How to worsen Ontario’s power plan

When the province of Ontario in October announced its Fair Hydro Plan, which lowered electricity rates to current ratepayers by 25 per cent — by passing on costs to future ratepayers — the Association of Major Power Consumers of Ontario ( AMPCO) had a problem. The group, representing companies in the province that consume significant energy in their production, took issue with a claim in the province’s revised LongTerm Energy Plan ( LTEP) that stated: “Currently, the electricity price for industrial electricity consumers in Ontario is lower than the average price in the Great Lakes region as reported by the U. S. Energy Information Administration.”

Objected AMPCO at the time: “That statement sends the message that Ontario industrial prices are already competitive with surround- ing jurisdictions. That is simply not the case.”

AMPCO had lobbied long and hard for special treatment under Ontario’s rising power rates. It got that several years ago when the provincial energy minister directed the Ontario Power Authority to develop and deliver a program that would bring relief to large industrial companies. The program — which required that the large industrial “Class A” ratepayers drive down peak demand — commenced in 2011 and has grown since then as more and more industrial clients were allowed to qualify with lower and lower consumption limits. Joining the Class A ratepayers can result in substantial savings, achieved on the backs of the rest of Ontario’s ratepayers who are the “Class B” group, made up of households and smaller businesses.

The extent of the subsidy from the Class B ratepayers to the A class can be seen on the province’s Independent Electricity System Operator’s website, where monthly consumption and costs for each class are outlined. In 2017, Class A ratepayers consumed 33 TWh ( terawatt hours), sticking them with a surcharge of $1.7 billion or 5.1 cents/ kWh, their share of what the province calls a “Global Adjustment” — a grab- bag of subsidies to renewables, conservation, nuclear and other non- market costs. Class B ratepayers, meanwhile, consumed 104 TWh, yet were required to pay $ 10.2 billion, or 9.8 cents/kWh.

In effect, AMPCO’s Class A ratepayers made off like bandits given Ontario’s electricity regime, paying 42 per cent less on average than Class B ratepayers paid. Yet, last month, AMPCO’s president complained that wasn’t enough. “The provincial government’s Fair Hydro Plan, rolled out earlier this year, is intended to reduce electricity bills for residential customers by 25 per cent. Unfortunately, almost none of it applies to large industrial customers, who continue to watch their bills increase and their competitiveness and ability to attract capital decrease. An industrial Fair Hydro Plan would help to preserve and create jobs and would grow the economy.”

That conclusion is perverse and harmful to Ontarians. An industrial Fair Hydro Plan wouldn’t “grow the economy,” unless the subsidies built into it magically wouldn’t have to be repaid.

A MPCO’s president should have instead criticized the government for creating the highest electricity rates in Canada and among the highest in North America. He should also have reminded the government that the Fair Hydro Plan’s advertised 25 per cent cut to hydro rates is only a cynical deferral, meant to assuage voters, and will have to be paid back in future years by Class B ratepayers, their children and grandchildren.