Ontario’s power policies an example of what not to do – Gwyn Morgan (Globe and Mail – August 19, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The political firestorm raging in Ontario about the cost of cancelling two natural-gas-fired power plants reminds me of a conversation I had with then-premier Dalton McGuinty in 2005. At the time, I was head of Encana Corp. and we were co-chairing a Public Policy Forum event.

As we chatted privately before the dinner, he said: “As a gas producer, you must be happy we’re going to close our coal-fired power plants.” I replied: “Well, it’s not a big deal in the context of our North American gas markets, but you’d better make sure those gas power plants are built before you shut the coal plants.”

Eight years later, Ontario power consumers are stuck paying $585-million for two gas-fired plants that were never built. That’s just the tip of the iceberg. Mr. McGuinty’s decision to shutter the coal-fired plants was followed in 2010 by his government’s Green Energy and Economy Act, aimed at replacing some of the coal-fired power with highly subsidized wind and solar energy while, supposedly, turning Ontario into the green power capital of North America.

Ontario offered so-called feed-in rates almost four times the existing system rates for wind, and more than 10 times for solar power. Like bees to honey, wind and solar companies rushed to sign 20-year, rate-guaranteed contracts. 

A report last spring by the conservative Fraser Institute think tank estimated the green subsidies would add almost $6-billion to household electricity costs and $12-billion to business and industrial costs, transforming Ontario’s previous low-cost electricity economic advantage into a crushing competitive millstone.

The report concluded: “Electricity prices for large users in Ontario are now among the highest in North America and are expected to increase by 40 per cent to 50 per cent further in large part to pay for costs incurred under the GEA [green energy act].”

The report calculated that Ontario’s manufacturing and mining sectors would be particularly hard hit, driving down manufacturing investment returns by 29 per cent and mining returns by 13 per cent. But almost all businesses will feel the pain and job losses will be severe.

“The province’s claim that 50,000 jobs will be created by the GEA was unsupported by any formal analysis and the province has since admitted both that the vast majority of any GEA-related jobs will be temporary, and that the 50,000 figure does not account for offsetting permanent job losses due to electricity price increases under the GEA,” the report concluded. “Consequently, the claim has no basis in fact.”

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