Politicians can’t make electricity cheap again
What do electricity prices have in common with the rain? Politicians don’t control either. However, hearing Progressive Conservative and NDP members slamming the Liberals this week for rising electricity costs and pretending they somehow have the answer, you’d hardly know it. But the fact is, any politician who promises low electricity rates is selling a lie — one that all of us end up paying for sooner or later.
Ontario’s electricity woes stem back to the late 1970s and, over the past 40 odd years, all three parties have had a hand in them. It started with the building of the Darlington nuclear station, which the Bill Davis Tories approved and the David Peterson Liberals saw through to completion — 10 years late and almost $12 billion over budget. No one could afford to pay the real cost of Darlington, so Ontarians carried that debt for the next three decades.
Over that time, electricity — like cars, and coffee and just about everything else we buy — didn’t get cheaper; it got more expensive. And when the recession hit in 1993, and electricity prices were rising, people got angry. The party in power at that time, the NDP, did the popular thing; it froze electricity rates, halting investment in the power system.
Electricity became a wedge issue yet again in the election that followed. This time it was Conservatives elected on a promise of cheaper electricity through the power of the free market. They broke up Ontario Hydro and created Hydro One and Ontario Power Generation to unleash competition.
But instead of prices going down, they skyrocketed — increasing one thousandfold at one point. Why? Years of artificially suppressed electricity prices, massive nuclear debts, and U.S. trading part- ners that paid far more for electricity than Ontario. It turned out that no one wanted to pay the “fair market price” of electricity after all. And, just as the NDP before them, Conservatives quickly shut down competition and froze electricity rates. However, they didn’t do it quickly enough to win the next election, which was, again, all about electricity prices. The year was 2003, and the McGuinty Liberals had inherited a seriously broken system. Not a single power plant had been built in Ontario in 10 years, and blackouts were forecast for the coming summer. So the government had a choice: build infrastructure and raise prices, or do nothing and risk the political fallout of failing to maintain basic electricity service to the province. They built. Costs leapt. And the lights stayed on. Once the reliability was stabilized and the electricity planning function restored, the government began the challenging process of ramping down the aging and polluting coal fleet and augmenting the gas plant investments with hydro upgrades, nuclear refurbishments and renewable power. Huge investments in distribution and transmission infrastructure continued apace.
Billions of dollars were spent over a 10year period to make up for more than 20 years of neglect and ill-informed policy decisions by all three political parties. And that is the long answer to why Ontario’s electricity rates have risen over the past decade.
Here’s the short answer: Electricity requires infrastructure, infrastructure costs are tied to commodities and labour, and these costs go up over time. What people pay for electricity in any given region is a product of geographic luck (availability of cheap hydro for example) and having rare — but possible — infrastructure foresight (the ability to plan effectively for electricity of the future).
No politician can snap their fingers and make electricity instantaneously cheaper — at least not without making it simultaneously more expensive for all of us down the road.
That isn’t to say we can’t look after those who are clearly and legitimately harmed by price increases — specifically rural Ontarians with limited options. Wednesday, the government was to pass a law preventing electricity disconnects for Ontarians in winter. That is the right thing to do and it is supported by all parties — a rare moment of non-partisan sanity, in what has been an insanely charged political discussion.
But more needs to be done, especially to make sure Ontarians are in safe and efficient homes where electricity isn’t being wasted. We should hold all of our politicians to account for their past records and future claims regarding electricity — including how they will deliver it in a way that is clean and consistent and fair. But we should never trust a politician who says they will “make electricity cheap again.” It might win them the election, but it won’t do us any good at all.
Electricity requires infrastructure, infrastructure costs are tied to commodities and labour, and these costs go up over time
Bruce Lourie is president of the Ivey Foundation, a Canadian charity, and former director of the Ontario Power Authority (OPA) and Ontario’s Independent Electricity Systems Operator (IESO). He served as a member of the electricity transition committee under the Harris government.