Ontario’s electricity bills: a regressive tax?
On September 10, 2013, when the temperature hit 34 degrees in Toronto, demand for electricity in Ontario peaked at 8 PM when we were consuming 22,417 megawatts (MW) of power. At that point according to the Adequacy Report from the IESO, we still had excess capacity−8,437 MW in fact, or enough to power over seven million average Ontario homes.
So the question becomes, if we have power to spare, why do we continue to add expensive sources of power generation like wind and solar to the electricity grid? Surely the addition of that expensive generation that must be backed up will do nothing more than drive electricity prices up.
Has our electricity system turned into nothing more than a form of wealth transfer or, perhaps, a regressive tax? The latter is defined as: “A tax that takes a larger percentage from low-income people than from high-income people. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder.”
As it turns out, the management of our electricity system by the Liberal government during the past 10 years has been both. Consider the following points and see if any of them were meant to keep our electricity prices competitive with other markets, and that might have helped to create jobs in Ontario. Job creation may have resulted in tax revenue that could have been use to reduce our deficit, improve health care, built better transit, or provide better government services.
Reality in Ontario today
Here is what ratepayers must accept:
- Paying for smart meters and resulting time-of-use pricing–we eat supper after 7 PM and do our laundry in the middle of the night
- Paying to replace smart meters because they “don’t communicate”
- Paying for the development of the “smart grid” which turns out to be not so smart.
- Subsidizing very large energy consumers by picking up a chunk ($200/400 million) of what they would have to pay if they were a household, just to keep remaining manufacturing jobs
- Paying huge Net Revenue payments to gas plant electricity generators for sitting idle
- Paying wind generators to not produce electricity
- Paying solar generators to not produce electricity
- Paying to erect meteorological stations to measure how much wind generators might have produced so that we can pay them for not producing
- Paying for “steaming off” perfectly clean nuclear power from Bruce Power
- Paying for the Ontario Power Authority to run ads on TV, radio and the newspapers to tell us to conserve electricity, racking up average annual spending of $300 million
- Paying for costs of operating the Ontario Power Authority, which we were told was a temporary long-term planning agency
- Paying to get the local distribution company to pick up old refrigerators and being told it’s free
- Paying to move two gas generation plants at a cost of about $1 billion
- Paying to have the school boards in Toronto and elsewhere put solar panels on their roofs so they could generate money to fix some of the roofs
- Paying for grants to people that can afford to purchase new expensive electric vehicles (EVs)
- Paying to put in charging stations for those EVs that use the streets but don’t pay gas taxes
- Paying for someone else to use coupons to purchase CFL or LED light bulbs
- Paying for grants to small and medium sized companies to retrofit their lighting systems
- Paying for expensive electricity generated by solar panels placed on your local municipally owned arena
- Paying for grants so your municipality can exchange incandescent and halogen street lights to LED lights
- Paying your local distribution company extra money each year because their revenue deteriorated because you conserved electricity, so they asked for and got a rate increase blessed by the Ontario Energy Board
- Paying to connect wind and solar generators to the transmission system run by Hydro One, a wholly owned provincial monopoly
- Paying the cost of electricity produced by your neighbour for those solar panels on his roof for which he gets 80 cents a kilowatt hour
- Paying for the costs of solar power produced by corporations like Loblaws, Canadian Tire, IKEA, etc., which they sell into the electricity grid at 70 cents a kilowatt hour, but buy the power they need at the same (or lower) price that you pay
- Paying forever for “residual stranded debt” that should have been paid off 5 years ago.
- Paying for the sale of surplus electricity to New York, Michigan, etc. at a price 75/85% below its cost
- Paying HST on our electricity bills which automatically added 7% to its cost and generates well in excess of $1 billion for the province’s coffers
Now look over these 28 points and think about which represent “wealth transfers” and which represent a “regressive tax.” Review them again and pick out any that added cost-effective new generation. Hint: you will probably have trouble finding the latter!
Energy Minister Chiarelli recently bragged about the reputed $35 billion in new investment attracted to the province by the Green Energy and Green Economy Act and the 31,000 jobs that it supposedly created. Those 31,000 jobs (most are relatively short term construction jobs) will cost the ratepayers of the province over $3 million each.
What Minister Chiarelli didn’t say was that the $35-billion investment will cost ratepayers well over $100/120 billion by the time those 20-year contracts have ended, and most of that will be extracted from the pockets of many Ontarians who cannot afford the “regressive tax” it has become. Many are discovering they can’t afford to turn their lights on for fear of being unable to buy groceries.
What a legacy for the McGuinty/Wynne team.
October 3, 2013
The opinions expressed here are those of the author and not necessarily Wind Concerns Ontario.