The Myth of the horse racing subsidy

My MPP finally got mentioned in the Globe and Mail

That Dalton McGuinty would even consider no longer using slot-machine revenue to prop up an otherwise money-losing racing industry, veteran MPP Garfield Dunlop charged, is proof that the Premier “hates rural Ontario.”

             -Adam Radwanski

Ah yes ... the horse racing subsidy.

This from a brief mention in the recent report of the Commission on the Reform of Ontario's Public Services:

In addition to revenues from wagering, since the late 1990s the industry has benefited from a provincial tax expenditure (a reduction to the provincial pari-mutuel tax) and a percentage of the Ontario Lottery and Gaming Corporation’s gross slot revenues that together are worth an estimated $400 million in 2011–12. Over the past 12 years, approximately $4 billion has flowed through 17 racetracks to support purses, racetrack capital improvement and operating costs.  - page 316

Later, on page 408, the report would put the shocking tag of $334 million in 2009-2010, an amount Dwight Duncan would note; “would pay for over nine million hours of home care or insulin pumps and supplies for five years for almost 17,000 people,” Mr. Duncan said.  - February 13, 2012



So off I went on a little fact-find expedition, which -I note for reporters outside of Toronto - didn't take very long at all.  Harris co-located the slots and unfortunately before the string of Ontario Lottery and Gaming Corporation Annual Reports I could locate were found, there was this reference to the 2000-2001 report on CTV's site:

The 2000-2001 report shows a stunning surge of more than half a billion dollars in profits from some 5,000 slot machines at 12 racetracks. One-armed bandit lounges were expanded with some controversy the year before to bolster the flagging racing sector.

I added the emphasis to be clear that things started off pretty good.  In 2002-2003 annual's report we see racetrack accounting shown separately from charity casinos (racetrack's providing 77% of the total of the two with revenues of $1,262,523 and direct operating expenses of $614,262), but after that they are shown together.  That's a lot more than $334 million a year.
That's not Donald Drummond's point though - he points out slot machines put at sites geared to that, instead of tagged onto horse tracks to prop up a dead model, would be far more profitable.

Fortunately, we have a group of sites developed just for slots.  The are called resort casinos.  Now if Drummond, Duncan, Radwanki, Regg Cohn, etc., had any horse sense we'd see the decline of money from one business (revenues less net expense), while the other escalated.

Reality stupidly refuses to submit to the definition of reality dictated by Drummond's commission, and it's mainstream media cheerleaders.

How many needles can you buy by dumping $650 million a year in revenue to save $334 million in expenses?  Those $4 billion in subsidies seem to have $6-7 billion of revenues offsetting them (some of the $9 billion of revenue being from charity casinos).

This isn't proof the Premier hates rural Ontario.
It is a good indication in dealing with OLG, a serious person would start with the resort casinos.

Maybe horse shows would help.

At The End of the IESO 18-Month Outlook

"Though energy from coal in 2011 was less than three per cent of total output, at times the flexibility of coal units is beneficial."

"The availability of the remaining coal fleet, although running at reduced levels from previous years, provides flexibility which is very beneficialto the reliable operation of the Ontario power system."

Ontario's Independent Electricity System Operator (IESO) released it's latest 18-Month Outlook on Friday, as they do quarterly along with the supporting documentation. I've always found the organization exemplary in making data available as widely as possible, and noted Steve Paikin's blog entry yesterday also showed admiration for the behavior of this public organization. The report book-ended a week that started with the firing, without cause, of the suddenly former chief of the Toronto Transit Commission (TTC), general manager Gary Webster. I don't follow Toronto's politics closely, but I was e-mailed, along with the link to an article in the Toronto Star, the suggestion a chill could run through many bureaucracies following the firing of Mr. Webster. Mr. Webster was unwilling to make a case that the Mayor was ordering him to make. I'm certain there are many shades of grey to the TTC situation, but I think the bureaucrat must exist somewhere between resisting to undertake the ridiculous, and placating the powers beyond the silo or their expertise while arguing their educated views to represent the public responsibly. I prefer to work with base data, but the 18-month outlook is always informative, and I believe, very subtly, rebelliously/responsibly, independent.


Paul Murphy, President and CEO of the IESO, spoke to the Ontario Energy Network early in January, and I noted this short string from that speech: "wind alone can’t replace coal." These words connected in this way, regardless of the context, were a surprise to me.  The zombie McGuinty team has been reciting the message of eliminating coal with each new announcement of an industrial wind project.

