Ontario power users get some relief, but there’s still much more to do

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Appeared in the Toronto Sun, August 18, 2017
Ontario power users get some relief, but there’s still much more to do

According to a recent report, the governments of Ontario and Quebec are negotiating a power agreement that would see some of Quebec’s cheaper hydro power sold into Ontario’s high-priced energy markets. The draft agreement would see Ontario importing eight Terawatt-hours of Quebec hydro power—about enough to supply 800,000 households in Ontario with power—at a bargain rate of six cents per Kilowatt-hour (KwH). Consider that in 2016, the average price for residential power (including taxes) in Toronto was over 20 cents per KwH.

This is a promising development (if done properly, which, given Ontario's record is questionable), and it is one that several Fraser Institute authors called for in a study titled “What goes up: Ontario’s soaring electricity prices and how to get them down.” But importing hydro power from Quebec is only one step that should be taken to bring Ontario’s shockingly high power prices down.

Another suggestion from authors Ross McKitrick and Tom Adams includes rolling back Ontario’s high feed-in tariffs for power from renewable energy sources—like other countries including Germany and Spain, which went whole hog for high feed-in-tariffs that were found to be unsustainable.

And though it might put a damper on people’s willingness to contract with the government, rolling back the feed-in tariffs can be done. In a bulletin for the Fraser Institute in 2014, law professor Bruce Pardy showed that Canadian governments have the power to cancel contracts issued by current or previous governments. Pardy explained that “Legislative supremacy is a central feature of the Canadian system of government” suggesting that either provincial legislatures or the federal government can pass laws that change or cancel legally binding agreements. They can even do so if those changes lead to the expropriation of property, or cause hardship to the people who entered into the contract. This same principle, McKitrick and Adams note, was upheld by the Ontario Court of Appeal in 2013.

Additional steps to bring power prices down in Ontario could include maintaining a de facto moratorium on new wind and solar power installation, preserving four coal-power generators in an operational state with state-of-the-art pollution controls, and subjecting nuclear refurbishment to a cost-benefit test.

Ontario households are groaning under high power bills. From 2008 to 2016, electricity prices in Ontario rose by 71 per cent. During that time, average price growth across Canada was 34 per cent. From 2008 to 2015, electricity prices also increased two-and-a-half times faster than household disposable income in Ontario. Ontario’s growth in electricity prices was almost four times greater than inflation and more than four-and-a-half times the growth of Ontario’s economy (real GDP).

Holding off on wind and solar, and importing hydro power from Quebec, are good steps that have been taken to ease some of that burden. But there have also been some missteps recently, such as when Ontario’s government chose to stretch-out existing power contracts, which is essentially just refinancing one’s mortgage over a longer period of time. That, according to Ontario’s Financial Accountability Officer, will cost future Ontarians an additional $21 billion over the next 30 years. The Wynne government should avoid such “hide the cost” strategies in favour of actions—such as killing feed-in-tariffs—that can produce real reductions in electricity prices in Ontario.