It’s official—electricity prices in Ontario are still rising

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Appeared in the National Post, November 7, 2019
It’s official—electricity prices in Ontario are still rising

Ontarians are all too familiar with the rising cost of electricity. In recent years, due largely to the Green Energy Act, Ontario electricity bills have skyrocketed for households and businesses. The Ford government has promised to lower the cost of electricity. But according to new data, and despite the government’s efforts, electricity prices in Ontario continue to rise.

So how did we get here? The province’s’s rising electricity costs have been, in part, blamed on the 2009 Green Energy Act (GEA) and its subsidization of electricity purchase contracts. These contracts provide long-term price guarantees at above-market rates to generators of renewable energy (wind, solar, bio-energy and some hydro). To fund these subsidized contracts (and some other costs including conservation programs), Ontario introduced an extra charge—or surcharge, technically called the Global Adjustment—to electricity prices. Since then, electricity prices have soared; not because electricity costs more to generate, but because the surcharge has risen dramatically.

To date, the Ford government has implemented a series of measures meant to lower electricity rates, including cancelling more than 700 early-stage renewable power contracts (although later-stage contracts remain intact), repealing the Green Energy Act, and reforming the administration of the “Fair Hydro Plan,” which subsidizes residential electricity costs, racking up more provincial government debt.

And yet, the main driver of rising electricity costs in the province—the surcharge—continues to rise. In fact, the surcharge (adjusted for inflation) increased 13 per cent between June 2018 and June 2019. And subsidies to renewable generators still represent approximately 34 per cent of the total surcharge cost.

Moreover, our analysis shows that over the past year the price of electricity has increased for almost every type of consumer in Ontario.

For example, despite the debt-funded government subsidy, Toronto residents saw a five per cent increase in their electricity costs between April 2018 and April 2019. In fact, provincewide, Ontario residents now pay 22 per cent more (on average) than Canadians in the rest of the country.

And large electricity consumers in Ontario—who pay the highest electricity rates in the country—now pay 65 per cent more than large consumers in the rest of Canada. Over the same 12-month period, large electricity consumers (large factories, for example) saw a 10 per cent increase in Toronto and seven per cent increase in Ottawa.

Obviously, these high electricity prices strain household budgets while also hurting competitiveness of Ontario businesses and industry. So what can be done?

Instead of borrowing to reduce the growth of current residential electricity rates, and thereby increasing the debt of the province, the Ford government must find ways to reduce subsidies to renewable providers—that’s what’s driving higher electricity prices—particularly solar and bioenergy generators who absorb 15 per cent of the surcharge yet generate only three per cent of Ontario’s electricity.

The Ford government has promised to lower electricity costs for Ontarians. While some progress has been made, much more must be done to mitigate the root cause of still-rising costs, for the sake of Ontario families and the economy at large.

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