Ontario needs an energy plan … and soon

By Michael WarrenThe Sault Star

Reliable, secure, clean and affordable electricity is essential to our way of life and the future economic health of Ontario. You would think that after seven years in office the McGuinty liberals would have a long-term energy plan to achieve these goals. They don’t.

What they do have is a complex framework of energy market participants and regulators who are currently operating in a policy vacuum. All they have to guide them is an ever-changing patchwork of disjointed government energy initiatives.

Most of these initiatives are not understood by the public. Some are ill-timed, others highly controversial or too costly. This leaves consumers and business with the impression that the Liberals are making up their energy policy as they go along. Voter anger, frustration and disbelief are mounting. 

At the heart of McGuinty’s approach to energy pricing is the idea that we should pay for the real cost of generating and delivering electricity. He argues that the alternative is to keep adding to the existing “stranded debt”-currently nearly $8-billion — accumulated under previous governments that subsidized hydro rates. He also believes that user pay will have the effect of lowering our energy use, and shifting our focus to conservation.

His approach makes sense in principle. But attempts to implement it have been badly planned and thus fraught with problems.

For example, the move to full cost recovery should have begun in the early years of McGuinty’s first mandate. Instead, in the midst of the worst economic downturn in living memory, the province is allowing hydro rates to skyrocket in order to reach this goal.

My September hydro bill is an astonishing 20% higher than last year’s — a 12 % increase in electricity generated and delivered, regulatory charges and debt retirement– plus another 8% thanks to the HST. Undeterred by the angry backlash that has greeted this scale of rate hike, Ontario Hydro has already applied for further rate increases of 15.7% in 2011 and 9.8% in 2012.

McGuinty is expected to trim these increases to about 8% in advance of the election next year. But this is no consolation when many household incomes are stagnant.

Ironically, part of the utility’s argument is that the demand for power has gone down due to a slow economy. So they want higher rates to maintain profits. It seems that we have to pay more for electricity whether demand goes down or goes up! A ‘catch 22’ that does nothing to promote the conservation ethic.

To make matters worse, we’ve recently learned that seven months ago, the Ontario Energy Board, quietly shifted the responsibility for building new electricity systems from investors to consumers. Electric utilities can now include up to 100% of their construction costs in the rate base. For the last century utilities have had to borrow money to build assets, and then recover the costs from consumers as the new power was delivered. The Board also allowed utilities to earn up to a 9.85% return on equity for this year — an increase of 17% over the previous ceiling.

Critics estimate that these two decisions alone account for $240-million a year in hydro costs — an average of $60 for each family in Ontario. No wonder people feel duped and powerless when it comes to their hydro bill.

Nuclear power was supposed to be part of the long term solution. It provides over 50% of our power needs and was slated to be maintained and even grow. For years this government touted the advantages of nuclear energy as a stable, constant, green-housegas free source of electricity.

Then in mid 2009, two years into a $20-billion nuclear upgrade project meant to replace two aging reactors at Darlington, the government abruptly “suspended” the whole project. Apparently the bids came in too high. For almost a year the only remaining nuclear initiative was the refurbishment of two reactors at Bruce Power.

Now it seems that Ontario Hydro plans to phase-out Pickering in 10 years at a cost of $300-million, and spend an undisclosed amount (read billions) to refurbish, not replace, the Darlington nuclear station. No word on what happens after Pickering, or on the future of nuclear energy in Ontario, or on the business case for these massive investments.

Meanwhile the government having put nuclear energy into expensive limbo, turns on its heels, and introduces the Green Energy Act. Suddenly we are to believe that renewable energy — wind, solar, hydro and bio-mass are going to fill the nuclear shortfall. And it will enable us to phase-out our coal fired plants by 2014.

Environmental groups are ecstatic. Energy consumers are wary. They should be.

Instead of starting slowly, the province has roared ahead with implementation. Nearly $1-billion in long-term green energy contracts — that pay huge rate premiums — are being signed every week, according to power expert Tom Adams. The higher cost of this green energy is already showing up on your hydro bill under the heading “Regulatory Charges.”

The $1.5-billon introduction of smart meters, intended to save us money and get us to use more off-peak electricity, has yet to entice consumers. Price differentials between off-peak and peak hours are not yet big enough to prompt many of us to do our laundry at midnight or our dishes before dawn. McGuinty has promised to revise the price differential to allow for greater savings. Hope springs eternal.

For this government to have any chance of re-election it must come forward with an integrated, long-term energy plan — and soon. The plan has to outline the optimum energy mix, be fullycosted, have a net economic benefit — and not empty our wallets in the process.

Michael Warren is the CEO of The Warren Group Inc and a public policy commentator. He is a former Ontario deputy minister, Toronto Transit Commission chief general manager and CEO of Canada Post Corporation. r.michael.warren@gmail.com

11 thoughts on “Ontario needs an energy plan … and soon

  1. “Energy consumers are wary.”………..this quote from above taken out of context is rather light and fluffy in my opinion. Energy Consumers are BROKE, with many having to sell their life long homes in order to move into a smaller less costly habitat because of this “energy policy” or lack of.

