’t it?….slippery old hacks that know their way around the Public trough and all the ins and outs of how to screw the public without getting caught!

    Well, Johnny……….you’ve been caught and of course you couldn’t have done it without some help along the way from “good old boy” Dalton eh?

    The “grift” has to end now!

  16. This makes me sick(er). As was stated above, get the RCMP and OPP in there at the IESO to lay charges that will stick. Get the money repaid to the consumers of electricity in Ontario. Shades of ENRON, Madhoff, Freddie Mac and Fannie Mae! Bring these criminals to justice, lock them up and throw away the key.

  17. First of all — some stand-by contracts are justified…. They are very common in business and consumer affairs. Think about service contracts — you are paying insurance because you might need the product or service.

    The article is about the abuse of those contracts. They are not about the philosophy.

    If you do not want generators on standby — then you will get the service equivalent to wind power. We need some “over capacity” in service at all times — and we need some on stand-by.

    Focus on the abuse.

    Don’t scream for all stand-by contracts to get revoked — you may get what you asked for — and not like it at all.

  18. ……..just like the contracts that are negotiated at the highest level of the Financial Industry where CEO’s and COO’s and CFO’s” are entitled to huge bonuses for destroying the lives of millions by mishandling funds and creating phony markets to flip homes like hamburgers?????………

    “all contracts at all levels” should be at least looked into to see how fair or unfair they really are when they affect an economy and quality of life for large numbers of citizens.

    “This is just how business is done these days” explanation doesn’t cut it anymore.

    Obviously when business decisions are based on destructive and fraudulent “guidelines” established over the years to protect unscrupulous business people then it is wrong!

    “Oh quit being naive” is another answer that I get a lot. Sorry, but back in the ’70’s when I was the assistant to the President of a Multi national company that started out as a Canadian Company I learned that there were such a thing as “business ethics” and we tried to follow those unwritten ethics on a daily basis.

    The companies that weren’t “ethical” were well known in our Industry and they were avoided like the “plague” by legitimate buyers of products.

    Fast forward 40 years and I see a total lack of ethics in business nowadays and I blame that on the teachers and professors in our bastions of higher learning of teaching young people how to “get away with profits” instead of “how to make a legitimate profit” within Industry today!

    Until this practice is stopped and certain amount of honour and integrity is brought back into our education system we will experience very dark days thanks to the “grifters”!

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