XYLENE POWER LTD.

ELECTRICITY REGULATORY HURDLES

By C. Rhodes

OEB AND OPA ACCEPTANCE:
1. The Ontario Energy Board (OEB) must accept the concept that any party connected to the electricity grid is a grid customer. A grid customer may be a generator, a distributor or a load. On a particular phase a grid customer is usually alternately an energy transmitter and an energy receiver;
 
2. The OEB must then accept the principle of re-allocation of electricity system costs to treat all grid customers equally;
 
3. The OEB must then accept the principle that generators and distributors must pay for grid usage in the same manner as loads;
 
4. The OEB must accept the principle of allocation of nonenergy costs in proportion to interval energy transfer, interval power factor and daily congestion factor;
 
5. The OEB must then accept that the mathematics show that when the amount of distributed generation is relatively small, the generators connected to the high voltage transmission system must bear 2/3 of the transmission costs and 1/3 of the distribution costs;
 
6. Likewise, the OEB must accept that when the amount of distriuted generation is relatively small, parties connected to a distribution system must bear 2/3 of the distribution costs and 1/3 of the transmission costs;
 
7. The OEB must then accept that load customers' average electricity energy rate must increase by about $.034 / kWh to allow existing central generators to pay for their share of grid usage and debt retirement. Simultaneously average grid usage charges and debt retirement charges must decrease by about $.02 / kWh;
 
8. The OEB must accept that government mandated closing of coal fueled electricity generatiors in Ontario is financially the equivalent of implementing a coal prohibitive fossil carbon emissions tax. This equivalent tax will be about $200 / emitted CO2 tonne on coal fuelled electricity generation and will result in a further increase in the Hourly Ontario Electricity Price (HOEP) of about $.054 / kWh;
 
9. The OEB should interface with the Ontario Power Authority (OPA) and the Independent Electricity System Operator (IESO) regarding how the parties will implement an increase of about:
$.034 / kWh + $.054 / kWh = $.088 / kWh
in the Hourly Ontario Electricity Price (HOEP) and the legal, contractual and social implications of that price increase;
 
10. The OPA must accept that the Renewable Energy Standard Offer Program (RESOP) base rate for existing contracts will have to increase by $.0157 / kWh when this electricity energy price change takes effect just due to re-allocation of transmission/distribution costs;
 
11. The OPA will have to modify the FIT rates to include congestion factors and hence encourage behind the meter energy storage by wind generators;
 
12. The OPA should offer a new FIT rate of about $.3157 / kWh for biofuel electricity generators with outputs that are modulated in proportion to the total grid load. Absent the grid load proportional modulation the biofuel generator output should be subject to the same congestion factor based price regime as other renewable generation.
 
13. The OEB and the OPA must accept that interval energy, interval inverse load factor and daily congestion factor are better indicators for apportioning non-energy costs than is monthly peak kVA because monthly peak kVA excessively penalizes behind the meter generators. Daily congestion factor adequately captures the costs related to normal daily power variation;
 
14. The OEB and the OPA must recommend to the Minister of Energy and Infrastructure conversion of the Ontario electricity system to a distributed power network with non-energy costs allocated in proportion to the product of interval energy transfer, interval inverse power factor and daily congestion factor.

MOEI APPROVAL HURDLES:
15. The Ministry of Energy and Infrastructure will have to be fully convinced of the merits of distributed generation and of nonenergy cost allocation on the basis of interval energy transfer, interval inverse power factor and daily congestion factor;
 
16. The Minister of Energy and Infrastructure should send a letter to the Ontario Energy Board (OEB) requesting that the OEB re-evaluate the present allocation of electricity costs and the metering methodology used to allocate those costs. The Minister's letter to the OEB should specifically instruct the OEB to create an electricity rate structure that is conducive to distributed generation of electricity. The generators and loads must be able to connect to the electricity system at any point, including behind existing electricity meters, without rate bias or penalty. The Minister's letter should specifically address the issue of avoiding prohibitive costs to implementation of single unit generators that often arise from LDCs' use of monthly peak kW or monthly peak kVA metering.

OPA AND OEB APPROVALS:
17. The OPA should fund lawyers and witnesses to make the case before the OEB for distributed generation and for allocation of nonenergy costs on the basis of interval energy transfer, interval inverse power factor and daily congestion factor;
 
18. The OPA and OEB should intervene in the production of electronic smart meters to ensure that their firmware, displays and remote reading facilities include calculation of the parameters required for a distributed power network with multiple independent LDCs such as exists in Ontario. Specific parameters that must be calculated, displayed, stored and remotely read are Er, Et, (Er-Et) and T where:
Er = cumulative received electrical energy;
Et = cumulative transmitted electrical energy;
|Er-Et| = interval energy transfer;
T = time;
 
19.The OEB must resolve how interim metering issues will be handled during the transition period;
 
20. The OPA and the OEB should recognize that in-fence behind the meter generation and behind the meter electricity conservation both achieve the same effect, so in-fence behind the meter electricity generation should only be rewarded to the same extent as electricity conservation. However, once the facility becomes an average net exporter of energy to the grid the higher rates for net electricity generation apply.

OTHER WORK BY OPA AND OEB:
21. The OPA should implement a Standard Offer electricity conservation incentive program as set out at Electricity Conservation. This energy conservation program would use LDC kWh meter readings both as a baseline and for ongoing performance evaluation. The incentive rate under present circumstances should be $.068 / kWh saved.
 
22. The OEB and the OPA should reassess the criteria for of Time-Of-Use (TOU) rate setting because high differential TOU rates are required to trigger investment in energy storage. This energy storage is required to minimize future generation and transmission requirements;
 
23. The OEB should implement congestion factor based electricity pricing in order to achieve better electricity system stability than is practical with TOU rates.
 
24. The OPA and OEB should offer a zero notice interruptable electricity rate at a discount from the regular rate. The purpose of this interruptable power is to provide the Independent Electricity system Operator (IESO) sheddable load for electricity system voltage and frequency stabilization;
 
25. The electricity conservation and distributed generation incentive programs should be designed such that as electricity rates rise the incentive drops, so that there is no net cost to the rate payer as compared to the cost of new environmentally acceptable central generation (new nuclear or out of province hydro).

This web page last updated July 22, 2009.