Clearing the air

Ontario’s Minister of Energy made a number of misleading and inaccurate statements on TVO’s “The Agenda”. 

In a recent interview on TVO’s “The Agenda”, Ontario’s Minister of Energy, Bob Chiarelli, made a number of inaccurate and misleading statements regarding the province’s electricity sector. Here is what he said and how he misled the public.

Watch the full interview here.

Claim #1: Electricity bills went up by 2.5%

Actually, as of May 1, the generation portion of hydro bills increased, on average, by 9% on an annual basis. The 2.5% figure the Minister cites is a six month comparison. Most cost-of-living indices compare prices on a per annum basis. According to the most recent figures from Statistics Canada, inflation in Ontario increased by 1.5% over the past year.

The Minister also cited electricity rate increases in other Canadian jurisdictions, but those figures were all annual increases and often applied to the entire residential bill, not just generation.

table 1 clearing the air

The Minister’s 2.5% figure doesn’t include other parts of customers’ hydro bills that have also increased in the last year – such as the cost of delivering electricity. Monthly bills for Toronto Hydro customers, for example, are 18% higher in May than at the same time last year after the OEB approved a record capital spending program for the utility, according to a recent report from the Consumer Policy Institute.

table 2 clearing the air

Claim #2: Regular increases are common in every jurisdiction in North America

Many residential and industrial power customers in the United States have seen their energy costs decrease in the past year. A recent study by the Consumer Policy Institute showed the average price of electricity for residential customers in one-third of all states either declined or largely remained the same (below 1%) over the past year.

Industrial electricity customers in 39 states out of 51 (including the District of Columbia) saw their power bills decline compared to the same time last year, according to the most recent data from the U.S. Energy Information Agency (EIA). Only five states saw their industrial power rates increase by more than 2%. Many of the largest decreases were in northeastern states that are now taking advantage of low natural gas prices

Claim #3: The original $1-billion budget for the Niagara Tunnel Project came in at $1.2 billion

The original estimate for the Niagara Tunnel Project was $985 million. On completion in 2013, the final figure of $1.47 billion revealed a near 50% increase. The $1.2-billion figure quoted by the Minister of Energy is nearly $250 million below the final price tag.

Claim #4: Industrial prices in Ontario are below those of New York and are favourable to the United States

According to the EIA, 24 states (nearly half) have industrial electricity prices that are below those in southern Ontario on a currency-adjusted basis. One of those states is Ontario’s close neighbour, New York. Meanwhile, industrial customers in northern Ontario receive a 2 cent per kilowatt hour subsidy on their power bills with the cost of that subsidy passed onto other ratepayers. Furthermore, in 2011 the province changed how it charges customers for the Global Adjustment fee, which covers the cost of guaranteed contracts to generators and conservation, among other things. Industrial customers now pay a smaller share of the Global Adjustment, while residential customers pick up the tab.

Claim #5: Green energy created jobs and manufacturing

According to a 2011 report from the province’s Auditor General (AG), as many as 75% of the jobs created as a result of the 2009 Green Energy Act were short-term and would only last from one to three years. The AG also cited other studies showing that jobs created through renewable energy subsidies resulted in greater job losses in other parts of the economy because of higher electricity rates.

In November of 2015, a manufacturing plant for wind turbine blades closed its doors citing a “lack of future projects.”

More recently, the Ontario Chamber of Commerce said as many as one in five businesses may shut down within the next five years because of soaring electricity prices.

Claim #6: Average price of Darlington power will cost 7.7 cents per kilowatt hour

The final price tag for Darlington is far from certain, as the actual refurbishment work has yet to commence. While the Minister of Energy and Ontario Power Generation (OPG) both claim that the cost of power from a refurbished Darlington will be 7.7 cents per kilowatt hour (kWh), the track record of nuclear projects in Ontario is one of massive cost overruns. One report showed that the final price tag for nuclear projects in Ontario is 2.5 times higher than the original estimate. That would put the price of power from a refurbished Darlington plant above 15 cents per kWh.

Claim #7: Conservation decreases costs for the entire electricity system

While demand for electricity in Ontario has declined over the past decade – a result of shrinking industrial needs and, to a lesser extent, residential conservation – the overall capacity of the electricity system has actually grown. While conservation, as the Minister rightly points out, is intended to decrease the overall size (and cost) of the electricity system, that hasn’t been the case in Ontario. Falling demand and an increase in electricity sector capacity has resulted in higher rates to cover those costs.

Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236

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