Investor: Hydro One has too many unknowns to be a good investment

Japan Electricity Crunch exposes vulnerabilities in a liberalised power market as LNG shortages, JEPX price spikes, snow-hit solar, and weak hedging strain energy security and retail providers amid cold snap demand and limited reserve capacity.

Key Points

A winter demand shock and LNG shortfalls sent JEPX to records, exposing gaps in hedging, data, and energy security.

✅ JEPX wholesale prices spiked to an all-time high

✅ LNG inventories and procurement proved insufficient

✅ Snow disabled solar; new entrants lacked hedging

Japan's worst electricity crunch since the aftermath of the Fukushima crisis has exposed vulnerabilities in the country's recently liberalised power market, although some of the problems appear self-inflicted.

Power prices in Japan hit record highs last month, mirroring UK peak power prices during tight conditions, as a cold snap across northeast Asia prompted a scramble for supplies of liquefied natural gas (LNG), a major fuel for the country's power plants. Power companies urged customers to ration electricity to prevent blackouts, although no outages occurred.

The crisis highlighted how many providers were unprepared for such high demand. Experts say LNG stocks were not topped up ahead of winter and snow disabled solar power farms, while China's power woes strained solar supply chains.

The hundreds of small power companies that sprang up after the market was opened in 2016 have struggled the most, saying the government does not disclose the market data they need to operate. The companies do not have their own generators, instead buying electricity on the wholesale market.

Prices on the Japan Electric Power Exchange (JEPX) hit a record high of 251 yen ($2.39) per kilowatt hour in January, equating to $2,390 per megawatt hour of electricity, above record European price surges seen recently and the highest on record anywhere in the world. One megawatt hour is roughly what an average home in the U.S. would consume over 35 days.

But the vast majority of the new, smaller companies are locked into low, fixed rates they set to lure customers from bigger players, crushing them financially during a price spike like the one in January.

More than 50 small power providers wrote on Jan. 18 to Japan's industry minister, Hiroshi Kajiyama, who oversees the power sector, asking for more accessible data on supply and demand, reserve capacity and fuel inventories.

"By organising and disclosing this information, retail electricity providers will be able to bid at more appropriate prices," said the companies, led by Looop Co.

They also called on Kajiyama to require transmission and distribution companies to pass on some of the unexpected profits from price spikes to smaller operators.

The industry ministry said it had started releasing more timely market data, and is reviewing the cause of the crunch and considering changes, echoing calls by Fatih Birol to keep electricity options open amid uncertainty.

Japan reworked its power markets after the Fukushima nuclear disaster in 2011, liberalizing the sector in 2016 while pushing for more renewables.

But Japan is still heavily reliant on LNG and coal, and only four of 33 nuclear reactors are operating. The power crisis has led to growing calls to restart more reactors.

Kazuno Power, a small retail provider controlled by a municipality of the same name in northern Japan, where abundant renewable energy is locally produced, buys electricity from hydropower stations and JEPX.

During the crunch, the company had to pay nearly 10 times the usual price, Kazuno Power president Takao Takeda said in an interview. Like most other new providers, it could not pass on the costs, lost money, and folded. The local utility has taken over its customers.

"There is a contradiction in the current system," Takeda said. "We are encouraged to locally produce power for local consumption as well as use more renewable energy, but prices for these power supplies are linked to wholesale prices, which depend on the overall power supply."

The big utilities, which receive most of their LNG on long-term contracts, blamed the power shortfall on a tight spot market and glitches at generation units.

"We were not able to buy as much supply as we wanted from the spot market because of higher demand from South Korea and China, where power cuts have tightened supply," Kazuhiro Ikebe, the head of the country's electricity federation, said recently.

Ikebe is also president of Kyushu Electric Power, which supplies the southern island of Kyushu.

Utilities took extreme measures - from burning polluting fuel oil in coal plants to scavenging the dregs from empty LNG tankers - to keep the grid from breaking down.

"There is too much dependence on JEPX for procurement," said Bob Takai, the local head of European Energy Exchange, where electricity pricing reforms are being discussed, and which started offering Japan power futures last year. He added that new entrants were not hedging against sharp price moves.

