Elec­tric­ity pric­ing schemes cre­at­ing un­cer­tainty

In run-up to the elec­tion, the pro­vin­cial gov­ern­ment is do­ing some cre­ative ac­count­ing to counter grow­ing frus­tra­tion

The Woolwich Observer - - VENTURE - FAISAL ALI

BUSI­NESSES AND HOME­OWN­ERS ALIKE feel­ing un­der siege by ris­ing elec­tric­ity rates got a bit of a re­prieve this week from the On­tario En­ergy Board. The or­ga­ni­za­tion that typ­i­cally sets rates on May 1 and Novem­ber 1 in­di­cated there would be no in­crease this time around, a de­par­ture from what’s been the norm for years.

The board’s an­nounce­ment came in con­junc­tion with the shift of time of use (TOU) billing to the win­ter sched­ule ef­fec­tive Wed­nes­day.

Holding the line on prices is a marked de­par­ture from the norm for the prov­ince, which has seen elec­tric­ity costs sore pre­dictably over the last sev­eral years. This is in line with the new Long-term En­ergy Plan set out by the prov­ince last week, which touts a 25 per cent re­duc­tion in elec­tric­ity rates, the re­sult of bil­lions in in­creased debt down the road.

Ac­cord­ing to data on the On­tario En­ergy Board web­site, be­tween 2008 and 2016, TOU elec­tric­ity prices rose an av­er­age 9.3 per cent a year.

“It’s been a huge is­sue I think for busi­nesses and all sec­tors across On­tario, and I think this will be, along with labour leg­is­la­tion, prob­a­bly the dom­i­nant is­sues in the elec­tion com­ing up, the pro­vin­cial elec­tion next spring,” noted Art Sin­clair, vice-pres­i­dent of the KW Cham­ber of Com­merce

The cur­rent rates sit at 6.5 cents per kWh dur­ing off-peak pe­ri­ods, 9.5 cents dur­ing mid-peak, and 13.2 per kWh dur­ing on-peak hours.

The elec­tric­ity rates dropped sig­nif­i­cantly on May 1 of this year in an­tic­i­pa­tion of the ex­pected adop­tion of the so-called Fair Hy­dro Plan by the pro­vin­cial gov­ern­ment. The plan man­dated a 25 per cent im­me­di­ate de­crease in elec­tric­ity prices, fol­lowed by in­creases be­ing pegged to in­fla­tion for the next four years. Once the plan came into ef­fect in June, the On­tario En­ergy Board dropped the rates again the month af­ter in July to their cur­rent value.

The rate de­creases are bound to of­fer some re­lief to On­tar­i­ans on their en­ergy bills, at least for the short-term.

How­ever, some in­de­pen­dent an­a­lysts say the re­lief is only tem­po­rary and the plan will cost tax­pay­ers more, and drive elec­tric­ity prices even higher in lon­grun.

The On­tario Fi­nan­cial Ac­count­abil­ity Of­fice, an in­de­pen­dent re­search or­ga­ni­za­tion that pro­vides in­for­ma­tion to the pro­vin­cial leg­is­la­ture, has said that tem­po­rary rate de­crease be­ing ex­pe­ri­enced cur­rently will be off­set by much larger ex­penses down the road.

Ac­cord­ing to its re­port, the FAO found the re­fi­nanc­ing cost pro­posed by Kath­leen Wynne’s gov­ern­ment will see the prov­ince bor­row an av­er­age of $2.5 bil­lion an­nu­ally to sub­si­dize con­sumers’ elec­tric­ity. This, to­gether with an HST re­bate on elec­tric­ity and some re­lief pro­grams, will see elec­tric­ity rates drop for most peo­ple for the next ten years.

How­ever, from 2028 to 2049, tax­pay­ers will be forced to pay back those loans with in­ter­est, ul­ti­mately driv­ing elec­tric­ity prices even higher than they would have been oth­er­wise. The net re­sult will save $24-bil­lion on their bills in the short-term while cost­ing $45 bil­lion in the com­ing years.

