Ontario’s wealthiest residents can help lower electricity rates for everyone else.
It’s time for Ontario’s 1 per cent to do its share in helping the struggling Ontario economy, especially for the many who have – through no fault of their own – joined the ranks of what has become known as fuel poverty. The 1 per cent can lower everyone else’s power bills merely by stepping up its own consumption – the more the rich consume, the less low-income households pay. Best of all, having the wealthy increase power consumption does no harm to the environment.
The rich should do the easy things, like cranking up air conditioners, setting their pool heaters at higher temperatures and simply leaving their lights on. But they could do more, too – much more, to ramp up electricity usage. Electrically heated sidewalks and driveways would do away with snow and ice in winter while protecting users from nasty falls. Lighting up front porches and lawns, or more lavish holiday displays, would provide an amenity for neighbourhoods.
As Ontarians know, their electricity rates have been going through the roof – up an average 125 per cent in the last eight years, with more increases to come. What Ontarians may not appreciate is that energy conservation programs have driven recent rate increases. The Ontario Energy Board (OEB), the province’s energy regulator, recently blamed lower consumption for rising energy costs, saying the drop in electricity demand was “one of the main reasons” it had to hike prices.
Here’s why conserving energy raises rates. Conservation only works if both sides – those producing and consuming electricity – live up to their end of the bargain. Consumers must find ways to become more efficient, while the Ontario government – the dominant player in the energy sector – must refrain from building unnecessary generators and transmission lines to meet shrinking demand.
Consumers and businesses have done their part in cutting back on electricity usage. The average household now consumes 25 per cent less than a decade ago. Peak demand is also down dramatically, more than 16 per cent lower than in 2006.
Yet, the province has continued to build out the electricity grid regardless of whether power is needed. The province now has so much surplus electricity that it’s forced to dump it on neighbouring states and provinces at fire-sale prices, all the while paying Ontario generators not to produce electricity. The tab for those mammoth below-cost sales that Ontario’s neighbours are lapping up is being picked up by Ontario consumers, one reason why rates in Ontario have become unaffordable for all but the rich.
But if the rich do their part by going the extra mile, they can help reverse the suffering of the poor, who unlike the rich don’t have the luxury of upping their usage.
By increasing their consumption in off-peak hours, wealthy households would be soaking up Ontario’s surplus energy, increasing revenue for the utilities and lowering the price of each unit of power sold to everyone else.
Off-peak electricity consumed in Ontario instead of in neighbouring states would have no impact on the environment, as most of that power comes from carbon-free nuclear generators, hydro dams and wind turbines. But it would lower the cost of subsidies that Ontario electricity customers now pay to entice customers in New York, Michigan and other provinces to take surplus Ontario power. And it would help Ontario employment – when Ontario gives freebee electricity to industries elsewhere, the province is enabling its competitors to win out over Ontario industries, which don’t have access to that freebee power.
The rich in Ontario can and should help those not well-off by plugging into the Ontario economy with every jack they have. As a side benefit of stopping conservation, the province’s wealthiest households will be educating all Ontarians on the logic – or lack of it – that brought the province to this pass.
Brady Yauch is Executive Director and Economist of Consumer Policy Institute.