Three people, who requested anonymity because of the sensitivity of the matter, were more blunt. One called the utilities arrogant in assuming they could find LNG cargoes in a pinch. Prices were already rising as China snapped up supplies, the sources noted.

"You had volatility caused by people saying 'Oh, well, demand is going to be weak because of coronavirus impacts' and then saying 'we can rely more on solar than in the past,' but solar got snowed out," said a senior executive from one generator. "We have a problem of who is charge of energy security in Japan."

Inventories of LNG, generally about two weeks worth of supplies, were also not topped up enough to prepare for winter, a market analyst said.

The fallout from the crunch has become more apparent in recent days, with new power companies like Rakuten Inc suspending new sales and Tokyo Gas, along with traditional electricity utilities, issuing profit downgrades or withdrawing their forecasts.

Although prices have fallen sharply as temperatures warmed up slightly and more generation units have come back online, the power generator executive said, "we are not out of the woods yet."
 

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Hydro One Account Customization lets Ontario customers pick billing due dates, enable balanced billing, get early high usage notifications, monitor electricity consumption, and receive outage alerts, offering flexibility during COVID-19.

Key Points

A flexible toolkit to set due dates, balance bills, get usage alerts, and track electricity.

✅ Pick your billing due date for better cash flow

✅ Balanced billing smooths seasonal usage spikes

✅ Early high usage and outage alerts via text or email

Hydro One announced it is providing its customers with the flexibility to customize their account. Customers can choose their own billing due date, flatten usage spikes from temperature fluctuations through balanced billing and the Ultra-Low Overnight Price Plan, and monitor their electricity consumption by signing up for early high usage notifications.

Research shows that Ontario electricity customers want more choice and flexibility (CNW Group/Hydro One Inc.)
"Being in-tune with our customers' needs is more important than ever. As we continue to navigate the COVID-19 pandemic, customers tell us that choice and flexibility, alongside electricity relief, will help them during this difficult time," said Jason Fitzsimmons, Chief Corporate Affairs and Customer Care Officer, Hydro One. "As a customer-driven organization, we have an important responsibility to support customers with relief, flexibility and choice."

According to recent research conducted by Angus Reid, 78 per cent of Ontario electricity customers said balanced billing would help them better manage their finances, even as peak hydro rates remained unchanged for many self-isolating customers. Balanced billing flattens out the spikes in electricity usage that commonly occurs in the summer due to air conditioning use and in the winter due to heating.

The research also found that 72 per cent of customers would like to pick their own due date to better manage their finances. This feature is now included in Hydro One's new customization bundle, which will be shared with customers through an awareness campaign. Other customization tools include alerts when electricity usage falls outside of the customer's normal pattern, the ability to report outages online and the ability to receive text messages or emails when outages occur. Customers can visit www.HydroOne.com/Choice to learn more.

"Customers can pick and choose the tools that work best for them. We are now able to offer a suite of features built for any lifestyle as our employees support Ontario's COVID-19 response across the province," said Fitzsimmons.

In addition to these customization options, Hydro One has also developed a number of customer support measures during COVID-19, including a Pandemic Relief Fund to offer payment flexibility and financial assistance to customers. The company is also extending its ban on electricity disconnections to ensure that no customer is disconnected at a time when support is needed most. More information about Hydro One's Pandemic Relief Program can be found at www.HydroOne.com/PandemicRelief. Customers can continue to contact Hydro One to determine individual payment plans and determine financial assistance programs available to meet their needs, especially as disconnection pressures can arise for some households.

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Ontario Darlington SMR Expansion advances four GE Hitachi BWRX-300 reactors with OPG, adding 1,200 MW of baseload nuclear power to support electrification, grid reliability, and clean energy growth across Ontario and Saskatchewan.

Key Points

Plan to build four BWRX-300 SMRs at Darlington, delivering 1,200 MW of clean, reliable baseload power under OPG.

✅ Four GE Hitachi BWRX-300 units, 1,200 MW total

✅ Shared infrastructure cuts costs and timelines

✅ Supports electrification, grid reliability, net zero

The day after Ontario announced it would be building an additional 4,800 megawatts of nuclear reactors at Bruce Nuclear Generating Station, the province announced it would be dramatically expanding its planned rollout of small modular reactors at its Darlington Nuclear Generating Station, and confirmed plans to refurbish Pickering B as part of its broader strategy.

