Ontario Economy

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Ontario’s Liberal government is making up its energy policy on the fly, for its own political ends

In explaining why Ontario’s Liberal government scrapped its previous intention to build two new nuclear reactors, Energy Minister Bob Chiarelli offered up that the province now has a “comfortable surplus” of electricity.

That’s a strange way of describing the decimation of Ontario’s manufacturing sector — in part due to the uber-high electricity rates the Liberals have contributed to with their insane rush into expensive and unreliable wind and solar power.

Indeed, the main reason Ontario now has a “comfortable surplus” of electricity — whereas a mere decade ago we were worried about shortages and rolling brownouts — is not because our supply is better but because our economy is worse.

Simply put, when there are fewer manufacturers producing fewer goods, electricity demand goes down. If and when our manufacturing sector recovers, electricity demand will rise again, and that’s when we’ll need adequate sources of it if we’re not to return to the dire situation of just 10 years ago when Ontario was routinely described as “power starved” by energy experts.

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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 is probably the worst electricity market in the world,” said Pierre-Olivier
Pineau, an associate professor and electricity market expert at the University of
Montreal’s HEC business school. (Globe and Mail – October 14, 2013)

OTTAWA — The laws of economics suggest that when supply goes up, prices fall. Not so in Ontario’s increasingly twisted electricity market. Here, heavily discounted surplus power is routinely sold to neighbouring utilities in Quebec and various U.S. states, while customers at home face a steady diet of higher rates.

Ontario had net exports of more than 1,000 megawatts of electricity last year, or enough to power a million homes. Occasionally, Ontario Power Authority even pays Hydro-Québec to take electricity off its hands – power the Quebec utility can then resell in New England at a profit.

Al Yousef, process improvement manager at plastic packaging maker Par-Pak Ltd. of Brampton, Ont., is appalled by this bitter irony. The company pays 12 to 14 cents per kilowatt hour for electricity at its three Toronto-area plants – four or five times the price charged to Ontario’s neighbours in the wholesale market.

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

The Auditor-General of Ontario has released her report on the provincial Liberal government’s brazenly political decision to cancel two gas-fired power plants. Her estimate of the ultimate cost: about $1.1-billion, potentially reaching $1.5-billion.

This obscenity of mismanagement and prevarication came out of Duplicitous Dalton, Inc., a.k.a. the McGuinty government, an administration we now know was, politically, so venal as to toss perhaps as much as a billion and a half taxpayer dollars into the devouring — but politically favourable — wind.

D.D., Inc. even had the brass to insist, originally, that the cost to cancel just the Oakville, Ont., plant was only $40-million. The Auditor-General this week, after a cautionary distribution of Gravol tablets to the assembled press, offered a more altitudinous range of $675-million to $810-million — 15 to 20 times as much! And from the very beginning of the noxious affair, to any question the Liberal response was delay, obfuscate, stone-wall, delete emails, deny said deletions, miraculously locate the not-so-deleted emails, and, of course, insult and hector any and all critics.

Let there be no more “used car salesmen” jokes about political leaders. Used car salesmen are pillars of candour and conscience compared to this lot.

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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.

If you live in Ontario, deciphering your electricity bill is like trying to crack the encryption on a BlackBerry. It might tax even the professional snoopers at the U.S. National Security Agency.

It’s not as simple as multiplying the amount of power you use each month by the market price per kilowatt-hour. Beyond your “electricity” charge, there’s a “delivery” charge, a “regulatory” charge, a “debt retirement” charge and an Orwellian-sounding “clean energy benefit.”

And there’s a twisted political saga behind each one of them. If you manage to unbundle it all, you’ll discover that the market value of the power you consume accounts for only a tiny portion of your bill. Most of the rest of what you fork out goes to pay for decades of bungled energy policy-making. And pay you will, for years to come.

Indeed, the most important charge is the one that doesn’t directly appear on most people’s monthly statements. It’s called the “global adjustment” fee and it’s tacked on to your electricity charge to cover the government’s cost of buying above-market-priced wind, solar, nuclear and gas-fired power from private operators.

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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. 

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