The final paragraph of the new 18-month forecast caught my attention, and the final paragraph of the previous forecast still had my attention; so I went back and checked the final thought from previous forecasts too. They had been fairly dry reviews of precipitation, temperature, etc, etc..

That has changed, with a pointed message being made to finish the final 3 (maybe 4) forecasts.  Perhaps this is the balance between Mr. Webster's intransigence in Toronto, and the robotic stupidity of the press releases from the Ministry of Energy.

Here are the final paragraphs of the previous four, quarterly, forecasts:

June2011 – November 2012

The biggest variation from the previous year is that in 2010 we saw lower hydroelectric production during the summer months. The major factor that contributed to this variation is the decrease in precipitation levels from previous years. We also saw an increase in wind capacity during the early months of 2011.

September 2011 – February 2013

Ontario can expect periods of SBG similar to 2009 and 2010, with a brief reprieve during the higher demand winter months, followed by a re‐appearance in spring 2012. During these periods of SBG, , beyond typical market actions such as exports, minimum hydro dispatch and nuclear manoeuvers, some out of market control actions are expected to be required in order to manage the surplus condition.

December 2011 – May 2013

The other large variation seen from the previous year was the frequency by which a nuclear unit had to be either maneuvered or shut down. So far in 2011, nuclear units have been maneuvered 113 times for a total of 364 hours. Compared to 2010 which had nuclear units maneuvered 14 times for a total duration of 64 hours, this represents a significant increase. This rise in manual action is a result of a lower minimum demands as well as a growing portfolio of inflexible generation. The ability to dispatch renewable resources may help to mitigate the need for these actions moving forward,

March 2012- August 2013

The retirement of two Nanticoke units during the past quarter not only removed 980 MW of installed capacity from our system but also removed the associated flexibility. The existing coal fleet, though running at vastly reduced levels from previous years, provides the IESO with desirable flexibility, under all operating conditions, from low load SBG to high peak periods. Units with flexible dispatch facilitate the management of maintenance outages, provide effective ramp capability and can even provide regulation, when necessary. These characteristics are important and are desired in new capacity. With the changes to gas‐fired generation projects in the GTA, and until the future of the Pickering Nuclear station is determined, decisions must be made over the next 18 months to ensure adequate supply beyond the middle of the decade.

The things the IESO notes as requiring attention aren't the things we hear about.
As drones continue stupidly repeating,  "Ontario is replacing dirty, coal-fired plants with cleaner sources of power like wind," the system flexibility is being lost as gas plants that can act 'like' coal are ignored and sources that aren't "flexible" - sources unlike coal - are recklessly pursued.

Updated Weekly Reporting:Wk 7

The data sheets behind the NEW: Weekly Report, have been refreshed, so the reporting is now showing for the week of February 15-21.
The demand trend down continued, with the average Ontario Demand dropping 542MW against the same week the previous year.
The price trend down continues, with the average Hourly Ontario Energy Price dropping over $8/MWh from week 7 the previous year, which is about a 25% drop.  The range in the HOEP over the week was mainly limited, with a low of $14.86/MWh but the high came in one exceptional hour on Saturday the 18th as prices surged to $280.73/MWh at 7pm, as demand peaked, and as wind output dropped.  During the week the average pricing for off-peak hours, which include all of Saturday, exceeded the average price for on-peak hours.
The depressed prices did coincide with a slight rise in net exports.

Updated Weekly Reporting:Wk 6

The data sheets behind the NEW: Weekly Report, have been refreshed, so the reporting is now showing for the week of February 8-14.
The demand trend down continued, with the average Ontario Demand dropping 615MW against the same week the previous year, but a cold weekend did provide the first days up over the comparable day a year earlier (ie. the 6th Saturday of the year).
The price trend down continues, with the average Hourly Ontario Energy Price dropping over $11/MWh from week 6 the previous year, to only $22.48.  The range in the HOEP over the week was extremely limited, with a low of $14.51/MWh and a high of only $28.34.
The depressed prices coincided with an increase in net exports to an average of 1452MW per hour.

Nuclear output was again the most reduced source, compared to the 6th week of 2011, while coal saw the largest increase.