The Au­di­tor Gen­eral of On­tario, like­wise a non­par­ti­san of­fi­cer of the leg­isla­tive assem­bly, raised sim­i­lar con­cerns about the plan. In its Oc­to­ber 2017 re­port, the of­fice claimed the pro­vin­cial gov­ern­ment was de­lib­er­ately ob­scur­ing the de­tails around the re­fi­nanc­ing.

“Af­ter re­view­ing the in­for­ma­tion avail­able to us, it is clear to us that the gov­ern­ment’s in­ten­tion ... was to avoid show­ing a deficit in the prov­ince’s bud­gets and con­sol­i­dated fi­nan­cial state­ments for 2017/18 to 2019/20, and to like­wise show no in­crease in the pro­vin­cial net debt,” read the re­port from Bon­nie Lysyk.

More than that, the re­port says, “it was known that the planned fi­nanc­ing struc­ture could re­sult in sig­nif­i­cant un­nec­es­sary costs for On­tar­i­ans.”

The re­port notes that el­i­gi­ble ratepay­ers will only pay 75 per cent of their en­ergy bills over the course of the pro­gram. How­ever, to make up for the short­fall and pay elec­tric­ity gen­er­a­tors the full amount en­ti­tled in their con­tracts, the prov­ince must float the other 25 per cent.

Of that, nine per cent is taken care off through the HST re­bate and other pro­grams. The re­main­ing 16 per cent must be bor­rowed from cap­i­tal mar­kets at the pro­vin­cial bor­row­ing rate.

“The prov­ince in­curs in­ter­est on the 16 per cent OFA [On­tario Fi­nanc­ing Author­ity] bor­row­ings, and a fu­ture gov­ern­ment will even­tu­ally col­lect money from On­tar­i­ans (ratepay­ers, tax­pay­ers or both) to re­pay both the prin­ci­pal bor­rowed and the ac­cu­mu­lated in­ter­est.”

For busi­nesses, the un­cer­tainty in elec­tric­ity rates go­ing for­ward are a nat­u­ral de­ter­rent to growth.

“It’s the long-term sta­bil­ity of the sys­tem that I think is a con­cern for most busi­nesses across the prov­ince of On­tario,” noted Sin­clair.

“You just look at the debt that’s been in­curred across the sys­tem and it goes back years. This isn’t a prob­lem that started five, six years ago; this has just been kind of a sys­tem­atic prob­lem across the prov­ince for 40 or 50 years.”

For lo­cal util­ity com­pa­nies like Water­loo North Hy­dro and Kitch­ener Wil­mot Hy­dro, while much of the pric­ing points are es­sen­tially out of their hands, there is still a fair bit that the com­pa­nies can, and have, been do­ing.

“For a lot of busi­nesses here in Water­loo Re­gion or par­tic­u­larly in the cities, Water­loo North Hy­dro has been ex­cep­tion­ally good in work­ing with our lo­cal busi­nesses and so has Kitch­ener Wil­mot [Hy­dro],” said Sin­clair.

Jeff Quint, man­ager of en­ergy ef­fi­ciency at Water­loo North Hy­dro, ex­plained that the com­pany was will­ing to work with their cus­tomers to help them lower their bills any way they can.

“We spend a lot of time in the field work­ing with the cus­tomers to try and help them where their en­ergy is used and how they can make bet­ter use of it,” said Quint, not­ing their ser­vices were avail­able to ev­ery­one from res­i­den­tial cus­tomers to large-scale in­dus­trial plants, and ev­ery­thing in be­tween.

With elec­tric­ity prices fac­ing a shaky fu­ture, en­ergy-ef­fi­ciency may be the best re­lief for peo­ple look­ing for a sus­tained re­duc­tion in their elec­tric­ity bills.

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