FAO misses the point on Ontario’s soaring hydro bills

A recent post from Ontario’s Financial Accountability Office (FAO) downplayed the negative impact soaring hydro rates are having on households and the economy.

Ontario’s Financial Accountability Office (FAO) has done its part in trivializing the significant electricity rate hikes that the province’s hydro customers have experienced over the last decade. In a recent post, “Home Energy Costs in Ontario”, the agency noted that home energy costs in Ontario are not that bad when compared to other provinces – showing that, while they are higher than in Quebec, Manitoba and British Columbia, they are lower than in Atlantic Canada and Alberta.

Yet, the FAO misses a vital point.

The public outrage over energy prices in Ontario is largely related to one sector, which has increasingly become a political pet project: hydro. The FAO’s figures factor in all forms of energy use, including natural gas, which has seen double-digit price declines in recent years due to the surge in shale gas production in the United States, not good energy policy in Ontario. In fact, Ontario’s gas sector, contrary to the electricity sector, has been largely untouched by political meddling – although that is about to change with the introduction of cap and trade and the Community Expansion hearing at the Ontario Energy Board (OEB).

Secondly, the FAO’s numbers end at 2014 and don’t include the double-digit electricity rate hikes that Ontario customers have seen over the last two years.

And thirdly, the FAO’s conclusions will provide little comfort for the one-in-four households and many businesses and manufacturers in Ontario that don’t have access to natural gas. Home heating costs for residential customers that rely on electricity, rather than natural gas, are already paying thousands of dollars more annually.

Data from Statistics Canada (see Figure 1) reveals that Ontario’s electricity ratepayers have experienced the fastest rate increases of any province in the country over the last decade.

change in electricity prices
Figure 1.

A recent study by the Consumer Policy Institute, which considered all parts (delivery, generation and other fees) of the electricity bill, showed that residential hydro bills have increased by as much as 72% for customers in Ontario over the past decade and have outpaced any U.S. state and province in North America (see Figure 2).

Electricity price changes
Figure 2.

Worse still is that the data from Statistics Canada doesn’t include the most recent rate hikes, which amounted to an additional 8-9% increase (from the same time the previous year) for the average consumer (see Figure 3). Since the beginning of 2015, the peak electricity rate has shot up by nearly 30%.

change in electricity rates
Figure 3.

Soaring hydro rates are having a very real impact on Ontario households. Recent data from the OEB showed that the number of residential electricity customers that are behind on their hydro bills has increased by nearly 20% from 2013 to 2015. The number of low-income households behind on their hydro bills has increased by 43% during that time.

Rather than highlight the negative impact the province’s electricity policies have had on monthly hydro bills and directly address the public’s dismay, the FAO has, instead, trivialized them.

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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4 thoughts on “FAO misses the point on Ontario’s soaring hydro bills

    1. Thanks for the comment. The price of a barrel of oil is around $45 now, or about the same price as it was in 2000/01. Electricity prices in Ontario are more than double what they were at that point. Furthermore, many states and provinces have seen rates go up well below what we’ve seen here in Ontario. Some jurisdictions have even seen price declines due to the abundance of natural gas.

      And finally, the price of crude oil is more attuned to demand/supply dynamics, whereas in Ontario, we have a significant oversupply of power, yet prices continue to go higher.

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