Electricity price hikes come at a political cost

Utilities are something we take for granted: nothing we really want as consumers, just something we need. The cheaper the better. Which is why we have a strong reaction to price increases, especially the large ones we’ve seen on our electricity bills.

Last updated on May 04, 23

Posted on Oct 15, 10

3 min read

Utilities are something we take for granted: nothing we really want as consumers, just something we need. The cheaper the better. Which is why we have a strong reaction to price increases, especially the large ones we’ve seen on our electricity bills.

It tends to rankle because we’re getting nothing more for all that extra money.
The recent rate increases announced by Waterloo North Hydro – its portion is up 18.5 per cent – is part of the trend going back more than a decade when the province started tinkering with what was then Ontario Hydro.

The organization that once served Ontarians was split into two – Ontario Power Generation and Hydro One – by the Harris government, which planned to privatize the industry. All-out privatization was scrapped, however, when rates rose alarmingly, striking fear into politicians not eager to face an angry electorate. But the damage was done.

As electrical power industry consultant Andy Frame, formerly a senior adviser to the Ministry of Energy, has noted, the changes shifted the public-good focus of the electrical utility envisioned by Adam Beck back in 1906.

“In 1998, Jim Wilson, minister of energy in the Mike Harris government, declared that the Adam Beck vision was over, and a new vision for Hydro has arrived. The electric power system in Ontario would be operated like a private business, and it would have lower cost and lower rates,” he writes in a recent opinion piece.

“Twelve years later, we now know that the cost of electricity in Ontario for residential, commercial and industrial customers is more than twice the 1998 rate, and that jobs have been lost because of high electricity rates.”

Profits and dividends. Increased taxes on operations. Special levies for green energy. Debt-retirement charges. Conservation fees. These and other changes have contributed to increased costs passed on to consumers. Add in the HST and the impact has been dramatic.

And we’re nowhere near out of the woods yet.

The province is paying high rates to green producers – multiples of what it sells the electricity for – to encourage alternatives. The shortfall is costing Ontario millions of dollars today, when very few of the projects are online.

Unless the pricing structure changes, our bills will be larger still if alternatives reach the 25-per-cent level targeted by the McGuinty government.

Understandably, McGuinty has been taking heavy fire for the rate increases. His defence makes perfect sense, but it’s not what we want to hear.

As with water rates locally, the plan is to have consumer pay the real cost of providing the services. Theoretically, that means no more subsidies from general coffers. It means covering the cost of replacing aging infrastructure. It means paying more to replace cheap, but dirty coal-fired plants with something cleaner.

In short, past mistakes and poor policies have returned to haunt us. Add in the HST and other taxes – the ones we naturally fixate on – and the package gets scarier still.

The McGuinty government has not been effective to date in addressing consumer concerns, namely soaring rates and security of supply. Substantial efforts are needed on the conservation and alternative-supply fronts to tackle the long-term issues we face in maintaining a safe, abundant and – equally important – affordable electrical system in place for Ontarians.

The Ontario Energy Board (OEB) says rate increases would promote conservation, giving consumers an incentive to use power outside of peak demand periods – typically between 4 and 9 p.m., especially during the winter and summer months. This is giving rise to smart meters, with an eye toward charging us more for electricity based on the time of day.

Doing your laundry and cooking at, say, 2 a.m. would prevent you from paying more, as would avoiding electric heat in the dead of winter and air conditioning on the most stifling of summer days. Unfortunately, peak time is identified as that time when most of us need electricity: if the house is empty all day because we’re at work and school, there’s no usage going on. Ditto for the wee hours when most of us are asleep.

Critics have called the smart meter program a failure, and with good reason. Costs have been higher for many of those using the meters – to add insult to injury, they’re paying for the meters too – though the government has said it will look at lowering off-peak rates to make participation more rewarding.

The NDP argues customers are paying an average of seven per cent more after having smart meters installed, a program that has cost the province $1.5 billion. About 80 per cent of Toronto Hydro customers, for instance, are paying more under the program.

Still, changes are necessary. And that means increases, though not necessarily at the rate we’re experiencing today. Either way, the McGuinty government is going to take flak for making us think about our utility bills, and for spending money on something that isn’t a shiny new consumer product.

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