Ontario Power Generation OPG was always going to be the first to build the GE-Hitachi BWRX-300 small modular reactor SMR, with the U.S.’s Tennessee Valley Authority among others like SaskPower and several European nations following suit. But the OPG was originally going to build just one. On July 7, OPG and the Province of Ontario announced they would be bumping that up to four units of the BWRX-300.

The Ontario government is working with Ontario Power Generation (OPG) to commence planning and licensing for three additional small modular reactors (SMRs), for a total of four SMRs at the Darlington nuclear site. Once deployed, these four units would produce a total 1,200 megawatts (MW) of electricity, equivalent to powering 1.2 million homes, helping to meet increasing demand from electrification and fuel the province’s strong economic growth, the Ontario Ministry of Energy said in a release.

“Our government’s open for business approach has led to unprecedented investments across the province — from electric vehicles and battery manufacturing to critical minerals to green steel,” said Todd Smith, Minister of Energy. “Expanding Ontario’s world-leading SMR program will ensure we have the reliable, affordable and clean electricity we need to power the next major international investment, the new homes we are building and industries as they grow and electrify.”

For the first time since 2005, Ontario’s electricity demand is rising. While the government has implemented its plan to meet rising electricity demand this decade, the experts at Ontario’s Independent Electricity System Operator have recommended the province advance new nuclear generation and pursue life-extension at Pickering NGS to provide reliable, baseload power to meet increasing electricity needs in the 2030s and beyond.

Subject to Ontario Government and Canadian Nuclear Safety Commission (CNSC) regulatory approvals on construction, the additional SMRs could come online between 2034 and 2036. That is the same timeframe that SaskPower is looking at for its first, and possibly second, units.

The initial unit is expected to go online in 2028 following Ontario’s first SMR groundbreaking at Darlington.

The Darlington site, which already hosts four reactors, was originally considered for an expansion of “large nuclear,” which is why OPG was already well on its way for site approvals of additional nuclear power generation. The plan changed to one, singular, SMR. Now that has been updated to four.

The announcement has significant impact on Saskatchewan, and its plans to build four of its own SMRs. The timing would allow Ontario Power Generation to apply learnings from the construction of the first unit to deliver cost savings on subsequent units. This is also the strategy SaskPower is following – allow Ontario to build the first, then learn from that experience.

Building multiple units will also allow common infrastructure such as cooling water intake, transmission connection and control room to be utilized by all four units instead of just one, reducing costs even further, the Ministry said.

“A fleet of SMRs at the Darlington New Nuclear Site is key to meeting growing electricity demands and net zero goals,” said Ken Hartwick, OPG President and CEO. “OPG has proven its large nuclear project expertise through the on-time, on budget Darlington Refurbishment project. By taking a similar approach to building a fleet of SMRs, we will deliver cost and schedule savings, and power 1.2 million homes from this site by the mid-2030s.”

The Darlington SMR project is situated on the traditional and treaty territories of the seven Williams Treaties First Nations and is also located within the traditional territory of the Huron Wendat peoples. OPG is actively engaging and consulting with potentially impacted Indigenous communities, including exploring economic opportunities in the Darlington SMR project such as commercial participation and employment.

The Ministry noted, “Ontario’s robust nuclear supply chain is uniquely positioned to support SMR development and deployment in Ontario, Canada and globally. Building additional SMRs at Darlington would provide more opportunities for Ontario companies and broader economic benefits as suppliers of nuclear equipment, components, and services to make further investments to expand their operation to serve the growing SMR market both domestically and abroad.”

Supporting new SMR development and investing in nuclear power is part of the Ontario government’s larger plan, aligned with a Canadian interprovincial nuclear initiative that brings provinces together, to prepare for electricity demand in the 2030s and 2040s that will build on Ontario’s clean electricity advantage and ensure the province has the power to maintain it’s position as leader in job creation and a magnet for the industries of the future, the Ministry said.

