Terence Corcoran: Ontario’s power disaster


Financial Post – Terence Corcoran | 19/09/13 | Last Updated: 19/09/13 5:43 PM ET

Terence Corcoran: "The new premier, Kathleen Wynne, appears to be coasting through the power issue, issuing directives and installing ever more megawatts of wind power at huge cost."

Peter J. Thompson/National PostTerence Corcoran: “The new premier, Kathleen Wynne, appears to be coasting through the power issue, issuing directives and installing ever more megawatts of wind power at huge cost.”
  • New study highlights desperate need for reform the province’s vast dysfunctional and costly electricity regime

For almost five years FP Comment has inveighed against the Ontario government’s profoundly uneconomic and costly electricity regime, a dictatorial and monopolist system that uses taxes and subsidies to greenify the power system of the largest provincial economy in Canada.  As I wrote in 2009: “In the midst of a major economic meltdown, and with looming budget deficits totaling more than $18-billion, now might not be the best time for the government of Ontario to be embarking on a crushing new green energy policy that could add billions to the province’s electricity costs. But Ontario Premier Dalton McGuinty is nothing if not immune to the folly of his own righteous policies and the fiscal crisis he faces as a result.”

Since then, via former Canadian banker Parker Gallant’s ongoing series — Ontario’s Power Trip — along with reports from consultant Tom Adams and many others, the growing absurdity of the regime has been detailed and documented on this page: Rising costs, market distorting feed-in-tariffs, subsidies to wind and solar, exports of power to New York at below cost — not to mention the $1-billion scandal over cancelled gas plants.

The burden on the economy has yet to be fully measured, but the cost to consumers is easy to identify.  In 2007, the all-in retail price of electricity was 10.38 cents per kilowatt hour. Today, the price for the same electricity is about 15.5 cents — a 50% increase imposed on consumers despite a recession that saw economic growth fall along with electricity demand.

That the Ontario Liberal government has been able to dodge this giant policy folly is mystery of sorts, although perhaps no surprise given the squishy Liberal bias of the provincial media. The new premier, Kathleen Wynne, appears to be coasting through the power issue, issuing directives and installing ever more megawatts of wind power at huge cost.

Maybe a new report from the C.D. Howe Institute by an independent consultant will light a fire. The opening sentences of the report, by A.J.  Goulding of London Economics International, describes vast scope of the Liberal folly:

The province’s power sector today has an electricity oversupply, a mismatch between generator capabilities and supply needs, rising prices for final consumers and a lack of cost transparency, along with a record of volatile, often contradictory, policies. Consequently, private-sector electricity generators are unable to justify investment in the system without some form of government-backed contract.

While various provincial governments have announced laudable goals over the years, their failure to implement either sound planning or rely on market principles has meant that Ontarians are not getting electricity at the lowest possible cost. Projections suggest that Ontario residents and businesses will be paying substantially higher electrical bills over the next decade than if the provincial electricity system had instead relied on combined cycle natural gas turbine electricity generation,even when the potential costs of buying greenhouse gas emissions credits are taken into account. As well, Ontario’s Feed-in Tariff program, under which the province has contracted for extensive wind and solar power for some years into the future, will increase generation and transmission costs, further hiking electricity prices.

This SNAFU-like description should alert all to the perils and mass disfunction of Ontario’s existing power system.  In his report,  A New Blueprint for Ontario’s Electricity Market, Mr. Goulding notes that in New York State, where electricity is gas-generated, the cost of electricity has edged down (see graph below).  The generated cost of electricity (including surcharges) in Western New York moved close to 40 cents a megawatt hour at the end of 2012, while the Ontario generated price (including surcharges for wind subsidies etc.) rose to near 80 cents.  How can an economy be competitive when basic electricity rates are double those of a neighbouring state?

For a full description of the Ontario fiasco, I highly recommend Mr. Goulding paper.  He also recommends a wholesale reform of the system.  Whether all of his prescriptions should be adopted is a matter for a debate that is totally absent in a province that desperately needs a radical deconstruction and renewal of its electricity system.

 

Original Article Here http://opinion.financialpost.com/2013/09/19/terence-corcoran-ontarios-power-disaster/

One thought on “Terence Corcoran: Ontario’s power disaster”

  1. Check out who are those involved in the C.D. Howe.
    The big boys have Ontario cut up into IWT pieces just like a piece of meat.

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