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Ontario Economy

Quebec-Ontario electricity trade is smart, but not simple – by Christopher Ragan (Globe and Mail – August 26, 2014)

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.

Last week, Quebec’s and Ontario’s premiers announced their desire to work together on crucial issues, including climate change, interprovincial trade and infrastructure. It is very positive for Canada when our two largest provinces recognize the benefits of co-operation. We should certainly hope they succeed, but let’s also be mindful of the obstacles in their way.

Especially interesting is the prospect of greater interprovincial trade in electricity. This would be a game-changer in Canada, and a very positive one. Quebec has a great deal of low-cost hydroelectricity available to export, and its current U.S. markets are becoming less interested in purchasing long-distance hydro power because of their own development of low-price shale gas.

At the same time, Ontario’s economy continues to grow but has few options for increasing its electricity capacity at costs anywhere close to Quebec’s. So the idea of Ontario buying electricity from Quebec is obviously sensible.

Any idea that is so obviously sensible must have serious problems, and there are at least three that come to mind.

The first will be the pressures from within Ontario to resist importing cheaper Quebec electricity. It will be argued that Ontario has built a world-class nuclear industry and that refurbishing existing nuclear plants and building new ones is necessary to keep this expertise at home.

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Wynne, Couillard to push national energy strategy at premiers conference – by Jane Taber (Globe and Mail – August 25, 2014)

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.

Bolstered by the new partnership with her Quebec counterpart, Ontario Premier Kathleen Wynne is eyeing Quebec’s abundant hydro power to light up Northern Ontario’s Ring of Fire development and reinvigorate talks for a national energy strategy.

She and Quebec Premier Philippe Couillard, both rookie premiers with majority mandates, recently forged a central Canadian alliance to co-operate on issues and bring prosperity back to their provinces.

Beginning on Aug. 26, all of the premiers will meet at the Council of the Federation in Prince Edward Island, and she and Mr. Couillard hope to come to the table with a “shared position” on a Canadian energy strategy. Under the previous separatist government – Mr. Couillard defeated Parti Québécois premier Pauline Marois in the spring provincial election – Quebec refused to participate in a Canada-wide strategy.

“It’s a different situation when there’s a strong federalist premier in Quebec,” Ms. Wynne said in an interview.

In addition, their new alliance calls for potentially increasing electricity trade between the two provinces. Northern Ontario is in dire need of infrastructure to help develop the Ring of Fire, which could provide thousands of jobs to the province and about $60-billion to its economy, according to the provincial government’s estimates.

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Ontario’s Wynne, Quebec’s Couillard forge central Canadian alliance – by Jane Taber (Globe and Mail – August 22, 2014)

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.

Ontario and Quebec are forging a central Canadian alliance to co-operate on issues, including potentially expanding electricity trade, hoping their combined clout will bring back prosperity to both provinces.

Ontario’s Kathleen Wynne and Quebec’s Philippe Couillard announced the new regional partnership in Quebec City on Thursday. It is the first time the rookie Liberal premiers – both leading so-called have-not provinces – have met in person. According to one senior Ontario official, there is “a lot of personal like-mindedness and great rapport between the two.”

A bullish Mr. Couillard said the new central Canadian alliance signals the two provinces are “back as a very important block of influence in the country.”

“I think by acting together we will be more efficient,” he said. “When we have common concerns like infrastructure, like climate change, like energy strategy, it’s good that we voice those concerns together … Western provinces do the same, Maritime provinces do the same. It was time that Quebec and Ontario, again, do that.”

As have-not provinces, Ontario and Quebec rely on millions of dollars of federal equalization payments as they struggle in the federation economically.

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Ontario should import low-cost hydroelectric power from Quebec – by Jack Gibbons (Toronto Star – July 21, 2014)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Jack Gibbons is chair of the Ontario Clean Air Alliance.

Their highly radioactive waste will linger forever, but the elderly nuclear reactors that provide half of Ontario’s electricity will soon reach the end of their lives. And the task of rebuilding them, currently in the planning stages, will almost certainly burden the fiscally crippled province with even more debt while electricity prices maintain their steeply upward trajectory for decades to come.

As an alternative, letting the oldest reactors die and replacing their output with clean, renewable water power from Quebec could save Ontario $600 million a year in foregone nuclear costs — beginning as soon as the two neighbours decide to end the electricity separatism that has traditionally stood in the way of such a logical and mutually beneficial hookup.

Quebec is the fourth-largest producer of hydroelectric power in the world and its electricity rates are among the lowest in North America. Its residential rates are 45 per cent lower than ours and its industrial rates are 55 per cent lower. In recent years, the province has produced far more cheap, clean electricity than it can use itself.

