Energy makes up to 30 per cent of the costs for mining operations in the province
Ontario’s power rates jeopardize the future of the province’s mining sector, said Michael Mantha, the NDP’s critic for northern development and mines.
Mantha, the MPP for Algoma-Manitoulin, said the province needs to ensure the mining sector has more long-term predictability for hydro costs.
“We need to focus on programs that will have a greater impact,” he said. The provincial government has a number of programs in place to provide competitive energy rates to heavy industry, including the Industrial Accelerator Program, the Industrial Electricity Incentive, changes to the Global Adjustment and the Northern Industrial Electricity Rate.
Electricity is the second highest operating cost for Ontario’s mining industry, after labour. According to the Ontario Mining Association, 15 to 30 per cent of the costs associated with a typical mine in the province are tied to energy.
“We’re asking for a rate that is long-term and competitive, but also pushes for conservation,” said Chris Hodgson, the Ontario Mining Association’s president.
Hodgson said long-term predictability is especially important for the industry. He said the province’s energy programs for industry have helped Ontario businesses compete with those of neighbouring jurisdictions, but admitted the province will never have energy rates as low as those in Manitoba and Quebec.
“We’re just asking for a level playing field with other competitors,” Hodgson said.
A Fraser Institute report called the Environmental and Economic Consequences of Ontario’s Green Energy Act, compared the average electricity rates in 11 North American cities from 2008 to 2012. For large consumers, the average rate in Ottawa was 9.09 cents per kWh. In Montreal the average was 5.05 cents per kWh and in Winnipeg it was 3.55 cents per kWh.
“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 Green Energy Act,” the Fraser Institute report said. “The rate of return in mining will drop by about 13 per cent and in forestry by about 0.3 per cent.”
Mantha said many of the province’s junior mining companies are too small to qualify for some of the industrial energy rate programs.
“The threshold for the Global Adjustment Program still stands at one megawatt, which penalizes mid-sized producers,” he said.
The Global Adjustment is the difference between the total payments made to certain contracted or regulated generators and market revenues.
“We are investing in people, infrastructure and in a strong business climate to drive continued growth and with the help of vital supports such as the Northern Industrial Electricity Rate Program we continue to support a stable, reliable and cost-effective supply of electricity in the region,” said Michael Gravelle, Ontario’s Minister of Northern Development and Mines, in an email to Northern Life.
“Our commitment is clear for the North — we will have the power required to attract new mining developments and support continued economic expansion,” Gravelle said.