Tuesday, September 13, 2011

Shocking Voters, the Dim Truth of Power Policy

According to much of the polling and discussion that surrounded the preceding months leading up to this election one can say quite convincingly that one of the top issues on the minds of Ontarians is electricity and its cost. Over the last four years under the McGuinty Liberals the citizens of Ontario have seen their electricity bill grow. Two major components that have led to the increases are the Green Energy Act and the HST.

These two points have been contentious talking points for the both the NDP and PCs in their effort to target Ontario voters on ‘pocketbook issues’. But despite public outcry on their hydro bills, and the desire for things to change there is shockingly little that any new government would be able to reasonably do to reverse the trend.

Why is energy so expensive?

As near as I can tell the cost of electricity has increased in Ontario for the same reason that many other infrastructure assets have. Our system was largely built in another time, back when large government spending and a public willing to tolerate deficits and investment built much of the structure that we enjoy today. The second factor is the growth in population and the commiserate increase in demand. With now over twelve million Ontarians, each with televisions, homes, air conditioning, and computers we use a lot of electricity.

Back to the infrastructure, much of what we have, what already is in place is aging, and needs to be replaced or upgraded. For a Niagara example we just have to look to the Niagara Falls hydroelectric project which is adding even more capacity to the province. Demand is increasing and our supply is tightening. Both PC and Liberal governments have vowed to shut down coal plants across the province. The Liberals have also pledged to support nuclear power to meet the rising demand.

In an effort to create more supply and diversify the type of the supply the government of Ontario brought in the Green Energy Act to promote these types of developments. Wind and solar projects, which are providing a small, but growing amount of our electricity has been partially subsidized, if I understand correctly, to nursemaid the industry. McGuinty and his government are quite proud of their project and tout their green jobs.

HST, the reformed GST and PST, applied to home electricity bill. The added 13% added some much undesired sticker shock to Ontarian consumers.

What can be done to fix this problem? In short, not much.

The options to increase the supply of electricity is one, very expensive and two, politically difficult. Environmentalists and health analysts object to the appearance and expansion of fossil fuel-powered generating stations, nuclear power has received another black eye in the wake of the Fukushima nuclear incident and there are no more sources of hydroelectric power left to exploit. We are constrained then to these small projects, like wind or solar, or more controversial options.

The opposition parties tacitly acknowledge this fact, as do the governing Liberals. The best they can do is offer small reliefs on the bills, and not a substantial change in policy. Here’s how it breaks down: to meet the energy needs of Ontarians the Liberals want to invest in nuclear (plans to expand Darlington were recently announced) and green energy alternatives, the Progressive Conservatives are banking on traditional power sources (including nuclear) coupled with natural gas. Finally the NDP take an interesting tact, they oppose nuclear power, and the fossil fuel, and instead argue that more effort to conserve electricity would better serve the province in reducing demand, rather than increasing supply.

In short, the parties are not that far apart from each other, and electricity is not a terribly partisan issue. If the province hit a major energy problem any one of the parties would open back up a coal plant to make sure the lights stayed on.

Efforts to make bills more affordable are largely a smokescreen. The Liberal rebate, offering about $200 per Ontario household does nothing to combat usage costs. Both the NDP and PCs are promising to remove the HST from hydro bills, but that again is only a small part. The Conservatives’ promise to clean out the implied corruption will do nothing to prices, and the elimination of Smart Meters may have a modest effect at best. Cuts in the kilowatt/hour price will likely mean increased demand which will trigger costs in providing more production.

The effect on Niagara broadly and the Welland riding in specific is interesting. The heaviest users of electricity is industry – or were. Cheap hydro costs help attract manufacturing to our province and generate jobs. High costs drive businesses to lower cost markets. I’m confident part of the reason Niagara was an industrial bastion in the twentieth century was the reliable and large quantity of power coming from the Falls.

Without a major investment in capacity (supply) or conservation (demand), or best, both energy prices will continue to rise. If the cost is deferred from home electric bills as some parties would like they will appear elsewhere as long-term debt, private-public partnerships, or increased taxes.

In the end one of the big issues of the campaign is one the next government will have little control over. Ontario’s electricity needs are growing and the cost to keep rates low and grow our production will be high, and someone must pay. The parties merely disagree on the fine points, what type or power generation they like best and what your bill should look like.

Also! I have been selected by the Toronto Star and Speak Your Mind to act as a Community Blogger during the 2011 Ontario election for the riding of Welland. Last week I posted on the shape of the race in this riding, including the main candidates, their bios and the background to this election, please check it out. I will try to keep the link between this blog and my Speak Your Mind page as solid as possible. 

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