ontario electricity

Toronto has highest electricity bills among major Canadian cities

Ontario's electricity prices are the fastest growing nationwide; Toronto's monthly bills are the highest among major Canadian cities

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Evaluating Electricity Price Growth in Ontario

Electricity is an essential part of our modern lives. It powers our economy, generating the economic activity that underpins our high living standards. It also allows Canadians to enjoy the comforts of modern life, from warm homes and warm meals to internet access and entertainment. The full enjoyment of these benefits depends on electricity remaining affordable for people across the income spectrum.

But affordable electricity appears to be a growing challenge for Ontarians. In fact, electricity prices in Ontario have risen substantially over the last decade, placing a burden on many Ontarian households. Indeed, the province of Ontario has the fastest growing electricity prices in the country and its cities have some of the highest average residential monthly bills in Canada.

Electricity prices in Ontario have increased dramatically since 2008 based on a variety of comparative measures. Ontario's electricity prices have risen by 71 percent from 2008 to 2016, far outpacing electricity price growth in other provinces, income, and inflation. During this period, the average growth in electricity prices across Canada was 34 percent.

Ontario's electricity price change between 2015 and 2016 alone is also substantial: the province experienced a 15 percent increase in one year. This was two-and-a-half times greater than the national average of 6 percent during the same period.

From 2008 to 2015, electricity prices also increased two-and-a-half times faster than household disposable income in Ontario. In particular, the growth in electricity prices was almost four times greater than inflation and over four-and-a-half times the growth of Ontario’s economy (real GDP).

The large electricity price increases in Ontario have also translated to significant increases in monthly residential electricity bills. Between 2010 and 2016, monthly electricity bills (including tax) in major Canadian cities increased by an average of $37.68. During the same period, electricity bills in Toronto and Ottawa increased by $77.09 and $66.96, respectively. This means that residents in Toronto experienced electricity price increases of double the national average between 2010 and 2016.

In Toronto and Ottawa, the average monthly bills for residential consumers including taxes in 2016 were $201 and $183, respectively.

On average in 2016, residents of major Canadian cities paid $141 including taxes for monthly electricity bills. This means that Toronto’s monthly electricity bills (including tax) are $60 more per month ($720 more per year) than the Canadian average. Consumers in Ottawa pay $41 more per month ($492 more per year) on electricity bills than Canadians in other provinces. Montreal had the lowest monthly electricity bills for residential consumers at $83.

The problem of skyrocketing electricity prices and high bills is a made-in-Ontario problem directly tied to the provincial government's policy choices. Ontario's policies around renewable energy (wind, solar, and biomass) have resulted in large additional costs for consumers. More specifically, Ontario’s high electricity prices can be attributed to poorly structured long term contracts, the phase-out of coal energy, and a growing electricity supply and demand imbalance in the province that is resulting in Ontario exporting electricity at a loss.

High electricity prices for Ontarians, particularly when taxation is included, should be of central concern when the government is devising energy policy decisions. Given the critically important role that affordable electricity plays in peoples' standard of living, it is time for the Ontario government to have a hard look at how their policy choices are affecting peoples’ lives. It is also time for the government to begin pursuing meaningful policy reforms aimed at lowering electricity bills for Ontario residents.

Dependence on housing leaves Ontario economy vulnerable

Business investment in Ontario is $50.9 billion this year, down from $53.8 billion before the recession.

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Economic growth in Ontario has lagged Canada since 2003, reducing the province to ‘have-not’ status within Confederation. One theme that runs throughout the paper’s analysis is the persistent weakness of Ontario’s manufacturing sector, where output has fallen in absolute terms since the recession that began nearly a decade ago. Given that manufacturing is still Ontario’s third largest industry, it is critical that its health be restored if the Ontario economy is to fully recover and prosper.

Manufacturing has recovered in other provinces in Canada, notably Quebec despite the well-documented woes of Bombardier. Manufacturing has become a larger share of Quebec’s economy than of Ontario’s, partly a reflection of how manufacturing has shrunk from 21.7% of Ontario’s economy in 2002 to 12.1% in 2015. This suggests manufacturing’s problems in Ontario cannot be blamed on global factors such as US export demand or the exchange rate, but are something specific to Ontario. The paper finds that the high cost of doing business in Ontario is the main drag on growth. These costs include everything from high electricity rates, the rising cost of labour and high income taxes to the indirect cost of a heavy regulatory burden. In particular, energy-intensive manufacturing has fared much better in Quebec than in Ontario in recent years, helped by Quebec’s much lower electricity prices. As a result of the high costs in Ontario, the temporary weakness that inevitably accompanied the 2008/09 recession has become chronically weak growth. Sluggish growth has erased Ontario’s historically lower unemployment rate than in neighbouring Quebec, a province long known for extensive government intervention in the economy and large government debts.

More broadly, business investment in manufacturing and elsewhere has languished during the recovery. Overall, investment plans are for $50.9 billion in 2017, compared with their pre-recession peak of $53.8 billion. Most of this reluctance to invest originates in the manufacturing industry. This reflects a number of factors. While the automobile industry has retooled its existing plants, no new plants have opened since 2009 while existing capacity continues to be shuttered, with another line scheduled to close this summer. Investment has fallen even more in other industries ranging from petroleum refining to lumber, computers and electronics, and rubber and plastics.

Chronically weak growth in manufacturing has left Ontario increasingly dependent on housing, which has contributed over 29% of its income growth in the past year, even before a spike in housing starts and prices early in 2016. Besides a sharp increase in housing starts in Toronto, there has also been a marked shift from the building of single-family homes to multiple-unit dwellings, mostly apartment and condominium buildings. The squeeze on the supply of single-family homes, partly the result of land use regulations, helped fuel the surge in their prices. At the same time, the increased supply of multiple units is threatened by the extension of rent controls by the provincial government.

With a growing chorus of analysts and the federal government warning that a possible bubble in Toronto’s housing market risks deflating, this leaves Ontario precariously dependent on a potentially unstable and unsustainable source of growth. A correction in the Toronto housing market would leave both Ontario’s economy and government fiscal projections vulnerable to a downward revision.

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