Meanwhile, its next-door neighbour, Ontario, is struggling with some of the highest power costs in the country and facing a minimum $13-billion bill to refurbish the Darlington nuclear reactors. There is already enough transmission capacity linking the two provinces to replace 97 per cent of the power currently produced by Darlington — and a tremendous opportunity to strike a deal that would provide huge economic benefits for both provinces.

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I refused to play the Conservatives’ fiscal game. So should Wynne – by Bob Rae (Globe and Mail – July 17, 2014)

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.

Bob Rae was premier of Ontario from 1990 to 1995

Critics on the right are now claiming that Kathleen Wynne’s Ontario government is on the road to fiscal rack and ruin – that it could, in one commentator’s words, push Ontario “back to the Bob Rae years.” That provokes these comments.

One would have thought that the experience of the last few years would have made the right wing narrative look pretty goofy but, no, these guys just can’t help themselves. In 1990, interest rates were kept deliberately high, the dollar rose predictably, U.S. companies shut factories in Canada as the newly minted free-trade agreement encouraged rationalization, and a bloated real estate market plummeted. All in one go, all at one time.

The shock to the Ontario economy was sharper and more severe than in 2009, and, as a direct result, public spending increased and revenues fell. This is what happened to Prime Minister Stephen Harper and Ontario premier Dalton McGuinty in 2009. It would have happened in Ontario even if Mike Harris had been elected in 1990. Remember that Tory premiers Bill Davis and Frank Miller ran deficits after the 1980 recession as well.

So, to compare 1990-91 with 2014-15 is to ignore where we were in the cycle, and what governments since the 1930’s have done when faced with such a drastic drop in prosperity.

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Ontarians have no excuse for being naive about nuclear – by John Barber (Toronto Star – July 10, 2014)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Given what we now know about the cost of nuclear power, why is Ontario ready to throw good money after bad to refurbish the Darlington Nuclear plant?

I admit I was young and naive back in the late 1970s when I boarded a school bus at Queen’s Park and travelled along with a shaggy group of protesters 70 kilometres east to demonstrate against the construction of the $4-billion Darlington Nuclear Generating Station. Some brought blankets to help scale the barbed-wire fence — and did that — but most of us just milled around for a few hours before leaving on the same yellow buses that had brought us.

If only we had known then the true cost of Ontario’s 20th-century nuclear empire — how after paying $30 billion to finance Darlington and its kin over the next three and a half decades, Ontarians would still owe $4 billion for the job in 2014 — the protest might have been more effective. Given the foresight, no sane citizen would have bought that deal.

But hindsight is a good enough proxy today as the engineers at Ontario Power Generation rush to complete their plans to refurbish the aging, still-not-paid-for nuclear complex — with the estimated costs of that $13-billion project seeming to rise every few months like alarm bells that never stop ringing.

History is repeating itself, but it’s no farce. With the Darlington refurbishment, Ontario risks another half-century or more of crippling debt to produce inherently dangerous, over-expensive electricity with ongoing waste-disposal costs calculated in molecular half-lives. It was a big mistake the first time, but can only be folly the second time around.

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Ontario debt rating outlook cut to negative by Moody’s – by Keith Leslie (National Post – July 3, 2014)

The National Post is Canada’s second largest national paper.

Canadian Press – TORONTO — Moody’s credit rating agency changed the outlook on Ontario’s debt rating Wednesday to negative from stable, citing concerns about the province’s ability to eliminate a $12.5 billion deficit by 2017-18 as scheduled.

“After several years of weak to moderate economic growth, and higher than previously anticipated deficits projected for the next two years, the province is facing a greater challenge to return to balanced outcomes than previously anticipated,” Moody’s Investors Service said in a statement.

The change in outlook affects approximately $250 billion in debt securities, Moody’s said as it reaffirmed Ontario’s Aa2 ratings.

The ratings agency didn’t wait for the Liberals to introduce their budget July 14 before lowering the outlook to negative, but Premier Kathleen Wynne has said it will be identical to the May 1 fiscal plan that was rejected by the opposition parties, triggering the June 12 election.

“Although the province has not yet tabled a new budget following its June election, indications are that it will be little changed from the May budget, which Moody’s indicated was credit negative for the province,” said Moody’s vice president Michael Yake.

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Joe Oliver channels Jim Flaherty in telling Ontario to quit whining and solve its own budget problems – by Kelly McParland (National Post – July 3, 2014 )

The National Post is Canada’s second largest national paper.

When the late Jim Flaherty was finance minister, he got a certain joy from taking pot shots at Ontario’s economy, which he felt was badly managed under a series of Liberal governments.