In February, World Nuclear News (WNN) reported that Poland was considering up to 79 small modular reactors of the same design as OPG and SaskPower. And on June 5, it reported, “Canada’s Ontario Power Generation will provide operator services to Poland’s Orlen Synthos Green Energy under a letter of intent signed between the partners, extending their existing cooperation on the deployment of small modular reactors.”

WNN added, “The letter of intent is aimed at concluding future agreements under which OPG and its subsidiaries could provide operator services for SMR reactors to OSGE in connection with the deployment of SMRs in Poland and other European countries. The partnership would include a number of SMR-related activities including: development and deployment; operations and maintenance; operator training; commissioning; and regulatory support.”

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California Utility Spending Bill scrutinizes how ratepayer funds are used by utilities, targeting lobbying, advertising, wildfire prevention cost pass-throughs, and CPUC oversight to curb high electricity bills and increase accountability and transparency statewide.

Key Points

Legislation restricting utilities from using ratepayer money for lobbying and ads, with stronger CPUC oversight.

✅ Bans ratepayer-funded lobbying and political advertising

✅ Expands prohibited utility communications and influence spending

✅ Aims to curb bills, boost transparency, and CPUC accountability

California's legislators are about to vote on a bill that would impose stricter regulations on how utility companies spend the money they collect from ratepayers. This legislation directly responds to the growing discontent among Californians who are already grappling with high electricity bills, as Californians ask why electricity prices are soaring amid wildfire prevention efforts.

Consumer rights groups have been vehemently critical of how utilities have been allocating customer funds, amid growing calls for regulatory action from state officials. They allege that a substantial portion of this money is being funnelled into lobbying efforts and advertising campaigns that yield no direct benefits for the customers themselves.

The proposed bill would significantly broaden the definition of what constitutes prohibited advertising and political influence activities on the part of utility companies, separate from income-based fixed electricity charges proposals that affect rate design. This would effectively restrict the ways in which utilities can utilize customer funds for such purposes.

While consumer advocacy groups have favored the legislation, it has drawn opposition from utility companies and some labor unions, as lawmakers weigh overturning income-based utility charges in parallel debates. Opponents contend that it would hinder utilities' ability to communicate effectively with their customers and advocate for their interests. Additionally, they express concerns that the bill could result in job losses within the utility sector.

The vote on the bill is expected to take place on Monday. The outcome of the vote is uncertain, but it is sure to be a closely watched development for Californians struggling with the burden of high electricity bills, with many wondering about major changes to their electric bills in the near term.

California's Electricity Rates: A Burden for Residents

A recent report by the California Public Utilities Commission (CPUC) revealed that the average Californian household spends a significantly higher amount on electricity compared to the national average. This disparity in electricity rates can be attributed to a number of factors, including the financial costs associated with wildfire prevention measures, investments in renewable energy infrastructure, and maintenance of aging electrical grids, even as the state considers revamping electricity rates to clean the grid.

Examples of Utility Company Spending that Raise Concerns

Consumer rights groups have specifically highlighted instances where utility companies have used customer money to fund lavish executive compensation packages, sponsor professional sports teams, and finance political campaigns. They argue that these expenditures do not provide any tangible benefits to ratepayers and should not be funded through customer bills.

The Need for Accountability and Prioritization

Proponents of the bill believe that the legislation is necessary to ensure that utility companies are held accountable for how they spend customer funds. They believe that the stricter regulations would compel utilities to prioritize investments that directly improve the quality and reliability of electricity services for Californians, alongside discussions of income-based flat-fee utility bills that could reshape rate structures.

The impending vote on the bill underscores the ongoing tension between the need for reliable electricity services and the desire to keep utility rates affordable for Californians. The outcome of the vote is likely to have a significant impact on how utility companies operate in the state and how much Californians pay for their electricity.

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China Industrial Power Demand 2020 highlights COVID-19 disruption to electricity consumption as factory output stalls; IHS Markit estimates losses equal to Chile's usage, impacting thermal coal, LNG, and Hubei's industrial load.

Key Points

An analysis of COVID-19's hit to China's electricity use, cutting industry demand and fuel needs for coal and LNG.

