Fraser Forum

Auditor general report sheds more light on Ontario's soaring electricity costs

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We’ve been writing a lot recently on Ontario’s high electricity rates, which are partly driven by the province’s heavy investment in renewable energy. High electricity prices have been taking money out of consumers’ pockets and hurting the province’s competitiveness. A new report from Ontario auditor general Bonnie Lysyk (pictured above) sheds further light on just how costly electricity has become in the province.

Here are some of the highlights from the report:

• Generation costs in Ontario have increased by 74 per cent in the last decade, from $6.7 billion in 2004 to $11.8 billion in 2014, and may grow to $13.8 billion by 2022.

• Global Adjustment (GA) fees have increased from $650 million in 2006 to $7.03 billion in 2014.

• From 2006 to 2014, consumers had already paid $37 billion in GA fees and are expected to pay $133 billion in GA fees between 2015 and 2032.

• The price of Ontario’s electricity is higher than what it is exported for. From 2009 to 2014, Ontario exported 5.1 million megawatt-hours (MWh) of power. It cost $3.1 billion more to produce that power than Ontario wound up receiving in revenue for it.

• Consumers have paid $9.2 billion more for renewables under the current 20-year contracts than they would have had to under Ontario’s previous program of renewable procurement.

• Ontario’s guaranteed prices in 2014 for wind and solar are approximately double and three and a half times the current average U.S. costs, respectively.

• Using non-hydro renewables to reduce electricity-sector carbon emissions costs approximately $257 million for each megatonne of emissions reduced (Ontario’s estimated 2012 emissions were 167 megatonnes).

Research conducted by the Fraser Institute has come to many of the same conclusions as the Ontario auditor general’s report, with the big one being that Ontario’s renewable experience has been exceedingly costly.

For example, one study found that while wind and solar power provided just under four per cent of electricity in Ontario, they accounted for about 20 per cent of the average commodity cost in 2013.

Another Fraser Institute study found that had Ontario continued with ongoing retrofits to its coal plants, all of the environmental benefits of the Green Energy Act could have been achieved at one-tenth the cost.
Ontario’s high electricity prices undermine Ontario’s competitiveness by putting its businesses and manufacturers at a disadvantage compared to those in the American rust belt.

And businesses are clearly feeling the pinch. One recent survey found that 38 per cent of Ontario business owners expect to see their bottom lines shrink because of high electricity prices. This will result in delayed or cancelled investment.

The auditor general’s report provides yet more evidence that Ontario’s approach to electricity policy has produced considerable economic pain for precious little environmental gain.