Ten years ago Ontario made a wise but difficult decision to stop burning coal and turn instead toward renewable energy that is healthier for both people and the planet. No one said doing that would be cheap, but few could have predicted just how shambolic – and thus how expensive – the transition would be.
Over the past 14 years, hydro prices in the province have tripled, exceeding by far those in the rest of the country. This has created hardship for many Ontarians and a political disaster for the Liberal government. As Energy Minister Glenn Thibeault said on Friday, it didn’t have to be this way.
In an encouraging speech to the Economic Club of Canada in Ottawa, Thibeault acknowledged that the Liberal government made mistakes that have contributed to out-of-control electricity costs. The transition away from coal was the right direction, he said, but it was not handled properly: “As they say, hindsight is 20-20.”
Indeed, it’s not hard to see where things went wrong. When Dalton McGuinty came to power in 2003, Ontario’s energy infrastructure was outdated and unreliable. Rolling brownouts were common. To remedy this, his government rightly invested in new, greener infrastructure. But in the process, it made a big mistake, offering hugely lucrative, fixed-term 20-year contracts to renewable-energy providers that continue to haunt the province to this day.
The problem was that the deals guaranteed that the energy companies would get paid regardless of how much power they produced, denying Ontarians the cost benefits of energy competition. Moreover, far more plants were built than were needed, especially after demand plummeted beginning with the 2008 recession. The auditor general has said Ontario now has a capacity that is more than twice the average need, and nearly a third larger than the peak demand. Yet residents continue to pay for these superfluous plants through their hydro bills.
Then, of course, there was the $1 billion the government squandered cancelling two inconveniently located gas plants in advance of the 2011 provincial election, and the unexpectedly costly upkeep of the new infrastructure. Not to mention the continuation of eye-popping pay packages for hydro’s senior executives, the unseemliness of which grows in direct proportion to the rise in energy bills.
Since Premier Kathleen Wynne took over in 2013, her government has made several promising but modest moves in the right direction. It renegotiated deals with wind and solar power providers, saving a significant sum in the process; ceased production of new nuclear reactors; and started buying cheaper hydroelectric power from Quebec. More dubiously, late last year the government offered an 8-per-cent rebate on bills, taking $1 billion out of public coffers just to put a few extra bucks in the pockets of Ontarians.
But, as Thibeault acknowledged in his speech, much more must be done to rein in hydro costs. The province has already promised more rate relief, perhaps in the form of a means-tested rebate that would help those least able to absorb the skyrocketing costs. That would be a welcome addition to last year’s regressive rebate. Thibeault also reiterated his commitment to making Ontario’s electricity more competitive in the future, by relinquishing government’s control over prices and allowing providers to bid for contracts. That, too, would be a welcome step.
Ontario has been a leader in the transition to green energy. As Thibeault said on Friday, that move was “absolutely the right policy.” But this transition is not just about energy; it’s about people. The sooner the government attends to the impact on Ontarians, especially those in need, the better.
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