1. Bruce Sharp, P. Eng. Director, Electricity Aegent Energy Advisors Inc. bsharp@aegent.cabsharp@aegent.ca, 416.622.9449.112 May 15, 2014

2.  Getting it all wrong  Picture is not pretty  Costs largely fixed  Lowering = transferring

3. 1. Make electricity consumers – not taxpayers – pay for electricity 2. Make consumers pay the true cost of the electricity they use 3. Maintain culture of conservation 4. Depoliticize electricity policy

4.  Commodity = spot price + Global Adjustment (“GA”)  2013: ◦ Spot price (arithmetic average) = $ 24.98/MWh ◦ GA, Class A (average) = $ 33.19/MWh ◦ GA, Class B = $ 59.24/MWh  % of total costs:

5.  Total commodity cost = HOEP + GA Class B (assumes zero load growth)

6.  Capital-intensive  Chunky  Inertia  Overbuild  Bias

7.  Balloon effect  Shift to taxpayers ◦ Ontario Clean Energy Benefit ◦ Provincial portion of HST  Shift to other ratepayers ◦ Debt Retirement Charge ◦ Conservation ◦ Cost allocation

8.  See “costs largely fixed”  If costs 95% fixed:

9.  EEG is green-only version of Ontario Global Adjustment  2014: € 62.4/MWh  Industrial policy decision  Significant avoidance (90%) at average load of ≳114 kW (also, electricity cost ≥ 14% of value added)  Intensity requirement can have unintended consequence

10.  GA avoidance  Class A/B ◦ Since January 1, 2011 ◦ Demand-based allocation of GA costs ◦ 5,000 kW threshold, moving down to 3,000 kW ◦ 2013: Average 39% reduction in GA charge ◦ In theory, avoids investment ◦ Benefit can be derived by doing nothing ◦ Price signal ≳ 2 x generation alternative

11.  Do: ◦ Conserve - and more than the other guy ◦ Ratepayer transfers: be transparent, recognize their impact  Don’t: ◦ Transfer costs to taxpayers ◦ Have price signals inconsistent with other options