By Ray Rivers

October 27, 2017

BURLINGTON, ON

If Kathleen Wynne’s Liberals are not re-elected come the provincial election next year, it will partly be because of how the Liberals have managed and mismanaged the energy file. True enough there has never been a power blackout or even a brownout over their period of governance – as there had been regularly during the previous Harris/Eves government. But the price of electricity had been dramatically rising, at least until this past summer when it tumbled by a whopping 25%.

There are a number of reasons that account for why our hydro bills had been rising:

1. Neglected maintenance – During the Rae and Harris years electricity infrastructure, transmission in particular, had been sacrificed resulting in brown and black outs;

2. Privatization – New generation, whether renewable or conventional energy required long term contracts with fixed prices and guaranteed purchases;

3. Labour Costs – The utilities’ employees are among the best paid in the province, senior executives with Ontario Power Generator (OPG) and Hydro One in particular; and

4. Waste – Most memorable is the billion or so spent to cancel new gas plants still under construction, allegedly to save electoral seats in the GTA.

Maintaining the system has not always been the top priority – we end up paying for it eventually.

For a generation Ontario Hydro had typically debt-financed its operations, even before the Davis government. In fact when Mike Harris dissolved Ontario Hydro at the turn of the millennium he discovered an accumulated debt load of almost $40 billion, some $20 billion greater than the value of all of the utilities’ then current assets.

This stranded debt had been placed on our utility bills until more recently when the Liberal government eliminated it.

As rates started rising over the McGuinty/Wynne years, lower income families complained about how they couldn’t afford to pay their hydro bills, some businesses threatened to move out of the province, and even the left wing media were doing an almost daily grind on electricity prices. So early this spring the Premier responded to the criticism by taking out a mortgage, the way someone looking to renovate their house might do. She is using the borrowed money to cut electricity bills for small business and residential customers by 25%.

In a way it’s just turning the clock back. And it’s fair game for opposition politicians to call this a political pre-election move. It sure looks that way – trying to win votes by lowering hydro bills today and paying the piper tomorrow. It’s OK for the political parties to do that – call her out – but not Ontario’s Auditor General, Bonnie Lysyk who is supposed to be an independent officer of the legislative assembly. Instead she is acting like the king-maker James Comey did in the last US election.

The nub of her report is that it would have been less costly to finance the 25% rate cut by adding to the provincial debt rather than piling it onto OPG and its financing agency, because Ontario’s credit rating is better than OPG’s and the interest rate is lower. She is right to point that out but not to assign motive on behalf of the government – that is my job and the job of the opposition parties. And the government would likely respond that the debt should go to the rate payers rather than the general public – something she fails to note.

Former Premier Mike Harris was no friend of a “Best in the Business” hydro system.

The Ontario AG delivered another scathing report almost two years ago in which she decried the use of long-term fixed-price electricity supply contracts, but failed to offer any alternative as to how the system would work otherwise. It has been the provincial policy since the time of Mike Harris to bring on new energy sources through the private sector using long term supply contracts. And the private sector needs the security of a contract to ensure that it receives a fair return on its investments.

Again, she was right in pointing out that privatization had been a costly exercise. But somebody on her staff needed to take a course in micro-economics 101. She presented an imaginary $37 billion number, a purely hypothetical figure which might as well have been pulled from the air. But it is a complicated file, her strength is accounting not economics, and so her report then, as now, was only partly helpful.

Over the last decade Ontario’s energy costs climbed to be the highest in Canada – though still much lower than those in the major North American centres in California and New York. With the 25% reduction Ontario has fallen more in line with the other provinces. But of course it will never be able to compete with Quebec, Manitoba or BC. These jurisdictions have a tremendous advantage with their low cost water power endowment, and they have also retained their provincial monopolies to generate and distribute electricity reliably and cheaply.

Leader of the Opposition at Queen’s Ark – Patrick Brown

New Progressive Conservative leader Patrick Brown claims he’d tear up the province’s long term supply contracts, much as Dalton McGuinty promised to tear up the 407 lease Harris had signed years before him. It was simply not possible, the lawyers had sealed it well. And even if Brown were legally able to do that, how would he replace these contracts – how would he keep the electrons flowing and the lights on? I am one of the hundreds of Ontario residents who operate a small solar energy project under Ontario’s MicroFIT energy program. Without a reasonable assurance of market access and price no reasonable business entity is going to take a gamble investing in a public sector electricity system.

Brown is not someone to be underestimated. Over the relatively short period of time he has been provincial Tory leader, the former Harper disciple and MP, has moderated and adapted. In fact he has boldly reversed his view and position on abortion, same sex marriage and sex education in schools. And it has worked for him, he is now leading in provincial popularity with almost half those polled saying they would vote for him. He has been a strong and vocal critic of the Liberal government at Queens Park and on the electricity file in particular.

But if he is to become our next Premier he has to do more than just criticize – to tell us what he wouldn’t do. Brown, who had been promising to release his party’s long term energy plan several months ago, almost immediately pulled back from that promise until next year and the election. Indeed it would be very helpful for Mr. Brown to present a coherent alternative. After all it was his party who created this chaos in the first place by dissolving our relatively stable and low cost provincial electricity monopoly. He might want to look to Quebec, Manitoba or B.C. for inspiration.

Ray Rivers writes weekly on both federal and provincial politics, applying his more than 25 years as a federal bureaucrat to his thinking.  Rivers was a candidate for provincial office in Burlington in 1995.  He was the founder of the Burlington citizen committee on sustainability at a time when climate warming was a hotly debated subject.     Tweet @rayzrivers

Background links:

Ontario 2003 Black-out –    Bruce Nuclear Deal –    Stranded Debt –   Auditor General Report –

More AG –    Large Renewable Suspended –    MicroFit Valuation –    Patrick Brown Energy Plan –

Ontario Polling –