I saw a tweet the other day that seemed like the Ontario Energy Industry would be addressing an issue of interest to me:
#ELECTRICITY RATES: WHERE DO WE GO FROM HERE?
— Ontario Energy Association (OEA) (@energyontario) April 23, 2020
Turns out it was a lot less interesting than I thought.
My quick scan of the OEA’s “Help those who need help” paper finds little I agree with presented from a perspective that is foreign to me – and yet I agree with the action option they steer people to agree with:
OPTION 3: PHASE OUT ELECTRICITY COST REFINANCING SUBSIDIES
This option is the lowest cost option for provincial taxpayers. It would see bills remain stable, increasing by about 1.5% more than inflation each year until such time as electricity bills cover system costs. This option would result in electricity bills for Ontarians that are, on average, 13% below the cost plan inherited by the government, exceeding the government’s commitment.
I’m pretty sure the current Premier campaigned on actual cost controls, and not more interesting accounting – not that accounting is useless.
The industry perspective that sees cost savings as raising consumer rates above inflation deserves to, at least, have it’s historical presentation challenged.
Since the OEA’s paper goes back to Bob Rae’s rate freeze – after some big rate hikes once Darlington’s reactors entered service early in the 1990’s – lets quickly review how much of today’s so-called “electricity price mitigation programs” are actual costs to the government due to electricity.
Before Bob Rae’s NDP government killed the “Power at Cost” principle that guided Ontario during the heyday of its public provider (Ontario Hydro), Ontario’s electricity wasn’t meant to make government’s a profit, and it wasn’t subject to taxes.
It seems impossible a paper would cite rebating the provincial portion of the HST as a subsidy one year while ignoring it had only been subject to that tax for a single year (when the Provincial Sales Tax was merged with the federal GST).
Similarly, Ontario Power Generation (OPG) – the generator remnant of Ontario Hydro – has been driving rate increases in Ontario in the past 18 months, and reaping great profits doing so: $1.1 billion in 2019. Hydro One (the transmission and distribution remnant) had traditionally been the greater revenue generator – but trailed behind in 2019.
About $3 billion of that $5.5 billion wouldn’t have been costs in days gone by.
Is electricity itself the reason for costly programs to help poor people, rural and remote people, industries in the struggling north, and the first numbered nations?
I don’t think so. Programs were instigated through electricity rates instead of being rightly paid for with taxes – and now get counted as electricity subsidies!
That’s another half a billion dollars – and there’s more areas where electricity sector revenues are used as taxation: like the Industrial Conservation Initiative where public sector entities can transfer their costs onto small consumers (who in turn get subsidized by government).
Anyway… none of this is what I try to write about. My most recent post at my main Cold Air blog is intended to avoid unnecessary costs being added to the system – and many posts I write count up the unnecessary costs that have already been added.
OccasionallyI’ve offered thoughts on how to reduce costs.
I can see why the OEA, which claims to “represent Ontario’s energy leaders that span the full diversity of the energy industry,” would suggest money could be saved by raising the rates on small consumers, but – despite agreeing with their “Option 3” – can’t see why anybody would treat a report that ignores actual costs as credible.