✅ 73 billion kWh loss equals Chile's annual power use

✅ Cuts translate to 30m tonnes coal or 9m tonnes LNG

✅ Hubei peak load 21 percent below plan amid shutdowns

China’s industrial power demand in 2020 may decline by as much as 73 billion kilowatt hours (kWh), according to IHS Markit, as the outbreak of the coronavirus has curtailed factory output and prevented some workers from returning to their jobs.

FILE PHOTO: Smoke is seen from a cooling tower of a China Energy ultra-low emission coal-fired power plant during a media tour, in Sanhe, Hebei province, China July 18, 2019. REUTERS/Shivani Singh
The cut represents about 1.5% of industrial power consumption in China. But, as the country is the world’s biggest electricity consumer and analyses of China's electricity appetite routinely underscore its scale, the loss is equal to the power used in the whole of Chile and it illustrates the scope of the disruption caused by the outbreak.

The reduction is the energy equivalent of about 30 million tonnes of thermal coal, at a time when China aims to reduce coal power production, or about 9 million tonnes of liquefied natural gas (LNG), IHS said. The coal figure is more than China’s average monthly imports last year while the LNG figure is a little more than one month of imports, based on customs data.

China has tried to curtail the spread of the coronavirus that has killed more than 1,400 and infected over 60,000 by extending the Lunar New Year holiday for an extra week and encouraging people to work from home, measures that contributed to a global dip in electricity demand as well.

Last year, industrial users consumed 4.85 trillion kWh electricity, accounting for 67% of the country’s total, even as India's electricity demand showed sharp declines in the region.

Xizhou Zhou, the global head of power and Renewables at IHS Markit, said that in a severe case where the epidemic goes on past March, China’s economic growth will be only 4.2% during 2020, down from an initial forecast of 5.8%, while power consumption will climb by only 3.1%, down from 4.1% initially, even as power cuts and blackouts raise concerns.

“The main uncertainty is still how fast the virus will be brought under control,” said Zhou, adding that the impact on the power sector will be relatively modest from a full-year picture in 2020, even though China's electric power woes are already clouding solar markets.

In Hubei province, the epicenter of the virus outbreak, the peak power load at the end of January was 21% less than planned, mirroring how Japan's power demand was hit during the outbreak, data from Wood Mackenzie showed.

Industrial operating rates point to a firm reduction in power consumption in China.

Utilization rates at plastic processors are between 30% and 60% and the low levels are expected to last for another two week, according to ICIS China.

Weaving machines at textile plants are operating at below 10% of capacity, the lowest in five years, ICIS data showed. China is the world’s biggest textile and garment exporter.

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Goreway Power Station Overbilling exposed by Ontario Energy Board shows IESO oversight failures, GCG gaming, and $100M in inappropriate payments at the Brampton natural gas plant, penalized with fines and repayments impacting Ontario ratepayers.

Key Points

Goreway exploited IESO GCG flaws, causing about $100M in improper payouts and fines.

✅ OEB probe flagged $89M in ineligible start-up O&M charges

✅ IESO fined Goreway $10M; majority of excess costs recovered

✅ Audit found $200M in overbilling across nine generators

Hydro customers shelled out about $100 million in "inappropriate" payments to a natural gas plant that exploited flaws in how Ontario manages its private electricity generators, according to the Ontario Energy Board.

The company operating the Goreway Power Station in Brampton "gamed" the system for at least three years, according to an investigation by the provincial energy regulator. 

The investigation also delivers stinging criticism of the provincial government's Independent Electricity System Operator (IESO), slamming it for a lack of oversight. The probe by the Ontario Energy Board's market surveillance panel was completed nearly a year ago, but was only made public in November because it was buried on its website without a news release. CBC News is the first media outlet to report on the investigation.  

The excess payments to Goreway Power Station included:

• $89 million in ineligible expenses billed as the costs of firing up power production. 
• $5.6 million paid in three months from a flaw in how IESO calculated top-ups for the company committing to generate power a day in advance.   
• Of $11.2 million paid to compensate the company for IESO ordering it to start or stop generating power, the investigation concluded "a substantial portion ... was the result of gaming."  

Most privately-owned natural gas-fired plants in the province do not generate electricity constantly, but start and stop production in response to fluctuating market demand, even as the energy minister has requested an halt to natural gas generation across the grid.  IESO pays them a premium for the costs of firing up production, through what it calls "generation cost guarantee" programs. 

