(July 8, 2016) Ontario’s hydro bills have been increasing by double digits in recent years. Here’s why.
This speech was presented as part of the “Grounds for Thought” speaking series at the Green Beanery coffee shop in Toronto.
I want to thank everyone for coming out tonight to talk about hydro bills.
Ontario’s Ministry of Energy and other provincial agencies have in recent years repeatedly told us that, while we may think our hydro bills are going up at an exorbitant rate, the reality is that what’s happening here is really no different than what’s happening in other places across North America. Their message has been, in short, it’s really not so bad.
I’m here tonight to give you a bit of good and bad news about those comments.
The good news — if we can call it that — is that you’re not delusional. The reality is that hydro bills in Ontario have been going up at a faster rate than anywhere else in North America. Not only that, but the increase in your hydro bill continues to blow past the price increases seen for other goods and services, such as food and shelter.
Contrary to claims that your surging hydro bill is the norm, what’s happening here in Ontario is nothing like what’s happening in other states and provinces.
The bad news is that — if that wasn’t bad enough — is that not only have hydro bills in Ontario exploded in recent years, but recent policy and legislation will ensure that trend won’t end anytime soon.
But first, let’s step back a moment and look at what’s happened with residential electricity bills in Ontario compared to other jurisdictions. I’m going to provide some numbers, so bear with me.
- For those of us in this room who buy our power from Toronto Hydro, your hydro bill is 18% higher than it was at the same time just last year. To put that in context of the wider economy, that’s 9 and a half times the rate of inflation in Ontario.
- If we go further back than just this last year and look at the price we pay generators for the power they produce — that includes everything from nuclear reactors to industrial wind farms — the situation is no better.
- For example, over the last decade, the price charged consumers to use power in off-peak hours has increased by 149% — or about 8 times the rate of inflation. The peak price for power over the last decade has increased by more than 70% — or more than 3 and a half times the rate inflation.
- Wages in Ontario over the last decade have increased by about 27% or about one third the rate of hydro bills in Toronto.
Again, I know that’s a lot of numbers, but the conclusion is really very simple. You are using more of your paycheque each month just to keep the lights on.
Now, those dramatic price increases would be tolerable if they were in line with price increases of other goods and services. Unfortunately, they’re not.
- If we consider the average Toronto Hydro bill — which would include the price of generating power and delivering it to your home or apartment — then your monthly bill increases have been outpacing the price of other goods by about 4 times.
- Food prices have gone up at less than half the rate of hydro bills.
- Meanwhile, if you’re a natural gas customer — which in many ways is a competitor to hydro — your bill has actually fallen over the last decade.
The point of those figures is to show you that the growing burden of paying your monthly hydro bill isn’t simply a result of a country or province that’s beset by out of control inflation. This is very much an isolated problem that is afflicting the province’s electricity market.
So how does the province defend itself from such miserable numbers?
One argument often used in defending soaring hydro bills is that, well, “look, we took the necessary steps to upgrade our electricity system after years of neglect, making it more reliable and more environmentally friendly.”
The problem with that defence is that it’s largely not true.
The province’s two largest utilities remain — according to their own studies (see here and here) — inefficient, reliability in many cases remains poor and nuclear reactors, which still pose one of the largest environmental threats to Ontario citizens, are just as vital, if not more, to keeping the lights on in Ontario as they were 20 years ago.
Let’s break those comments down.
- Take Hydro One, which operates the province’s transmission lines, as an example. According to the province’s Auditor General, Hydro One struggles to perform routine maintenance on its transmission lines even though its budget for that kind of work has increased by over 30% in the last two years.
- The result has been more blackouts, with outages lasting longer and occurring more frequently on the company’s transmission lines.
- Hydro One is not alone.
- The province’s much celebrated smart meter program has gone over-budget and under performed. The Auditor General has repeatedly said that it has been a poor investment for electricity customers. That program is expected to cost $2 billion dollars.
- As for nuclear power, it now plays a larger role in providing power to homes and businesses than it did in 2008. While the province is quick to highlight how it made the electricity sector “green” it fails to acknowledge the province’s ongoing reliance on nuclear power and the environmental community’s long-standing fight against it.
As you can see, many of the excuses offered to explain way soaring hydro bills aren’t true.
I would like to stand up here and say the sticker shock you receive each month when you open your hydro bill will soon end and hydro prices will stabilize.
Unfortunately that’s not the case.
- The province’s own long-term energy plan — which is its own blueprint for what comes next in the energy sector — already forecasts that the hydro bills will increase by about twice inflation (if inflation measures 1.6%) over the next two years. Considering that the long-term energy plan has understated past price increase, it will probably be even larger.
- Or look at Toronto Hydro, which recently convinced the OEB to increase the delivery charge on your bill by about 9% annually over the next four years.
- Not to be outdone by the other public utilities in the province, Ontario Power Generation, which is the successor to the old Ontario Hydro — is asking for a 69% increase in rates for its aging nuclear reactors — some of which it plans on refurbishing. Any cost overruns on the refurbishment will push up rates for decades to come.
So what’s really going on here?
The bigger issue in Ontario is that the last decade has seen Queen’s Park systematically take greater control over nearly all of the major decisions of the province’s electricity sector. Any sort of economic planning has been pushed to the side to make way for political planning.
The Auditor General summed it up succinctly when she said that the process for electricity planning in this province is “broken”.
There are many examples of this. Take nuclear power. Rather than have an open public forum to debate the merits of spending nearly $13 billion to refurbish the Darlington reactors, the province legislated that the refurbishment should go ahead and, in the process, shut down any debate on whether that’s the most economic plan.
But that’s just one example among many.
The end result of such decisions is that the never ending, faster-than-inflation increases to your hydro bill increasingly reflect the cost of the political decisions that have been made in regards to the energy sector, not the actual cost of selling you power. The Auditor General recently highlighted that province has been, I quote, “operating outside the checks and balances of the legislated planning process.” She went on to show that those decisions have cost ratepayers billions of dollars.
I should add that recent plans and legislation will only further stake the province’s claim as the sole decision maker when it comes to the energy sector.
I would be more than happy to take your questions.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236