Canada's Condominium Magazine

Skyrocketing hydro rates: we’re going green, but, even with subsidies, can we afford the rising costs of energy?

In the peak of winter shocking hydro bills can give home-owners a deep-freeze chill. There are many Ontario hydro customers, especially in social media, who cry foul: “Ontario is being ripped off.” and “We have the most expensive power in the world.” Is there any truth behind the accusations? If so, what can be done about it?

Including the most recent rebates in Ontario, the average Ontarian will pay 14.12 cents per kilowatt hour, versus the Canadian average of 12.84 cents per kilowatt hour.

When the government undertook major upgrades to improve and modernize the electric system — and began pushing green energy — everything seemed to be in balance. Upgrading the electric system would make it more reliable, and efforts to implement green energy was intended to reduce our carbon footprint while simultaneously creating manufacturing jobs and improving economic conditions. Ontario rushed, perhaps too quickly, to shut down dirty coal, but without a cost-effective replacement.

 

Ontario’s electricity is more expensive than other provinces and among the most expensive in North America.

 

Supply now exceeds demand

Then, the Ontario government hitched its green plan to subsidies and ongoing premium rates for Wind turbines, creating a new level of cost not seen before. In 2008-2009 global recession hit, and demand was deemed too high as manufacturing subsided. Contracts were still in place, however, which led to a stream of energy sources that have left Ontario with an overabundance of power.When supply exceeds demand, it typically results in lower costs

However, the government continued to be locked into contracts, resulting in the excess being sold to the United States at lower rates — which left Ontario residents footing the bill in what is labeled as a “global adjustment.”

Greenpeace energy campaigner Shawn-Patrick Stensil said, “This dynamic is made worse because demand keeps falling. Covering the cost of this excess surplus is spread over fewer kilowatt hours.”

Premier Wynne takes responsibility

Premier Kathleen Wynn of Ontario.

Last year, Premier Kathleen Wynne made headlines when she admitted that the high electric rates were her mistake, stating,

“I take responsibility as leader for not paying close enough attention to some of the daily stresses in Ontarians’ lives. Electricity prices are the prime example.”

She described the burden rising costs have placed on citizens. “People have told me that they’ve had to choose between paying the electricity bill and buying food or paying rent,” she 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 promised “to find more ways to lower rates and reduce the burden on consumers.”

 

Wind turbines, subsidized by the government, cost Ontario’s a lot per kwh, but only contribute, currently to 6% of Ontario needs.

 

Fixing with rebates?

Fixing it proved to be more difficult than anticipated, however. Ontario began rebating the eight per cent provincial portion of the Harmonized Sales Tax (HST) on electricity on January 1st and reduced electricity costs by 17 per cent for most residents by July 1st. The government provided hydro subsidies for those in need, while switching rural and remote residents from hydro bills to the broader tax base of all Ontarians. They also spread out the cost of system improvements over the course of 30 years, which means lower rates for now but greater costs in the long run — but an increase in debt. Basically, the province is borrowing billions of dollars across 30 years to lower hydro bills per month now for uers.

Long-term costs

Combining the  long-term subsidies to wind turbine operators, with the new subsidies to hydro users that spreads the costs over 30 years, will increase debt interest costs. The Province’s own financial accountability officer warned that the rebate to hydro bills will add “additional debt interest” of $25 billion over 30 years. However, worse case scenario would see the the costs jump to as much as $93 billion.

While opponents argue that the changes only serve to extend the costs rather than solving the problem, Wynne maintains that the move is reasonable and necessary. She stated that the system improvements will benefit Ontarians for generations and therefore should be paid out over time rather than forcing current residents to pay the entire bill right away.

The truth is that providing electricity requires infrastructure, supply, contracts to provide that supply, and more. These are costly, and the funds to provide them have to come from somewhere… whether that is paid out over time or upfront. Maintenance and labour costs also add to the price of electricity in any form.

 

Neglected infrastructure

When infrastructure is neglected for far too long or technology reaches a point where old ways are no longer the most efficient means of providing that energy, improvements become necessary. Each region’s needs and sources vary, and regardless of the method, there will always be costs associated with the service provided. If mistakes are made, they need to be corrected. Unfortunately, there is no magical solution that will solve our problems, nor is there a solution that will appease everyone.

Supporters of these changes see it as an improvement. Although they will be paying more in the long run, they no longer have to choose between staying warm and feeding their families. However, others feel that more can be done, such as holding politicians accountable for maintaining records and ensuring citizens have safe and efficient homes and access to electricity that is not being wasted.

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