Introduction To Ontario’s Hydro Price Problem
Kathleen Wynne’s plan to make Ontario’s electricity cleaner and more stable has been under scrutiny since its implementation in 2013 after her moves have raised hydro prices astronomically in the province.
Wynne has admitted that the cost of Ontario hydro “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.”
She may have intentions to fix the problems she has created, but there is a lot of work to be done if Ontario hydro prices are to stabilize in the future. Here are the five main contributing factors why Ontario hydro prices are so high; if the provincial government plans to fix this overbearing issue, these areas would be a great place to start.
- Oversupply of power
Ontario’s electricity producers are generating more power than we consume in the province. But the government is locked into contracts to purchase that power regardless. It sells off the excess to the U.S., at rates below the cost of production. And even though you aren’t consuming that power, you still have to pay for your share of it every month (through a line on your power bill called the “global adjustment”).
“This dynamic is made worse because demand keeps falling,” said Greenpeace energy campaigner Shawn-Patrick Stensil. “Covering the cost of this excess surplus supply is spread over fewer kilowatt hours.” He argues the government could solve the excess power problem in one stroke by taking the entire Pickering nuclear station offline.
Cancelling power contracts seems an easy solution — but not a cheap one: remember it cost $1 billion to cancel those infamous gas-fired power plants in Mississauga and Oakville.
2. Pricey green energy
Wind, solar and bio-energy account for 6.3 per cent of total electricity generated in the province, but 16.3 per cent of the total generation cost, according to the auditor general’s recent investigation into hydro prices.
Auditor Bonnie Lysyk criticized the government for offering overly generous contracts when it launched its big green energy push in 2009. Despite shifting gears to a competitive bidding process, the auditor found that in 2014, Ontario was still paying “double the market price for wind and 3½ times the market price for solar energy.”
3. Weakened energy watchdog
The Ontario Energy Board is the independent body that regulates electricity pricing in the province, but not all electricity pricing. It has little ability to control the price paid to electricity generators, other than Ontario Power Generation’s nuclear plants at Pickering and Darlington and most of OPG’s hydroelectric dams. Anytime OPG wants to increase these prices, it has to seek approval from the board.
Ontario will rebate the eight per cent provincial portion of the HST off hydro bills starting in January. Other than that, Energy Minister Glenn Thibeault is ruling out further taxpayer-funded subsidies to lower electricity rates. (Pierre-Olivier Bernatchez/CBC)
But the OEB does not have that power over private producers. They negotiate prices directly with the government and have negotiated some rather profitable contracts, since that is their motive. They now account for about half of all the electricity generated in Ontario, therefore a significant chunk of your hydro bill is out of the reach of the regulator that’s supposed to protect the interests of consumers.
4. Time of use pricing
Ontario brought in smart meters to allow for variable pricing of electricity during the day, with the aim of driving down consumption during times of high use by raising the prices substantially during those peak periods. The move has had little effect on peak demand, according to an analysis commissioned by the government’s Independent Electricity System Operator. It means that we’re still consuming plenty of electricity during those peak periods, and paying a lot more for it than before smart meters arrived.
Chief executive Mayo Schmidt started work Sept. 3 and by the end of the year will enjoy $1.36 million in base pay, incentives and pension value.
5. Over-paid hydro workers
The latest edition of the Sunshine List includes 7,632 employees of Ontario Power Generation. Their earnings total $1.07 billion. The last time Hydro One workers were on the Sunshine List (in 2014), there were 4,279 employees, with salaries totalling $550 million. The auditor general flagged in 2013 that generous salaries, pensions and benefits at OPG — especially among top executives — were partly to blame for rising hydro prices.
OPG has cut staff by 8.5 per cent, but increased the size of “its highly paid executive and senior management group” by almost 60 per cent since 2005, creating “a top heavy organization,”Ontario Auditor General Bonnie Lysyk said in her annual report.
“Earnings and benefits were significantly more generous at OPG than for comparable positions in the Ontario Public Service, and many of OPG’s senior executives earned more than most deputy ministers,” she reported.
OPG has contributed “disproportionately more” to its pension plan that its employees have, said Lysyk.
Disproportionately indeed, as these OPG executives continue to turn out lackluster results and absurdly expensive hydro prices for all of Ontario.
Latest posts by David McDonald (see all)
- How To Encourage Consumers To Buy Any Product - June 22, 2017
- Global Poverty Eradication: Can It Be Done While Maintaining Environmental Sustainability? - June 20, 2017
- What Is The Role Of The Financial Institution In An Economy? - June 14, 2017