    There is no “wait and see time” left, there is no hope for a solution and a change in Government won’t undo the massive damage that has been inflicted on the hard working taxpayers of the Province.

  2. No mere change in politicians will undo the destruction of pristine wilderness and it’s precious freshwater resources either.

    The clear-cutting of our CARBON SINK forest alone makes industrial wind a “dirty” power source, add to that the disruption of wetlands and the release of bog gasses and you have a “stinking dirty” power source.

    And, I do not thank the electricity system for MY way of life I thank my ecosystem. MR. Warren has been spending too much time on the MEI website!
    Does your way of life include allowing your fellow citizens to be tortured by noise and sleep deprivation in their homes, captive to equity loss and ignored by their elected representatives!

    Industrial wind power is a stinking dirty and sadistic energy source.

  3. Ontario also needs a serious plan to cherish and protect birds and bats.

    With every small death our world is hugely diminished.

  4. The Liberal government is too bought in to their “green” policy to change now. They will have to be voted out. We need a premier and political party that will step back and take practical steps to get our power system back in line. It will take a lot of work and time with all the damage that has been done over the last 20 odd years.

  5. Good luck finding a Political Party that gives a damn for our fellow Neighbors and Citizens…….this whole political system has been corrupted beyond repair!

  6. Thank you Claire, I recognize someone who knows how interconnected our ecosystems are and that we “plug in” to the electricity system as it is now, at the risk of unplugging critical connections in our ecosystem.

    Even the politicians who talk about small-scale and local wind projects as an alternative to industrial wind should be asked to DEFINE THEIR TERMS. To me small-scale is each home or business being responsible for some degree of energy self-sufficiency(and hopefully in some cases weaning from the grid entirely)as a way to learn to live within the carrying capacity of our ecosystems.

    Quixote is right to be suspicious of all political stripes. To most, small-scale means just down-sizing the industrial model! No great enlightenment there, and certainly not enough intestinal fortitude to stop projects already underway. National natural heritage treasures are being vandalized and they can’t muster enough concern to call out the army to deal with this state of emergency.

  7. RE:VOLT, it is so true that we must, first and foremost, manage our own energy as individuals. I really feel that this is the message to me at this time. I have been preparing to buy a simple place in rural Ontario – preferably off-grid. But now I don’t know where because the turbines could pop up anywhere.

    As a child of rural Ontario, I am very distressed that so-called “L/liberals” have become left-wing fascists, prepared to rape and pillage without regard for other humans, never mind the sacred creatures who have my beloved companions and guides from very early childhood.

    The political “spectrum” is a circle. Somewhere on that circle left and right meet, either as fascism or enlightened co-operation. It seems we have to get through the former to get to the latter. Although I still hold onto hope that they co-exist, because for some of us, they do and they must.

    Meanwhile, I will seek an off-grid shared accommodation/apartment in the country, and wait for the end, that can’t come soon enough, of this filthy dirty, anti-green, greed-driven, corrupt wind industry.

  8. The really sad fact that a town in the near future will advertise in their marketing program for relocation to that area will be the statement “Our Town Is Turbine Free”!

    How bad does it have to get before this reality comes to fruition?

    How far down the scale of “liveable communities” does our Rural Country-side have to go when a statement like that is, and will be used, to attract new residents.

    McGuinty has literally destroyed our Province!!!!!!!!!!!

  9. For most of the pre-election build-up, I was trying to decide whether or not to vote. There were two turning points that helped me decide.. The first, and I have made this reference to this before on this site, was when each candidate was asked, at the end of a debate, to sum up in one word their vision for Toronto. Smitherman said “power” or “powerful”; Ford said “vibrant.” I know a power addict when I hear one.

    The second turning point occurred when Smitherman bragged thusly: “I am the father of the Green Energy Act.” And no one called him on it. No one. In fact, there was applause.

    As for Dalton, I thought that he would want to brag that HE is the father of the GEA. I guess he and George will sort it out. Perhaps they are both fathers of this sad bully of a child.

  10. Perhaps of General Interest…

    The Super La Nina and the Coming Winter
    http://pajamasmedia.com/blog/the-super-la-nina-and-the-coming-winter/2/

    “It is common for the jetstream to behave this way when the sun is in the solar minimum, such as it has been for the last three years. We are emerging from the minimum, but the sunspot numbers are continuing to be very low. Some solar experts say this next sunspot maximum may be one of the weakest in 200 years. As a result, the tendency for the jetstream to blow over parts of the Earth with little month-to-month variability may continue this year. That would result in continued extremes of temperature. The difference would be this time cold areas would be even colder due to the oncoming super La Nina and the falling global temperature.”

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