Tuesday, April 19, 2011

The $540-million electricity tax

Parker Gallant Apr 19, 2011 – 4:58 PM ET

Ontario electricity consumers received the latest whack to their pocketbooks Tuesday. The Ontario Energy Board (OEB) announced that electricity rates will rise anywhere from 8% to 15% beginning May 1. The biggest increases will hit consumers who are part of the province’s brave new world of time of use (TOU) pricing. For off-peak electricity (between 11 pm to 7 am), the cost of electricity will jump 15% to 5.9 cents a kilowatt hour. Mid-peak electricity (early morning to 11 am and early evenings) jumps 10% from 8.1 to 8.9 cents per kWh. Peak use electricity (11 am to 5pm) rises 8% to 10.7 cents a kWh from 9.9 cents.

These rate increases come on top of a 12% increase last May. Note, also, that the increases are greater for off-peak than peak.

The near double-digit boost in the price of electricity increase (with a total annual value of about $540-million) pretty much wipes out the McGuinty government’s much-vaunted “electricity benefit.” Under the benefit, the government takes 10% off the electricity bills of consumers. But now the electricity companies will take most if not all of the 10% back.

In a disingenuous news release titled “Helping families, keeping electricity rates down,” Energy Minister Brad Duguid’s office tried to spin the official price increases by touting the 10% benefit without mentioning the near-10% increase in electricity rates just announced by the OEB. Nor does the government highlight the policy absurdity: Taxpayers will pay consumers a 10% reduction in their electricity bills to cover rising costs of electricity brought on by the government’s energy policies. Effectively, the government will tax Ontarian (or borrow now and tax later) to cover rising electricity costs.

For electricity users who are still not plugged into the province’s TOU-system, the average increase May 1 will be between 6% and 7%, depending on the tier. Second tier (over 600 kWh) electricity rates will rise to 7.4 cents a kWh. Most on the Regulated Price Plan (RPP) will be switched to TOU over the next several months so those still on the RPP will enjoy their lower increases for a short time only.

This year’s rate increases may not end here. The next OEB price review is schedule to take place Nov. 1. Will the OEB dodge the issue, since that date precedes by a few days a provincial election expected to have energy policy as a key topic?

With consumption basically flat year over year and hundreds of new high-price wind and solar systems entering the grid, the reality of the McGuinty Green Energy Plan, now nearing its second anniversary, is working its way into consumers bills. Prices are going up in large part to cover the costs of subsidies to the developers, big and small.

In short, Ontario is seeing the results of paying for rooftop solar installation like those at the IKEA stores, which receive 71.3 cents per kWh under the Feed-in-Tarriff (FIT) program. Meanwhile, these enterprises pay TOU rates for the actual power they consume. As that “renewable” energy enters the grid, the OEB forecasts the overall effect on the Global Adjustment (GA) account and resets the rates. The GA is a catch-all for all extra costs associated with the McGuinty government’s Green Energy Act. Those extras costs, pooled in the GA, are distributed among all ratepayers, who pick up the estimated costs through semi-annual rate adjustments. Last May it was 12%, although no rate increase was introduced last November.

Mr. Duguid’s press release Tuesday had the temerity to claim that “The Ontario Energy Board released updated electricity rates today showing the average household bill this May compared to May 2010 has remained flat.” Flat! It was flat only if you start counting time AFTER the 12% increase last May 1, and don’t count the new increases starting this May 1. No wonder Ontario’s books don’t balance.
As ratepayers we should express our thanks to the taxpayers for picking up the costs of that 10% “electricity benefit.” However, ratepayers are also taxpayers. Maybe it’s time we stopped shuffling the deck chairs and face the reality that the Liberals have mortgaged Ontario for the next 20 years through their irrational electricity policies created by the Green Energy Act.

Parker Gallant is a former Canadian banker who looked at his Ontario electricity bill and didn’t like what he saw.



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