In a 2012 speech he said the province had “no one to blame but themselves” for their troubles, and complained that “Ontario’s spending mismanagement is a problem for the entire country.”

“I would hope that they’re able to manage their spending better than they have been able to do over the past eight or nine years of government.”

He had plenty of justification for his taunts. Under his direction, the federal budget was well on the way to being balanced, while Ontario couldn’t seem to get a handle on its much-smaller shortfall, for all the bold talk from Queen’s Park. At the time of Flaherty’s address, Ontario expected a deficit of more than $12 billion, but was promising to bring it down. Two years later, it is still expecting a deficit of more than $12 billion and is still promising to bring it down.

It was reported that the Prime Minister’s Office eventually intervened and suggested Mr. Flaherty put a sock in it. His successor, Joe Oliver, lacks Mr. Flaherty’s brashness, but also seems to have been freed of the sock. In an article in the Financial Post Thursday, Mr. Oliver suggests, in the politest of terms, that the new government of Kathleen Wynne has no one but itself to blame for the mess it’s made of its economy, and should stop bleating at Ottawa to come to its rescue.

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These two provinces just can’t plug in – by Konrad Yakabuski (Globe and Mail – June 26, 2014)

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.

Provincial elections have now come and gone in Ontario and Quebec, with majority Liberal governments elected in both. Presumably, that means less political posturing, potentially clearing the way for a new era of electricity co-operation between Canada’s largest provinces.

Don’t hold your breath.

Electricity regulators in Ontario recently asked stakeholders whether the province should import more hydro power from Quebec. Their draft report is due next week. This coincides with a big push by Ontario’s anti-nuclear lobby to scrap the planned multibillion-dollar refurbishment of the Darlington and Bruce power stations in favour of buying “cheaper” electricity from Quebec.

Reorienting electricity policy in Canada, however, is tantamount to turning around an oil tanker. All the forces in the political universe seem to conspire against it, ensuring that past is prologue.

For decades, both provinces have operated in electricity policy silos, with self-sufficiency and economic development trumping consumer interests.

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Ontario’s economic fundamentals need fixing – by Kevin G. Lynch (Toronto Star – June 17, 2014)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Now that Ontario’s government is decided, it’s time to address a series of economic challenges that we ignore at our peril.

With Ontario’s government now decided, the governing begins. And it will be a challenging task. Ontario faces economic challenges that we ignore at our peril. The pace of growth has declined, and it is permanent, not temporary. The government debt of Ontario is high, and still rising. The productivity of Ontario business is low, and barely increasing, while its innovation performance is poor and shows only isolated pockets of improvement. The Ontario cost base, from electricity to regulations to congestion is relatively high, and shows few signs of becoming more competitive. As the Jobs and Prosperity Council bluntly observed, the status quo is not an option for Ontario.

Growth in Ontario, long the stalwart of the Canadian economy, averaged roughly three per cent annually from 1980 to just before the global recession, but is now heading downwards to a long term growth path of only 2.1 per cent per year according to the government’s Long-Term Report on the Economy, or even lower by other estimates.

This massive decline in Ontario’s potential growth is the result of a variety of interconnected factors: aging demographics, weak productivity growth, structural shifts in manufacturing competitiveness and sustained weakness in our traditional trading partners. What is clear is that a failure to rebuild Ontario’s growth capacity will affect everything from the affordability of public services to the number and quality of jobs to living standards.

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Kathleen Wynne will have to show what kind of premier she really is – by Adam Radnowski (National Post – June 13, 2014)

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.

Kathleen Wynne has achieved what even many of her fellow Liberals doubted was possible.

A year-and-a-half after inheriting from Dalton McGuinty what seemed to be the flaming wreckage of a decade-old government, Ms. Wynne’s party entered this campaign just hoping to cling to power. Instead, their rookie leader won them back a majority.

Now, having proved herself a remarkably successful campaigner, Ms. Wynne will have to demonstrate what kind of premier she really is. And the big catch is that the way she won back office, by rallying the centre-left (and a whole lot of unions) behind her in opposition to Tim Hudak’s Progressive Conservatives, has set up expectations she is going to have a hard time meeting as she returns to the cold realities of a government deep in deficit.

It may take a little while, for both her and her supporters, for those realities to sink in. Ms. Wynne has vowed to reintroduce promptly the budget the Tories and NDP rejected to kick-start the election, which means she will get to make good on her promises to launch a new provincial pension plan, increase spending on social programs, invest in infrastructure, and try to stimulate economic growth through direct business investment.

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Kathleen Wynne’s reality: Ontario’s massive debt cannot be ignored – by Theresa Tedesco (National Post – June 13, 2014)

The National Post is Canada’s second largest national paper.

