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.
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. firstname.lastname@example.org