Cap and trade. Hydro One management. Green energy contracts. Just weeks into his mandate, Doug Ford has been actively tackling his populist checklist when it comes to the energy file. Whether that translates into markedly lower costs, particularly for electricity, remains to be seen, but there are plenty of reasons to be doubtful.
A new board and CEO for Hydro One is window dressing, just Ford following up on his $6-million man comments on the campaign trail. The real issue remains Kathleen Wynne’s massively irresponsible selloff of a good chunk of the public trust as a way to cover a small fraction of her fiscal mismanagement – cheated Ontarians will be paying for that in perpetuity. The same short-term thinking applies to current rebates, which provide some optics for a few billion in savings now in exchange for tens of billions in price hikes on future electricity bills.
With the cap-and-trade scheme, Ford has cancelled a costly program that was long on optics and short on actual environmental benefits. Essentially, it was another of Wynne’s cash grabs. There should be visible savings on the energy front, a few cents on the price of gasoline and an estimated $6 or $7 a month off the average monthly natural gas bill, for instance.
In the new PC government’s latest move, it announced the cancellation of some 758 green energy projects in various stages of implementation. It claims there will be $790 million in savings, though there are few details on cancellation costs.
Initially a fairly minor contributor to massive increases in the price of electricity, the previous government’s Green Energy Act became more burdensome as the number of contracts grew given the huge gap between subsidized prices paid to producers and actual market rates. Worse still, falling demand saw the province selling off excess supply for still larger losses.
The mismanagement of Ontario’s electricity system is part of a trend going decades when the province started tinkering with what was then Ontario Hydro.
The organization that once served Ontarians was split into two – Ontario Power Generation and Hydro One – by the previous Progressive Conservative government of Mike Harris, which planned to privatize the industry. All-out privatization was scrapped, however, when rates rose alarmingly, striking fear into politicians not eager to face an angry electorate. But the damage was done.
The changes shifted the public-good focus of the electrical utility envisioned by Adam Beck back in 1906. Under the Harris government plan, the power system in Ontario would be operated like a private business, and it would have lower costs and lower rates, though just the opposite happened – a decade after the 1998 changes, the cost of electricity in Ontario for residential, commercial and industrial customers was more than twice the initial rate, with a large number of jobs lost because of high electricity rates.
Profits and dividends. Increased taxes on operations. Special levies for green energy. Debt-retirement charges. Conservation fees. These and other changes have contributed to increased costs passed on to consumers. Add in the HST and the impact has been dramatic.
And we’re nowhere near out of the woods yet.
The province is paying high rates to green producers – multiples of what it sells the electricity for – to encourage alternatives. The shortfall is costing Ontario a fortune. As with water rates locally, the plan is to have consumer pay the real cost of providing the services. Theoretically, that means no more subsidies from general coffers. It means covering the cost of replacing aging infrastructure. And it means continuing to pay for the Liberal government’s decision to phase out coal-fired plants. Of course, we’re not paying the “real” price, as many of the alternative projects come with over-inflated returns to producers, precisely the reason Ford has move to scrap new feed-in tariff (FiT) projects.
In short, past mistakes and poor policies have returned to haunt us.
Successive governments have not been effective to date in addressing consumer concerns, namely soaring rates and security of supply. Substantial efforts are needed on the conservation and alternative-supply fronts to tackle the long-term issues we face in maintaining a safe, abundant and – equally important – affordable electrical system in place for Ontarians.
The Ontario Energy Board (OEB) says rate increases would promote conservation, giving consumers an incentive to use power outside of peak demand periods – typically between 4 and 9 p.m., especially during the winter and summer months. This gave rise to smart meters, with an eye toward charging us more for electricity based on the time of day, but again the government failed in the program’s implementation, wasting billions, with Ontarians reaping none of the promised savings.
Doing your laundry and cooking at, say, 2 a.m. could theoretically prevent you from paying more, as would avoiding electric heat in the dead of winter and air conditioning on the most stifling of summer days. Unfortunately, peak time is identified as that time when most of us need electricity: if the house is empty all day because we’re at work and school, there’s no usage going on. Ditto for the wee hours when most of us are asleep.
Critics have called the smart meter program a failure, and with good reason. Costs have been higher for many of those using the meters – to add insult to injury, they’re paying for the meters too.
Still, changes are necessary. And that means increases, though not necessarily at the rate we’re experiencing today. Ford’s predecessors took flak for making us think about our utility bills, and for spending money on something that isn’t a shiny new consumer product … and then failing miserably, making much of the system worse, though there has been some progress on the decidedly boring task of system reliability, for instance.
The situation is such that Ontarians are ready to let Ford exercise his populist agenda, though there’s an equal chance he too will make things worse. But there is that bit about desperate times and the resultant measures.