The Fraser Institute

The Fraser Institute

October 30, 2014 06:15 ET

The Fraser Institute: Contracts With Wind, Solar Power Companies Driving Up Electricity Bills in Ontario

TORONTO, ONTARIO--(Marketwired - Oct. 30, 2014) - Unless the Ontario government reverses course on its transformation of the province's electricity system, power rates will continue to soar, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"Over the past decade, electricity prices in Ontario have skyrocketed, and they'll continue to rise unless the province starts to put the interests of ordinary Ontarians ahead of industry insiders," said Ross McKitrick, Fraser Institute senior fellow, economics professor at the University of Guelph, and co-author of What goes up: Ontario's Soaring Electricity Prices and How to Get Them Down.

In recent years, Ontario closed all of its coal-fired power plants and entered into contracts with other generators including renewable energy companies (hydro, wind, solar and biomass). These companies charge the Ontario Power Authority (OPA) higher-than-market-value prices for energy. To make up the difference, the OPA slaps an extra charge-called the Global Adjustment-on the electricity bills of Ontarians.

Since 2007, the Global Adjustment has risen six cents per kilowatt hour, a billing unit for consumers, and is the main reason electricity bills have increased dramatically.

"In the U.S., power rates have been falling but Ontarians are paying more than ever because of the Global Adjustment," said Tom Adams, independent energy analyst and study co-author.

What's the solution?

According to the study, to prevent further electricity rate increases, the province could halt all new hydroelectric, wind and solar projects. And to reduce rates, the province could terminate (where possible) existing contracts between renewable energy companies and the OPA.

"Wind and solar power systems provide less than four per cent of Ontario's power but account for 20 per cent of the cost paid by Ontarians, yet the government wants to triple the number of wind and solar generators. That's a good deal for wind and solar producers but a raw deal for consumers," Adams said.

Moreover, notes the study, Ontario could import electricity from Quebec (particularly while Ontario refurbishes its nuclear power plants) and reopen four of 12 coal-fired power units at Lambton and Nanticoke that had been outfitted with advanced air pollution control equipment prior to their closure, making them as clean to operate as natural gas plants.

"The Ontario government conducted a misleading public relations campaign to demonize coal and scare the public into thinking that the Lambton and Nanticoke plants greatly harm Ontario's air quality, which is false," McKitrick said.

"Many European countries made costly commitments to renewable energy but are now winding back those commitments. If Ontario wants to provide residents and businesses with relief from rising power costs, it should reconsider costly commitments made to renewable energy companies."

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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