The following is a longer version of a short article posted on Global News today.
Recent public debates about electricity prices in Ontario have focused strongly on the costs renewable energy under the Green Energy Act. This focus is misguided, as the province’s renewable energy program has only accounted for a relatively small portion of the total increases in electricity costs. Although the portion of overall costs attributable to renewables has been rising (17% of the Global Adjustment in 2013 to 25% in the current year), nuclear power plant refurbishment projects (42-45%), the construction of new natural gas fired plants (26% in 2013, 17% in 2016), upgrades to long-neglected transmission and distribution infrastructure, and simple inflation (depending on base year estimates run 33%-50% of the total increases) have accounted for much larger portions of the overall cost increases. The proposed refurbishments of the Bruce and Darlington nuclear power stations are by far the largest areas of risk for further cost increases, given the well-established history of delays and massive cost overruns on previous nuclear projects in Ontario.
It is important to recall as well that Ontario’s electricity rates remain in the middle of the pack relative to other Canadian provinces and US states. Province like Quebec, Manitoba and BC have lower rates due to the very high portion of their supplies that come from historic hydroelectric power developments. Ontario exhausted its readily developable supplies of hydroelectricity in the 1950s. Similar rate increases have been seen in other jurisdictions needing to undertaken major renewals of their electricity systems following extended periods of low capital investment, as has been the case in Ontario. As of 2004 it was estimated that 80% of Ontario’s electricity system would need to be replaced or refurbished over the next two decades.
A great deal of attention has been given to rate increases in rural areas - principally those where Hydro One functions as the local distribution company. Despite programs to reduce the basic electricity price in these areas, several factors contribute to high electricity costs in rural Ontario. Low-efficiency electric water and space heating continues to be widely used, particularly where there is no access to the gas grid. Secondly, the maintenance of transmission and distribution infrastructure tends to be more expensive than in urban area due to the longer distances over which wires and poles must be provided per customer.
That said, there are several steps the province could take to reduce electricity costs to consumers, and to reduce the risk of further electricity cost increases in the future. First, the province should to make energy conservation its for priority for investments in the system. Conservation remains the most cost-effective way of meeting energy needs, and carries with it many co-benefits in terms improved housing quality and economic efficiency. The replacement of low-efficiency electric heating in rural areas should be a high priority.
Secondly the province should undertake an independent, public, evidence- based evaluation of the environmental and economic risks associated with the Darlington and Bruce refurbishment projects before they proceed. An evaluation of the economic, environmental, and technical performance of potential alternatives to these projects, such as increased electricity imports from Quebec, should be undertaken in parallel.
Third, in the longer term, Ontario needs to establish a meaningful independent, public review and approval process for its electricity plans to ensure their resilience, and economic, social and environmental sustainability.
Finally, the province must abandon the misguided sale of Hydro One. The sale makes little sense in fiscal terms, trading a long-term reliable revenue stream for a one-time infusion of capital. Moreover, privatization of the utility can only lead to higher costs for consumers, as private sector investors in the utility seek to maximize their return on investment. The privatization also has the potential to greatly complicate the deliver of energy conservation programs in rural areas, and the development of low-impact, distributed electricity sources.