Skip to main content

Ontario Election 2018: The Liberals have made a mess of the electricity file, but Doug Ford would double down on their mistakes

May 2018

Mark Winfield, York University

With last week’s announcement by Ontario Progressive Conservative Leader Doug Ford of his plan to reduce hydro rates, electricity costs have emerged as a central question in the upcoming Ontario election. However, Mr.Ford’s less than one-page solution has the potential to make the situation worse than ever. An effective long-term strategy for reducing electricity costs requires some deeper reflection, including the recognition of some unwelcome truths.

The first of these truths is that substantial increases in electricity costs, relative to where they stood a decade ago, were inevitable. Ontario’s electricity system went through a long period of minimal capital investments, even on basic maintenance, under a succession of Progressive Conservative, Liberal and NDP governments. The approach kept rates low in the short term, but at the cost of a growing backlog of needed repairs. When Dalton McGuinty’s Liberals came to power in 2003, they were confronted with the news that 80 percent of the system needed to be reconstructed or replaced.

Since then, while rates have risen, the reliability of the system has been dramatically improved, coal-fired electricity, which once provided twenty-five percent of the province’s power, has been phased out, with major public health and environmental benefits, and substantial investments have been made in renewable energy and energy conservation.

That said there is no doubt that better decisions could have been made over the past 15 years. Did we pay too much for renewable energy development?  Probably yes – but the role renewables in the overall increases in electricity costs has been grossly overstated.

Moreover, the focus on the costs of renewables has obscured discussion of other major drivers of cost increases, particularly first round of nuclear refurbishments, which ran billions over budget and years behind schedule.

Key decisions about long-term investments were made an atmosphere of near panic in aftermath of 2003 blackout and the collapse of Mike Harris-era market experiment. A meaningful long-term planning and public review process was never established.

Instead, the province has defaulted into making-decisions around questions with enormous long-term economic and environmental consequences, on the basis of short-term political considerations. Examples from the past seven years abound. The gas plant cancellations before the 2011 election, the Hydro One sale, whose primary rationale seems to be to keep the financing of capital investments off the province’s books, the financially calamitous Fair Hydro Plan designed to provide short-term rate reductions at the cost of tens of billions to future consumers, and the Bruce and Darlington nuclear plant refurbishments. Those multi-billion-dollar projects have been subject to far less external scrutiny than even the financially disastrous BC Site C and Newfoundland Muskrat Falls projects.

The government’s performance on file, even allowing for the depth of the challenges it inherited in 2003, does not inspire confidence, and it offers little in terms of a more rational approach in the longer term.

The problem for Ontarians is that thus far, the major opposition parties are offering little better. PC leader Doug Ford proposes to retain the fiscally disastrous Fair Electricity Plan. Andrea Horwath’s New Democrats essentially commits to the same path. Ford would to use the dividends from Hydro One to further reduce bills, while the NDP wants to use the revenues to buy Hydro One back. Neither mentions what services and investments that are currently being paid for with the dividends will be cut instead.

Energy conservation is widely accepted as by far the least costly means of meeting consumers’ energy needs.  It also delivers range of other benefits, from improved housing quality and comfort to increasing the energy efficiency and therefore competitiveness of Ontario industry. Yet Mr. Ford proposes to remove conservation from the electricity rate base. That leaves only three options: terminate conservation programs altogether; increase taxes to cover the costs of conservation programs; or cut spending somewhere else to provide the required funding. Mr. Ford hasn’t indicated which option he has in mind.

Mr. Ford’s third proposal is to impose a moratorium on new electricity supply contracts and to re-open existing ones. A pause on new, non-conservation contracts is not necessarily a bad idea, as long as it applies across the board to all technologies, including the massively expensive and risky refurbishments of the Darlington and Bruce nuclear power plants.

There are a number of steps Ontario’s political leaders could take from there if they are serious about controlling hydro costs in the future.  Regulatory oversight of the semi-privatized Hydro One should be tightened to make sure the utility is not leveraging its Ontario rate base revenues to finance out of province ventures. A strengthened focus on conservation, with an emphasis on the needs of low-income consumers, offers the best option for keeping costs down in the long-term.

Finally, the province needs to engage in a meaningful, independent, public review of the province’s long-term electricity needs and options in terms of cost-effectiveness, resilience, and sustainability. All options: nuclear refurbishments; hydro imports from Québec; additional renewables and conservation; and distributed generation and storage; need to be on the table. Such a review offers the only option for building some sort of lasting consensus around the system’s future direction and putting an end to the practice of managing the system around short-term political goals.

Mark Winfield is a Professor of Environmental Studies at York University. He has written extensively on electricity issues in Ontario over the past decade.