Drummond Report - On Electricity, it's worthless

Officially titled, the Don Drummond led "Commission on the Reform of Ontario's Public Services" devotes a section to electricity.  Here's the recommendation - along with my initial reaction to each of them:

Recommendation 12-10: Eliminate the Ontario Clean Energy Benefit as quickly as possible.
I guess that would be now – the vote buying worked already

Recommendation 12-11: Review all other energy subsidy programs against measures of value for money and achievement of specific policy goals.
Bureaucrat paid to control expenses recommends more reviewing; empty-headed twaddle.

Recommendation 12-12: Produce an Integrated Power System Plan (IPSP) built on the foundation of the province’s Long-Term Energy Plan.

The LTEP is a political document. None of the comments invited are on the public record and it’s universally acknowledged to be idiotic.  The LTEP can't be the foundation of anything of value.
The experts paid to produce an IPSP, at the OPA, should do so only if the LTEP is ignored.

Recommendation 12-13: Consolidate Ontario’s 80 local distribution companies (LDCs) along regional lines to create economies of scale.
Everybody knows consolidation is overdue - having provincial overlords enforcing it wouldn't be helpful though.

Recommendation 12-14: As part of the review of the feed-in tariff (FIT) program, take steps to mitigate its impact on electricity prices by
Only a poor economist would accept any form of the FIT program in today’s over-supplied Ontario.

Recommendation 12-15: Procure larger generation facilities through a request for proposal (RFP) process.
Why large? How large is large? 

 Large is cheaper – why not only large? 

 See above comment on FIT program. MicroFIT rewards people for being better than other people (I'd say it rewards them for being politically correct AND well connected, but that itself would be PC).

Recommendation 12-16: Review the roles of various electricity sector agencies to identify areas for economies in administration. This could include investigating the potential to co-ordinate back-office functions.
That bureaucratic self-preservation instinct is one ugly tick.
Hopefully suggesting nothing when you have nothing to suggest is recommended elsewhere in the report.

Recommendation 12-17: Make wholesale electricity prices inclusive of transmission costs such as capacity limitations and congestion as part of a comprehensive restructuring of the wholesale electricity market.
Another minor note from a bureaucrat’s fiddle.
The government is spending billions on the Lower Mattagami project, which isn’t likely to produce much more output, required signing over part of the ownership to the local First Nations, requires probably another billion on transmission - as far as Wawa- and is taking place in a zone of Ontario where the wholesale market price has been negative, on average, for years. 

I don't see moving about line items as really addressing anything.

Recommendation 12-18: Make regulated prices more reflective of wholesale prices by increasing the on-peak to off-peak price ratio of time-of-use pricing and by making critical peak pricing available on an opt-in basis.
12-17 suggests improvements in the market one moment, and 12-18 is the ravings of a micro-managing bureaucrat wishing to enforce his opinion on a market   Peak demand is collapsing, leaving generators providing cheaper and cheaper pricing to meet the rare upticks in demand.

Recommendation 12-19: Co-ordinate a comprehensive, proactive electricity education strategy across sector participants that at a minimum covers:
Indoctrinate, indoctrinate, indoctrinate …

Recommendation 12-20: Strategically promote Ontario’s strengths in the energy sector, capitalizing on export opportunities for domestic goods and services.
Strategically?
Please don't strategize.

Updated Weekly Report: Wk 5 now showing

The data sheets behind the NEW: Weekly Report, have been refreshed, so the reporting is now showing for the week of February 1-7.
The demand trend down continues (as does the milder than usual winter), with the average Ontario Demand dropping over 1400MW against the same week the previous year.
The price trend down continues, with the average Hourly Ontario Energy Price dropping over $14/MWh, to only $21.58.
There was a large curtailment of supply necessary the morning of the 1st, coincident with strong wind production and negative prices.

Weekly Reporting on Ontario's Electricity System

After early reports, my testing does indicate the page referenced in this post, and many pages already on this site, are not compatible with Internet Explorer 8 - the last IE available for Windows XP.

I have no intention of making the pages compatible - see the sidebar for options.

I've posted a summary of weekly supply and demand statistics in Ontario. The final pieces of the data driving the reporting are posted by the Independent Electricity System Operator (IESO), which is generally on Friday. My reporting thus far agrees, as expected, with the reliable IESO reporting .  There are 3 reasons to check out mine:

• Context - I include comparison data to the same week in the prior year. 
• Graphics - Primary the communication is via graphs.  
• Curtailment - The reporting includes an estimation of how much supply is curtailed, hourly, throughout the weekly period.  The IESO does not.
• Supply Mix information.

The weekly reporting can be accessed by selecting the "NEW: Weekly Report" tab, beside the "Home" tab on this site.