Electricity bills in Ontario set to rise $300 a year by the end of 2011

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Ontario is about to rival Prince Edward Island as the province with the highest electricity prices in Canada, and rates will, for the first time, exceed the average cost of keeping the lights on in the United States

Residential customers in Ontario will pay $300 more a year on average for electricity by the end of 2011, an increase of 25 per cent, according to energy consultants. And the rate increases won't end there. Investments of more than $8-billion in green energy projects unveiled by the Ontario government Thursday will add another $60 a year to hydro bills by 2012.

The Ontario Power Authority announced Thursday that it has approved 185 wind, solar and biomass projects capable of generating 2,500 megawatts of electricity, enough to power 600,000 homes.

"This is the most significant climate change initiative in all of North America," Ontario Energy Minister Brad Duguid said at Durham College in Whitby, where the projects were unveiled. "It puts us ahead of the game and that's where we fully intend to stay."

Electricity consumers will pay another $5 a month by 2012, when the projects are up and running. The province wants cleaner air and an economic future, and that comes with a cost, Mr. Duguid said. The projects will create 20,000 jobs in Ontario's battered manufacturing heartland and also help the McGuinty government meet its pledge to replace the province's pollution-spewing, coal-fired electricity plants with cleaner sources of power by 2014.

"We're very conscious of the impact on the consumer of increasing costs," Mr. Duguid said. "This is one of the challenges for our generation."

Historically, Ontario's electricity prices have placed it in the middle of the pack in Canada. Prince Edward Island has the highest prices. Ontario has also enjoyed lower electricity prices than the United States, said energy consultant Tom Adams.

But consumers will pay another 3.04 cents a kilowatt hour for electricity next year, bringing the total cost, including distribution, to 14.54 cents, according to energy consultant Tom Adams. The calculation is based on typical consumption of 800 kilowatt hours a month.

By comparison, the average residential rate in the United States will rise just 2 per cent to 11.74 cents next year, according to a forecast this week by the U.S. Energy Information Administration.

"By 2011, we are going to blow past them," Mr. Adams said.

Several factors are responsible for the looming higher prices in Ontario, according to Bruce Sharp at Aegent Energy Advisors Inc. The government is luring green-energy investors with the promise of generous long-term contracts that include a guaranteed revenue stream. As well, the new harmonized sales tax will add 8 per cent to everyone's bill starting July 1, or $98 a year for the average bill. The introduction of time-of-use billing, which charges 9.3 cents a kilowatt during peak periods and 4.4 cents during off-peak periods, will result in a $50 a year increase for the typical residential consumer, Mr. Sharp said.

Environmentalists defended the higher costs associated with green energy projects.

"Any new plant you build today is going to be in this kind of a cost range," said Keith Stewart, director of WWF-Canada's climate change program. "When you look back 100 years, the naysayers were saying, 'don't build Niagara Falls, it's too expensive.' But that's what powered our economy for the first half of the 20th century."

But Progressive Conservative energy critic John Yakabuski criticized the government for not being more forthcoming about the impact of these projects on electricity prices.

"They're not talking about what it is going to do about prices," he said.

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GREEN POWER

Ontario Premier Dalton McGuinty and British Columbia Premier Gordon Campbell have been locked in a race for supremacy in the burgeoning market for green energy projects for the past year. On Thursday, Mr. McGuinty leapfrogged ahead of Mr. Campbell by awarding just over $8-billion in renewable-energy projects that will create enough power to light 600,000 homes. This is in addition to a $7-billion deal inked in January with South Korean industrial giant Samsung Group.

But Mr. Campbell won't be sitting on the sidelines for long. He plans to recapture the lead by rolling out legislation as early as next month to establish his province as a green-energy powerhouse.

And in the past month, electricity utility BC Hydro awarded green energy contracts worth an estimated $3.8-billion and has another eight contracts pending that could bring the total to over $6-billion.