Ontario’s 2020 budget and action on the electricity file

Action on the electricity file—Sort of!

The Ontario Minister of Finance, Rod Phillips, finally released Ontario’s 240 page 2020 budget on November 5, 2020.  Amongst other spending the budget contained actions focused specifically on Ontario’s small and medium sized private sector employers ignored by the prior government and ignored by the current government to this point! Those companies have suffered from huge increases in their electricity costs since implementation of the Green Energy and Green Economy Act (GEA) instituted by the former McGuinty/Wynne led Liberal Governments. The current Ford government and the prior government have been lobbied extensively as those costs continued to rise. The budget specifically referenced the climb in costs experienced by both large industrial customers and those classified as “commercial employers” by noting:

As demonstrated in Chart 1.6*, the price of electricity for industrial employers increased by 37 per cent from 2008 to 2019, while commercial employers have seen their electricity commodity costs increase by about 118 per cent over the same time period. These increases far outpaced the overall rate of consumer price inflation (21.4 per cent) over the same period. That means the increase for commercial employers was about five times higher than the rate of inflation.”

The foregoing clearly demonstrates “commercial employers” bore the brunt of the rate increases as “industrial employers” were much more successful in their lobbying efforts as rates climbed due to the GEA.  The large industrial ratepayers played a role by getting the previous government under the leadership of Premier Dalton McGuinty in 2011 to create their “Class A” status allowing them to considerably reduce their costs. They did this by picking five (5) hours at, or close to, the peak demand hours out of the 8,760 hours in the year. They reduced demand by firing up their gas generators behind the meter (BtM) at the anticipated peaks.The reduction in “peak demand” was labelled as “conservation”! The requirement to reduce demand during those “peak demand” hours was recently suspended by the Ford led government as noted in their announcement of June 26, 2020.

The budget announcement contained the following verbiage related to how they were to bring relief to both the large “industrial” and the “commercial” employers:  “Bringing more jobs to Ontario with a comprehensive plan to address the job-killing high costs of electricity, saving medium size and larger industrial and commercial employers about 14 and 16 per cent respectively, on average, on their electricity bills (at an additional expense of $1.3 billion over three years);”. 

The budget projected a $1.3 billion cost (over three years) which is simply a transfer to taxpayers. From a simple “back of the envelope” calculation the cost estimate contained in the budget appears to be incorrect and should be well over the amount suggested. 

To wit:  In 2019 the GA allocated to Class A customers was approximately $2.4 billion and to “commercial employers” almost $5 billion.  The 14% reduction for the Class A “industrial employers” would therefore cost approximately $320 million annually and the 16% reduction for “commercial employers” would add about $950 million. Together the two would annually cost $1,270 million or almost what the budget suggests would be over three (3) years.  The cost to taxpayers would therefore come to over $3.8 billion or almost triple what the budget claims.

While it is commendable the Provincial Government has finally listened to Jocelyn Bamford Chair of the CCMBC (Coalition of Concerned Manufacturers & Businesses) it is disappointing they appear to have bungled the estimated costs of the reduction in the electricity bills. The $3.8 billion in costs will be added to the $5.5 billion in annual costs the taxpayers are now footing for the relief given to residential users referenced as the “Ontario Electricity Rebate” on our monthly bills.

It is also disappointing the Ford led government has been unable to deal with the intermittent and unreliable renewable energy contracts signed by the McGuinty/Wynne led Liberal Government.  It is those contracts which were responsible for driving up the costs of electricity in the Province. Ontario’s costs of electricity were once a major benefit of the Province used to attract jobs not scare them away!

*Page number 93

Author: parkergallantenergyperspectivesblog

Retired international banker.

5 thoughts on “Ontario’s 2020 budget and action on the electricity file”

  1. The $3.8 billion added to the provincial government expenditures will not be paid from current taxation revenues. It will be added to the already immense debt that will be an anchor around the necks of future Ontario residents, possibly for generations to come . There are many lessons to be learned from a story like this. One is that the really, really bad decisions made by politicians and by the regulatory bodies that should have protected electricity ratepayers (I’m looking at you, Ontario Energy Board) over several years to please the Green lobbyists will have devastating effects on all the residents of Ontario for a long time. If you stole tens of billions of dollars, you should go to jail for life. The Ontario Liberals wasted tens of billions of dollars of other people’s money. Why, one wonders, is there no legal recourse or criminal penalty?

    Liked by 1 person

  2. Do we have a trustworthy assessment of the efficacy of these industrial scale wind turbines operating in Ontario, in terms of the mitigation of catastrophic global warming/climate change/ climate?
    If we have no real evidence at this point that these turbines are ‘fit for purpose’ then why on earth would the Ontario government continue to subsidize them? Why would the contracts not be cancelled?
    In the case of the largest project in Ontario, there is another fifteen years of this wasteful spending, until the contracts that the Liberal government signed, are up.

    And what will it cost, in addition, to compensate the people who have been and are still being harmed by the acoustic emissions trespassing onto their properties?

    Like

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