Ontario industries hammered by energy costs
Ontario hydro. (Dave Thomas/Toronto Sun)
The labouring industrial electricity customer is not the winner in a plan by the Ontario government to sell off a large stake in Hydro One, says Adam White, of the Association of Major Power Consumers in Ontario (AMPCO).
Large industrial users are struggling to stay competitive in a province whose electricity rates are among the highest in North America, and certainly in comparison to competing jurisdictions, but the government has given no guarantees that the sale won’t drive up bills, he said.
A lucrative deal just signed with Hydro One employees, and the commitment to allow investors to enjoy the benefits of any efficiencies, at least in the short term, do not reflect a desire by the government to promote the interests of its customer, he said.
“There’s no comfort that we can take from anything the government has said publicly on this. The reason Hydro One is worth such a premium to the bankers on Bay Street is because of the high rates they’ve been charging customers in Ontario,” White said. “I don’t think there’s anything in it for customers ... I just think customers are left holding the bag on this deal.”
Premier Kathleen Wynne has announced her government’s intention to sell off over time a 60% stake in the massive publicly owned utility for $9 billion.
The government says it would put $4 billion into a special fund to pay for new infrastructure like transit and roads.
“Hydro One would not have the power to set its own rates,” Jennifer Beaudry, a spokesperson for Energy Minister Bob Chiarelli, said. “Rates would continue to be set by the independent Ontario Energy Board.”
New legislation to be introduced by the government would boost OEB’s power to protect electricity ratepayers, she said.
White said large industrial users of power find it increasing uncompetitive in Ontario, and many have decamped to neighbouring jurisdictions with more attractive electricity rates.
Certain industries, especially those based in Northern Ontario and in a position to benefit from various government programs, remain competitive, but not companies located in Southern Ontario that are inflexible in their use of power, he said.
According to AMPCO’s number crunching, Ontario had the highest average delivered electricity rates for electricity in North America in 2013.
The fact that next door neighbours Quebec and Manitoba have a wealth of water-powered electricity generation explains some of the difference in price but not all, he said.
“Not only are they paying very high costs for the commodity but they’re paying some of the highest delivery rates ... so it’s not just a commodity cost problem, it’s not just a renewable energy or coal phase-out problem,” White said. “There’s a systemic issue in Ontario where everything we do in electricity costs more than anywhere else.”
Beaudry said the government has introduced a number of programs to help industries manage their electricity costs.
Participants in the Industrial Electricity Incentive, including manufacturing and mining companies, may qualify for lower rates in exchange for building or expanding a facility, she said.
“In Pembroke, the MDF paperboard plant reopened after being accepted in the IEI program — creating 140 new jobs for the area,” Beaudry said. “In Whitby, Atlantic Packaging expanded their paper mill and creating 80 jobs with the help of IEI program.”
White can list many companies that moved to Quebec or Manitoba or New York to escape high electricity prices.
Multinational papermaker Cascades has had a long history in Ontario, he said.
“Their newest and biggest plant they’ve ever built is in Niagara Falls, New York, right across the border,” White said. “And they’re there because they got tax breaks and they got discount power rates.”
Peggy Brekveld, a vice-president at the Ontario Federation of Agriculture (OFA), said farmers have pitched for a special farming industrial electricity rate in Ontario, but with no luck so far.
Electricity has been one of their largest input costs, leaving them scrambling to compete, she said.
“You want farmers in the province. You want farmers to stay. It’s about food security. It’s about food being local and close by,” Brekveld said. “But when we have to charge more in order to stay in business then you’re going to see more exports coming in. And you’re going to get your food from Mexico.”
A lower electricity rate would also benefit the food processors who are moving out of the province, like the canneries that left Niagara Falls, she said.
Towns can be devastated when major employers back up and head for sunnier climes but it would be a mistake to think that even large cities like Toronto won’t feel the pain eventually if prices continue to rise at above-inflation rates as predicted, White said.
“Who do we think all the bankers and brokers and lawyers are working for?” White said. “It’s easy enough when you’re driving around downtown with this giant construction boom that the city’s under to forget where the wealth is actually created in this province – dug out of the ground and hewed from the forest.
“Most of the members I talk to? Their Ontario plants are their worst performing plant.”
How Ontario Stacks Up To The Competition
(Industrial rates for electricity per megawatt hour)
Ontario Class A customers (average hourly peak demand of five megawatts or higher): $76.41
Ontario Class B customers (peak demand over 50 kilowatts and under five megawatt): $94.09
New York State: $55.97
Pennsylvania-New Jersey-Maryland: $44.78
New England: $54.08
(Source: Association of Major Power Consumers in Ontario, 2012)