Now that voters have returned Kathleen Wynne to power, the premier will need to find a way to manage a debt load that is larger than California’s while continuing to keep the credit rating agencies mollified long enough to avoid a dreaded downgrade.

With a net debt of $267.5-billion that is growing at a faster rate than the economy, the challenge is just beginning for the party that emerged victorious from the provincial election. “They are still going to be facing pressures from the credit agencies to get the province’s fiscal finances in order,” said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto. “There’s no way to avoid it. The reality is there and it can’t be wished away.”

Put simply, Ontario is increasingly dependent on tapping lines of credit because it spends more than it collects. Currently, the province pays $11-billion annually in interest payments to finance its debt — money that is not going toward paving roads, building public transit, hiring more teachers and shortening wait times in hospitals.

During the 40-day election campaign, which focused predominantly on the economy, the three main parties offered a stark choice: Conservative leader Tim Hudak vowed to cut 100,000 public-sector jobs over four years and lower corporate taxes to kick-start the creation of one million jobs in eight years while balancing the budget in two.

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Next Ontario government will only have bad news to deliver as debt pile grows – by Jack M. Mintz (National Post – June 10, 2014)

The National Post is Canada’s second largest national paper.

No matter who wins the Ontario election, the newly elected government will be faced with a fiscal hole that gets only wider and deeper. If the province is to gets its fiscal situation under control, either revenues need to increase or spending restrained by billions. There are no quick and easy solutions.

Let me detail Ontario’s house of debt to understand the gravity of the situation. The 2014 Liberal budget projected gross debt is expected to increase from $296-billion in 2013-14 to $311-billion by 2014-15. After subtracting financial assets, net debt will rise from $269-billion in 2013-14 to $289-billion in 2014-15.

Ontario’s net financial liabilities will be $20,500 per person or $82,000 for a family of four. This mortgage is in addition to federal, local and household debt liabilities borne by Ontario residents. It does not include other unfunded liabilities such as health care and elderly benefits that will increase sharply as baby boomers retire.

The $20-billion increase in net debt this coming year is a good measure of the real Ontario deficit. The debt problem is a bigger issue than suggested by a recent “educational” analysis provided in the Globe and Mail, which focused on the $12.5-billion operational deficit of the province, ignoring net liabilities to finance broader government operations, including $10-billion in capital spending.

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Ontario’s lost swagger: It’s now a have-not province with a don’t-want election – by Roy MacGregor (Globe and Mail – June 11, 2014)

A Place To Stand: The 1967 centennial theme for Ontario, Canada. A time when the mining sector was booming, well respected and an integral part of a booming economy, once of the most successful in the world. How did we let it slip away? – Stan Sudol

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.

Something happened to Canada’s largest province well before this June 12th election was even called.

Ontario lost its swagger.

One former provincial cabinet minister likens the mood to what Keith Spicer found more than 20 years ago when his Citizens’ Forum on Canada’s Future took the pulse of the nation and found it very weak indeed.

But this is no case – as was clearly the situation in Ontario back in 1990 – of taking such delight in kicking David Peterson’s Liberals out of office that no one considered that Bob Rae’s NDP government would thereby win a majority by default. Remember Mr. Rae’s line to the CBC when it was apparent he had won? “I’m having difficulty getting used to it.”

So, too, did those who kicked him into office, a sentiment repeated after they voted Mr. Rae out in 1995 and replaced him with the ideologically opposite Mike Harris. That may well explain why there seems such reticence among Ontario voters to act in any direction.

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Day of reckoning nears for Ontario as growing deficit raises risk of fresh credit downgrade – by Theresa Tedesco (National Post – June 9, 2014)

The National Post is Canada’s second largest national paper.

The warnings have been quick and delivered with a growing sense of unease. In less than three weeks, Moody’s Investors Services, a major international credit rating agency, issued successive commentaries about Ontario’s fiscal challenges that, although cautiously worded in pithy parlance, nonetheless signaled a further credit downgrade for Canada’s largest province appears inevitable – if not imminent.

“They have warned and alluded to the fact that if something isn’t done, a downgrade is inevitable,” said Candice Malcolm, Ontario director of the Canadian Taxpayers Federation.

That day of reckoning for Ontario and its increasingly precarious financial fortunes appears to be at hand no matter who wins the provincial election on June 12. “The fiscal squeeze does not disappear with a change of government,” declared Finn Poschmann, vice-president policy analysis at the C.D. Howe Institute. “Certainly the pressure is there for a downgrade.”

For a province that is hugely dependent on tapping lines of credit because it spends more than it collects, a future downgrade could severely cripple Ontario’s ability to function. Higher borrowing costs would add billions more to the debt-revenue measure, which is already the highest among 10 provinces.

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