Monday, April 1, 2013

April Fool's Day Reading suggestions

A couple of documents I've been notified of recently that, upon reading/skimming, I've briefly clicked my flashlight upon them and either me or them is really insane.

Ontario Society of Professional Engineers: Regarding Incentive Rate Making Options for Ontario Power Generation’s Prescribed Generation Assets (OSPE_Comment_ltr_20121210 here)
OSPE suggests the current OEB regulated prices that set nuclear rates higher than hydroelectric rates provide an unintended price incentive that encourages nuclear production over hydroelectric production. This unintended price incentive can be easily eliminated. OPG’s prescribed hydroelectric assets were recapitalized when OPG’s predecessor company, Ontario Hydro, was restructured at a much lower electricity price than we have today. If the portion of the stranded debt paid by ratepayers and held by the Ontario Electricity Financial Corporation (OEFC) were reassigned back into the hydroelectric assets of OPG then the new rate for hydroelectric regulated assets would:
  • Create incentives for OPG to curtail nuclear production before hydroelectric production
I think that suggests dumping debt from other businesses into a profitable business in order to drive the price sky-high because the highest cost supply should be the least likely to get curtailed...

Maybe OSPE is "Ontario Society of Pretend Economists"

The regulator (Ontario Energy Board -OEB) issued, on March 29th, it's “Report of the Board: Incentive Rate Making Options for Ontario Power Generation’s Prescribed Generation Assets.”; no mention was made of OSPE's whacky letter.

Image from website of reception sponsor
The Independent Electricity System Operator recently held a "stakeholder summit."  I noticed a sentence in the summary report of the event in a section on Optimizing Stakeholder Engagement 
... by virtue of having a committee, insiders and outsiders are created. The insiders have the benefit of being able to develop depth, but they can also risk being co-opted.
They have the likelihood of being dragged into the depths as if they are enriched by being co-opted.

Case in point; Navigant | Global Adjustment Review, Part 1: Options Identification - Discussion Draft
To be clear, Navigant’s scope of work did not include:
  • a critique of the magnitude or prudence of the costs recovered through the GA;
  • an assessment of the mechanism through which costs recovered through the GA are incurred;
  • the identification of means for reducing the costs recovered through the GA; or
  • alternatives to recovering the GA from electricity consumers (e.g., through general taxes).
In other words, Navigant may recognize that the Global Adjustment is a uniquely dysfunctional Ontarian creation (one I believe they were instrumental in designing), but since there was a contract for following up on a group decision for more outsourcing they are all in on coming up with "improvements."

Seeing as how the global adjustment has served to take a commodity market and turn it into a scheme where public power sold cheaply subsidizes private power sold expensively, it's frightening to consider what they want to get more efficient at.

The stakeholder initiative did come out of the 2011 Market Forum Report - from one of the recommendations I noted a year ago in Penthouse Fora: Personal thoughts on the IESO's Year

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