Overview

In late November 2016, Ontario Premier Kathleen Wynne grabbed some attention by admitting she had made a mistake by “not paying close enough attention to some of the daily stresses in Ontarians’ lives,” Wynne told the Ontario Liberal Party’s annual general meeting, held in Ottawa. She noted, “electricity prices are a prime example.”

Wynne calls high hydro prices her ‘mistake’, and people now have to choose between heating and eating due to the rising hydro prices in Ontario.

She defended Liberal government moves to make Ontario’s electricity system cleaner and more stable but admitted that the cost “has burdened people in every corner” of the province.

“People have told me that they’ve had to choose between paying the electricity bill and buying food or paying rent,” Wynne said. “It is unacceptable that people in Ontario could be facing that choice. So our government made a mistake. It was my mistake. And I’m going to do my best to fix it.”  

Admitting to a mistake is not something politicians do all that often. When they do, you can be assured there’s a good reason behind it. In Wynne’s case, it looks like she’s trying to neutralize — or at least, lessen — the damage that skyrocketing hydro bills are doing to her popularity.  

What Has Caused The Price Rise?

I’m only 19 years old. I haven’t experienced first-hand the severity of Ontario’s expensive hydro costs, but my family’s wallets have taken a hit due to this phenomenon, and I want to figure out why.

So, what’s driving the increase?

Rising Hydro Prices In Ontario
Annualized Ontario Electricity Rate Increases [Ontario-Hydro.com]

Is it the cost of canceled gas plants? Green energy schemes? Rising salaries and benefits for hydro workers?
Those all contributed.

According to The University of Toronto’s Don Dewees, inflation accounted for almost half the increase in cost for the average residential consumer. Since then, the rate of inflation has slowed, but Dewees estimates it is still responsible for somewhere around 30 per cent of electricity price increases in recent years.

The government’s much-criticized renewable energy projects also account for some of the cost, but not as much as many people seem to think, according to Jack Gibbons, Chair of the Ontario Clean Air Alliance.

“The rising rates now are driven partly because they’ve been paying high prices for wind and solar through the feed-in-tariff, and that’s what people like [Progressive Conservative Leader] Patrick Brown only talk about,” he says. A much larger factor, says Gibbons, are the costs associated with the province’s nuclear plants.

Looking at what’s called the global adjustment (GA) shows just how much more nuclear has driven rising costs than any other form of generation. The GA is a surcharge on the province’s electricity bills that covers a variety of costs including closing down the province’s coal-fired plants and Pickering nuclear power station, building new generating capacity and maintaining existing power plants.

A breakdown of the global adjustment shows that nuclear costs accounted for 42 percent of the GA, while gas-powered generation took up 26 per cent and renewables — including hydroelectric, wind and solar power — accounted for just 17 percent.

Winfield says there was essentially no choice but to spend billions of dollars on Ontario’s energy infrastructure by the time the Liberals took office because for about 20 years prior, provincial governments of all political stripes had spent very little on maintaining the energy system and building new capacity.

“We primarily were living off assets that were built some time ago,” he says. “We were keeping prices artificially low, and we reached a point where those assets began to reach end-of-life and had to be replaced. And in some cases, those capital costs proved to be much more than anticipated.”

As a result, we now have a surplus generation, in fact, excess nuclear generation, which we’re often exporting at a loss.

To prevent energy costs from spiraling out of control, Gibbons argues, Ontario should abandon its nuclear plans, invest in more energy conservation measures and look more seriously at imported hydroelectric power from Quebec as an essential part of the province’s energy mix.

Not all energy industry observers think doubling down on nuclear is a mistake for consumers, however.

Jatin Nathwani, executive director of the Waterloo Institute for Sustainable Energy, believes that in the long run, nuclear generation will still provide cheap power for the province. He also says that over-capacity is a good problem to have compared to the shortages and reliability problems Ontario faced in the early 2000s.

The Ontario Government has dug themselves into a deep hole, and we all have to suffer because of it. Unfortunately, the foreseeable future does not see hydro costs falling. However, Wynne has promised to focus more attention on stabilizing electricity prices in the province – I just hope she can stay true to this claim.

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