How will the Political Winds impact Ontario's Energy Landscape?
Energy has always been a political hot topic in Ontario. From the break up of Ontario Hydro in 1998, all the way to the Green Energy Act and also the increasing privatization of Hydro One, electricity has been a victim of political maneuvering and whims. For better or worse this is the system we have - so how will the newest government affect your rates and what changes can we expect in the next few years for Ontario Electricity?
Green Energy Act - Cancellation of Renewable Energy Projects
The liberal government was already winding down renewable energy and fit projects in 2016 amidst mounting costs along with the increasing backlash from rate-payers. In 2018, Doug Ford cancelled projects that were awarded contracts but had not reached certain milestones resulting in the cancellation of 758 wind and solar contracts thus far.
The PC's have also shown that they will also go after big business in renewable energy. The White Pines wind project has also been cancelled with retroactive legislation disallowing the company from suing the government.
It's still not clear what the total costs of cancelling all these contracts will be, however, Ontario does not currently need that energy. That's the problem with electricity contracts, it's not about what you currently need, it's about what you'll need in the future.
The future: No more incentives for renewable electricity generation.
Hydro One - Regaining control and firing the board
Forcing the board of hydro one to resign, so quickly after taking power will definitely win political points. However, it will do very little in terms of actual cost reductions for the ratepayer. Ontario's electricity system costs over $20 Billion Dollars a year to run. While multi-million-dollar salaries are not pennies when divided over the ratepayer base, that's exactly what they become.
The future: No change
Conservation Funding moving to the Tax Base
The energy conservation programs in Ontario have been highly effective and have reduced both peak demand and energy consumption in the province by improving efficiency through a wide variety of programs. The PCs have vowed to keep conservation programs active and move their funding from the rate-base over to the tax base. What this means is that instead of the charge showing up within the Global Adjustment portion of electricity bills, the cost will be transferred to general government operating budgets. This will artificially reduce bills by about 5% - 6%.
The future: Cancelling of some incentive programs while changing the more effective Conservation programs
Cap and Trade
The cap and trade program in Ontario has already been cancelled. The proceeds from the Cap and Trade program were being used to fund a variety of different programs with the aim of reducing emissions. Incentives for solar power and energy storage, GHG analysis for businesses, Electric Vehicles and residential window upgrades are a few of the programs that are now cancelled. The province is also gearing up to fight the federal carbon tax. No alternative programs for GHG reductions have been announced.
The future: New legislation to put a cap on emissions is being tabled, no real programs have been announced.
Global Adjustment and the ICI Program
In 2017 - The Industrial Conservation Initiative (ICI) caused a cost transfer of roughly $1.2B from Class A to Class B customers. This is huge savings for large customers while adding costs for smaller Class B and residential customers. Although the government has promised a 12% rate reduction on rates, they have also promoted that "Ontario is Open for Business". Increasing industrial costs is not an option if this promise is to be kept. In addition to this, the ICI program is keeping the provincial peak demand down and preventing the need for new generation sources. As Global temperatures continue to rise, we expect this program to have increasing importance in keeping the Ontario grid clean and stable.
The Future: No major changes, potential for minor change to ICI eligibility or number of peak days.