Energy prices in Ontario: the ‘epitome of bad planning’
Energy Minister Chiarelli tells us he is in control
Listening to CBC Windsor‘s recent radio interview with Energy Minister Bob Chiarelli and reading his recent remarks to the Oakville Chamber of Commerce and Professional Engineers of Ontario, Oakville Chapter, demonstrates the misguided logic and math skills that have made Ontario’s electricity system the mess it’s currently in.
The interview on the CBC was only 10 minutes but the hyperbole was beyond comprehension. In Windsor, Minister Chiarelli was touting “subsidies” for the greenhouse sector. A small part of Chiarelli’s prepared speech delivered at the University of Windsor was captured on CBC TV and a couple of the greenhouse beneficiaries noted the significance of the subsidies which in one case represents an annual $1 million reduction in their cost of electricity. That will wind up in the “electricity” line on the bills of residential and small business ratepayers. With 1,114 greenhouse nursery and floriculture producers in the province, we “ordinary” ratepayers should hope it’s not $1 million each, or we are looking at a total subsidy of $1.1 billion in annual costs.
The questions raised by the CBC interviewer related mainly to the planned privatization of Hydro One, as did Minister Chiarelli’s Oakville presentation, but the dance moves performed by the Energy Minister at both events and during the interview were over the top!
Here is one part of the report on his speech to the Oakville crowd: “The provincial government decided to embark on an ‘aggressive’ plan to sell assets such as Hydro One, the LCBO, The Beer Store and significant real estate holdings, where possible, in order to ‘mitigate’ increased pressures on power rates as a result of Ontario’s climate change and carbon plans that included eliminating all coal-powered transmission stations, Chiarelli said.” This would suggest Minister Chiarelli was saying the sale proceeds from Hydro One would be dedicated to “mitigate” power rate increases, yet the report from earlier in his speech was: “Chiarelli said 100 per cent of the net profits from the sale of Hydro One by legislative law would also be used to improve roads, highways, bridges, transit and other infrastructure.”
It is unclear how using “100 per cent of the net profits from the sale of Hydro One” to build bridges, highways or transit does anything to “mitigate” rate increases in the energy portfolio. Perhaps it’s a reflection of “Chiarelli math”?
Now on the Windsor portion of Chiarelli’s travels and pronouncements the Windsor Star reported:
“While hydro rates will continue to rise, Chiarelli said consumers have seen the last of sharp increases that averaged about six per cent annually over the last eight years. Starting next year, hydro rates for industrial users are expected to rise by 1.7 per cent — about the rate of inflation. Increases in rates for residential users will be ‘slightly higher,’ he added.” “Slightly higher” in Minister Chiarelli’s math means a minimum of 12% as was noted in an earlier article forecasting residential rate growth.
As far as the greenhouse growers are concerned the above noted article had this comment: “Justine Taylor, energy and environment co-ordinator at OGVG (Ontario Greenhouse Vegetable Growers), said hydro expansion is needed to compete with U.S. states, like Ohio, which offer dramatically cheaper electricity rates as well as incentives such as free land and tax holidays.”
It would appear Minister Chiarelli, hearing screams from numerous associations throughout the province, reacts to those who scream the loudest. He offers them concessions by burdening ordinary ratepayers and small commercial enterprises with higher and higher electricity rates to retain the jobs of those who threaten to leave.
It is ironic that U.S. states, like Ohio, NY and Michigan are the beneficiaries of that cheap electricity that Ontario exports hourly at a cost to ratepayers approaching $2 billion annually. This means they in turn can offer “dramatically cheaper electricity rates”.
The foregoing reflects on the results of the Green Energy Act which added a large amount of subsidized wind and solar generation to Ontario’s grid. Due to its intermittent nature they backed it up with expensive gas generation, allowed the spilling of hydro, steaming off of nuclear power, etc. The wasted generation is paid for by residential and small commercial businesses via the Global Adjustment.
The patchwork process the Energy Ministry exudes is the epitome of bad planning.
It is a reflection on the lack of a cost benefit analysis that would have disclosed the burden on Ontario’s economy the GEA created, but the Energy Minister appears willing to continue to dig the hole deeper and deeper.
© Parker Gallant, June 28, 2015