But the investigation found IESO did little checking into the details of Goreway Power Station's billings. 

Goreway Power Station, located near Highway 407 in Brampton, Ont., is an 875 megawatt natural gas power plant. (Goreway)

"Conservatively, at least $89 million of Goreway's submissions were clearly ineligible by any reasonable measure," concludes the report.

"Goreway routinely submitted what were obviously inappropriate expenses to be reimbursed by the IESO, and ultimately borne by Ontario ratepayers,"

The investigation panel found an "extraordinary pattern" to these billings by Goreway Power Station, suggesting the IESO should have caught on sooner. The company submitted more than $100 million in start-up operating and maintenance costs during the three-year period investigated — more than all other gas-fired generators in the province combined. The company's costs per start-up were more than double the next most expensive power generator. 

"Goreway repeatedly exploited defects in the GCG (generation cost guarantee) program, and in doing so received at least $89 million in gamed GCG payments." 

Company fined $10M

The investigation covered a three-year period from when Goreway Power Station began generating power in June 2009. Investigators said that delays in releasing documents slowed down their probe, and they only obtained all the records they needed in April 2016.

The investigating panel does not have the power to impose penalties on companies it found broke the rules. 

The IESO fined Goreway Power Station $10 million. The company has also repaid IESO "a substantial portion" of the excess payments it received during its first six years of operating, but the exact figure is blacked out in the investigation report that was made public. 

The control room from which the provincial government's Independent Electricity System Operator manages Ontario's power supply. The agency is also responsible for managing contracts with private power producers.(IESO)

"Goreway does not agree with many of the draft report's findings and conclusions, including any suggestion that Goreway engaged in gaming or that it deliberately misled the IESO," writes lawyer George Vegh on behalf of the company in a response to the investigation report, dated Aug. 1.

"Goreway has implemented initiatives designed to ensure that compliance is a chief operating principle."     

The power station, located near Highway 407 in Brampton, is a joint venture between Toyota Tsusho Corp. and JERA Co. Inc. During the period under scrutiny, the project was run by Toyota Tsusho and Chubu Electric Power Inc., both headquartered in Japan. 

Investigators fear 'same situation' exists today

The report blames the provincially-controlled IESO for creating a system with defects that allowed the over-billing. 

"Goreway was able to — and repeatedly did — exploit these defects," says the investigation report. It goes on to explain the flaws "have created opportunities for exploitation, to the serious financial disadvantage of Ontario's ratepayers," even as greening Ontario's grid could entail massive costs.

The investigation suggests IESO hasn't made adequate changes to ensure it won't happen again, at a time when an analysis of a dirtier grid is raising concerns.   

"Goreway stands as a clear example of how generators are able to exploit the generation costs guarantee regime," says the report.

"The Panel is concerned that the same situation remains in place today." 

PC energy critic Todd Smith raised CBC News' report on the Goreway Power Station in Tuesday's question period. (Ontario Legislature)

After CBC News broke the story Tuesday, the provincial government was forced to respond in question period, amid a broader push for new gas plants to boost electricity production. 

"Here we have yet another gas plant scandal in Peel region that's costing electricity customers over $100 million," said PC energy critic Todd Smith. He slammed "the incompetence of a government that once again failed to look out for electricity customers." 

Economic Development Minister Brad Duguid said: "There is no excuse for any company in this province to ever game the system."

Nine companies overbilled $200M: audit 

The IESO found out about the overbilling "some time ago," said Duguid.

"They fully investigated, they've recovered most of the cost, they delivered a $10 million fine — the biggest fine on record."

The program that Goreway exploited became the subject of an audit that the IESO launched in 2011. The agency uncovered $200 million in ineligible billings by nine power producers, wrote the IESO vice president for policy Terry Young in an email to CBC News.

The IESO has recovered up to 85 per cent of those ineligible costs, Young noted.

Reforms to the design of the the program have removed the potential for overpayments and made it more efficient, he said, even as Ontario weighs embracing clean power more broadly. Last year, its total annual costs dropped to $23 million, down from $61 million in 2014.

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