Karl Marx said that history repeats: first as tragedy, then as farce. In Ontario, the history of failed energy policy repeats – first as farce, and then as more farce.
Premier Kathleen Wynne faces an election in a little over a year and a half, and one of the main issues dogging the Liberal government is the price of electricity. Thanks to policy choices that the government itself seems incapable of unwinding, electricity bills have been on an upward tear for a decade. Many voters are furious. And so the Wynne government devoted the heart of its Throne Speech this week to a plan to lower the price of electricity. Not the cost of electricity, however. Just the sticker price.
Taxpayers of Ontario, you will now be paying for more of your electricity through your taxes, or through future taxes funded by deficit financing, and less through your electricity bill. Yes, that’s the new plan. It looks a lot like the old plan.
Nearly six years ago, Ms. Wynne’s predecessor, Dalton McGuinty, was facing an election. He was, like the current premier, spooked by rapidly rising electricity prices. These spiking prices, note well, had been engineered by the Liberal government’s mishandled Green Energy policy. To win back voters, Mr. McGuinty decided to give consumers a break. The tool: the so-called Ontario Clean Energy Benefit, which ran from the start of 2011 to the end of 2015.
The Clean Energy Benefit did not have anything to do with clean energy, and its benefits were illusory. All consumer hydro bills were awarded a government rebate worth 10 per cent – so the more electricity a customer used, the more they saved. This “benefit” for Ontario consumers was paid for by Ontario taxpayers. Yes, they’re the same people.
Given that the province was deeply in deficit at the time, that meant Queen’s Park was borrowing money, solely for the purpose of immediately handing it over to electricity customers. Cash was being put into your right pocket, but you weren’t supposed to notice that it was coming from your left.
In its final full year in operation, the province borrowed more than $1-billion to reduce everyone electricity bill. It was economically nuts. But it made sense politically.
And now it’s back. The new rebate is eight per cent – achieved by eliminating the provincial sales tax portion of the harmonized HST from electricity, and only electricity.
Ask any economist: If your goal is lowering energy use and pollution, the last thing you want to do is provide a subsidy to energy users. Yet that’s what this policy does. There may be arguments in favour of cutting taxes – but cutting the tax on electricity, and nothing else? Seriously?
Stranger still, this comes from a government that in this very same Throne Speech trumpets its plan to spend billions of dollars encouraging Ontarians to use less electricity. Billions spent subsidizing consumers into using less electricity, billions spend subsidizing them into using more. Did we mention the bit about farce?
The problem facing the Wynne government comes down to this simple fact: Year after year, electricity costs have been rising much faster than inflation. That’s not happening across North America; on the contrary, many jurisdictions are enjoying exceptionally low energy costs. But more than a decade ago, Ontario’s Liberal government decided that it would use the excuse of greening the electricity system – a perfectly good idea, if done right – to try to stimulate and subsidize the creation of new green industries in the province. The province essentially forced the electricity system to become more inefficient and more expensive, for no reason justified by economics or ecology.
Over the past 10 years, Canada’s Consumer Price Index has increased by 17.6 per cent. But over the same period, according to the Ontario Energy Board, the cost to consumers of a kilowatt-hour of electricity purchased at the peak hours of the day has risen from 10.5 cents to 18 cents, a jump of 71 per cent. Mid-peak electricity prices are up 76 per cent. And the price of electricity in the middle of the night, known as off-peak, is up 149 per cent.
Ontarians who sense that their electricity bills are spiralling upward are not imagining things.
A century ago, when Sir Adam Beck created the public utility that went on to become Ontario Hydro, his slogan was, “Power at Cost.” A century later, Ontario’s motto might as well be, “artificially costly power, priced below cost, with taxpayers picking up the difference.” What a mess.
By the time the next provincial election rolls around, the Liberals will have been in power for a decade and a half. Having done experimental surgery on the electricity system, they have no idea of how to cage their Frankenstein creation. So instead of fixing the fiasco, they are going to once again pay voters, with their own money, into not noticing it.
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