In 2009, the Ontario Liberal Government passed the Green Energy and Green Economy Act (GEA), legislation that included subsidies for green energy, e.g., wind power, solar, and biomass. These subsidies create winners and losers: Companies and individuals receive a higher than market price for the green energy that they produce, while consumers pay for the cost of the subsidies on their electricity bill.
When Ontario consumers pay for electricity, the market price is less than half the cost of their total bill.1 The market price (known as the Hourly Ontario Energy Price or HOEP) is based on the supply and demand for energy.2 In addition to the market price, customers must pay a surcharge called the Global Adjustment: “the difference between the hourly Ontario electricity price and the rates paid to regulated and contracted generators, and for conservation and demand management programs.”3 Included in the Global Adjustment is the cost of the subsidies to green energy producers.4
Because of green energy subsidies, Ontario’s energy costs are now among the highest in North America.5 In 2003, Ontario’s energy price for consumers was 6.5 cents per kilowatt hour (kWh).6 (This included a 4.3 cent hourly price, 0.7 cents for debt retirement, and 1.5 cents for delivery costs.7) By 2014, the consumer price had risen to 15 cents, increasing the average cost for consumers from $780 per year to more than $1,800.8 As Parker Gallant points out, “The additional $1,020 in after-tax dollars extracted from the province’s 4.5 million ratepayers is $4.6 billion – per year.”9 In 2015, when the Global Adjustment is added to the hourly price, Ontario consumers will pay 8.3 cents per kWh during non-peak hours and 17.5 cents during peak hours.10 If green energy was not subsidized by the Ontario government, the cost of electricity for consumers would be much lower.
The Ontario government subsidizes green energy through feed-in-tariffs: “subsidized electricity purchase contracts … that provide long-term guarantees of above-market rates for power generated.”11 Producers of green energy sign a contract that gives them a guaranteed price for 20 years.12 For example, in 2016, the rate for rooftop solar power will be 29.4 cents per kWh, eight times higher than the average hourly price of 3.6 cents per kWh in 2015.13 In previous years, contracts for solar power paid as much as 80.2 cents per kWh.14 Ontario consumers have no choice but to pay these higher rates for energy, and they will do so for decades to come.
Feed-in-tariffs provide an economic incentive for companies and individuals to produce green energy. The more green energy that is produced, the more consumers will pay on their monthly bill, and the less money they will have to spend on other goods and services. While the Ontario government has good intentions in trying to reduce C02 emissions, the GEA has emptied the pockets of millions of energy consumers. This can only have a negative impact on economic growth.
- “Global Adjustment: A Political Time Bomb In Ontario,” Lexology, accessed April 27, 2016, http://www.lexology.com/library/detail.aspx?g=c928396d-91c8-4b60-a828-6d05ecc80eae
- “The Mysteries of Electricity Pricing in Ontario,” Environmental Commissioner of Ontario, accessed October 12, 2015, http://www.eco.on.ca/blog/2013/02/20/the-mysteries-of-electricity-pricing-in-ontario/
- “IESO Price Overview,” accessed October 12, 2015, http://www.ieso.ca/Pages/Power-Data/Price.aspx
- “Your Electricity Bill on an Energy Contract,” Ontario Energy Board, accessed October 12, 2015, http://www.ontarioenergyboard.ca/OEB/Consumers/Electricity/Your+Electricity+Bill/Your+Electricity+Bill+on+an+Energy+Contract
- John Spears, “Ontario’s big industries plead for lower hydro rates,” Toronto Star, February 26, 2014, http://www.thestar.com/business/2014/02/26/ontarios_big_industries_plead_for_lower_hydro_rates.html
- Parker Gallant, “Ontario’s Power Trip: Irrational energy planning has tripled power rates under the Liberals’ direction,” Financial Post, June 2, 2014, http://business.financialpost.com/fp-comment/ontarios-power-trip-irrational-energy-planning-tripling-power-rates-under-the-liberals-direction
- “Ontario hydro rates rising Nov. 1,” Toronto Sun, October 15, 2015, http://www.torontosun.com/2015/10/15/ontario-hydro-rates-rising-nov-1
- Ross R. McKitrick and Kenneth P. Green, “Ontario’s Green Disaster,” May 1, 2013, http://business.financialpost.com/fp-comment/ontarios-green-disaster
- “March 10, 2010 – Ontario’s Feed-In Tariff Program Backgrounder,” Independent Electricity System Operator, accessed October 13, 2015, http://fit.powerauthority.on.ca/program-updates/newsroom/march-10-2010-ontarios-feed-tariff-program-backgrounder
- “Price Schedule – Feed in Tariff Program,” Independent Electricity System Operator, accessed October 12, 2015, http://fit.powerauthority.on.ca/program-resources/price-schedule
- “March 10, 2010 – Ontario’s Feed-In Tariff Program Backgrounder,” http://fit.powerauthority.on.ca/program-updates/newsroom/march-10-2010-ontarios-feed-tariff-program-backgrounder