Why Ontario electricity costs are going up and up!

Ontario residents may have noticed that their electricity provider has increased the per kilowatt-hour rates for use. One cause of the increases can be traced to a report published by the Ontario Clean Air Alliance (OCAA) in March 2008 (Eliminating Subsidies and Moving to Full Cost Electricity Pricing by Jack Gibbons) suggesting that subsidies to the production of electricity of almost $8-billion annually should be eliminated over a ten year period (at 3.5% per year) to bring Ontario more in line with other jurisdictions in North America. Subsidies became policy because it gave Ontario a “competitive advantage”.  As in any economic situation that only looks at one side of an issue, that “competitive advantage” is coming back to bite Ontarians. The genius that created the subsidies neglected to consider that they might discourage energy conservation and investment in small-scale generation, and they have. The article from OCAA also points to a resulting “productivity gap” between Ontario and neighbouring competitors such as New York State, which uses just half the electricity compared to Ontario to produce one dollar’s worth of GDP. While the subsidies were a bad idea to begin with, the story behind the additional increases gets much worse.

The local utilities appear to be the villain in this story but they simply distribute electricity for their municipal shareholders to the consumers. The real villains were previous governments who created the subsidies.  Now the McGuinty government is compounding those increases in its rush to be green at all costs – mostly yours.

Over 100 years ago competitive cheap hydroelectric power became widely available to businesses and residents of Ontario and it became the industrial dynamo of Canada. We still benefit from that very good start, but today, rather than encourage a competitive market in the production of cheap electricity the McGuinty Liberals are doing the opposite. They have made long-term deals with various companies (like Samsung Corp.) to purchase electric power at rates far in excess of the current market price of 4.5-cent per kilowatt-hour market rate (a 100 watt light bulb could run for 10 hours for 4.5 cents).

As a result Ontario will be forced to buy electricity at between 13.5 and 44.3-cents per kilowatt-hour (kWh) for the next twenty years from various solar and wind power companies. Recently (Aug. 13, 2010) McGuinty renegotiated a deal with 16,000 solar power project applicants to pay them 64 cents per kWh (down from an initial 80 cents) when they come on-line in the near future. Remember, these are intermittent power sources (no sun/wind no power), so “back-up” fossil fuel sources will be standing by (at additional expense because McGuinty is closing the cheap coal burning plants).

These massive subsidies to green energy are a result of policy brought about by the Ontario Green Energy Act (2009) which was shepherded through Queen’s Park by the powerful lobby group the Ontario Sustainable Energy Association (OSEA). Under the new Green Energy Act, former Energy Minister (now Toronto mayoral hopeful) George Smitherman (also of e-Health infamy), directed Hydro One to connect to the new heavily subsidized solar and wind power generators at a cost of $2.3-billion (the ones that will get 64-cents/kWh for their power). The OSEA claims to speak for Ontario ratepayers and it has exerted its influence through another group: the Green Energy Act Alliance (GEAA). How do these groups get funded? Well, it’s almost incestuous.

A recent article in the Financial Post (Aug. 17, 2010) by Parker Gallant points to a list of sponsors including: the Ontario Trillium Foundation (it distributes lottery revenue), the City of Toronto Atmospheric Fund, Ontario Power Authority, the Ministries of Energy, Natural Resources, Environment, Aboriginal Affairs, Hydro One and on and on. Its largely tax money that is influencing government policy, not public input.

In November 2009 OSEA held its 1^st Annual Community Power Conference. The sponsors above plus a few other branches of government and a very few private-sector sponsors that directly benefited (law firms, equipment importers, unions) paid for the conference whose Honorary Chair was David Suzuki (his foundation also gets money from Trillium above). The keynote speaker was then Energy Minister George Smitherman who is slated for this year’s conference, too. Somehow in all this the word “cozy” seems inadequate to describe how Ontario’s electricity policymaking works.

Is it possible to find a more expensive way to produce electricity than the McGuinty Liberals have? I doubt it. Imagine what kind of competitive position this creates for Ontario businesses for the next 100 years. Of course the new HST adds an additional 8% to your electric bill, as it will continue to go up and up.

This article was excerpted from the Fall Issue of Libertarian Bulletin the Newsletter of the Ontario Libertarian Party

The Dishonor of Militarism

The Dishonor of Militarism

Competition in government?

Today is Labour Day (yes, with a "u" in Canada) a holiday that celebrates organized labour (that picture from a Labour Day Parade in Fort William ON, 1903). This morning The US Heritage Foundation blog suggested that today should be called Government Day. In the US this is the first time that public sector unionized government workers outnumber private sector unionized workers. Unions have become a casualty (or is it causality? both?) of the recession/depression. In Canada it's likely similar, but maybe we're not there quite yet, certainly the public sector is rife with unions and the various levels of government seem to be in cahoots with their unionized employees. That of course is the problem, the public sector unions virtually eliminate one of the key features of bargaining, that is, looking for less expensive help, union rules prohibit that. Some of you may say that is the point of unions, the workers are protected. Certainly thats true, but who protects the tax payers? Is it elected officials that represent taxpayer interest? Of course it should be, but look at the job they have done.
Public sector strikes are fairly common, but in the end government negotiators generally cave in with offers in excess of anything available in the private sector. A recent Toronto garbage strike ended with unions getting a much better deal than private contractors give their workers.
Public sector construction contracts regularly requires unionized workers to carry out any work. In the Toronto region, electricians doing public sector work get between $34 and $36 per hour. The average hourly rate for non-unionized electricians work is $26. Now multiply that percentage difference (38% more) by all the public construction projects and its easy to see why government costs continue to rise much faster than the rate of inflation and governments go into debt. The elected officials who are responsible rarely get blamed, and if they do, they don't get re-elected but the new officials aren't any different. There is no competitive other government to take over (most political party's once in power act the same as their predecessors), the business of government is monopoly with minimal change every four years or so.
So imagine if there were alternate, but competitive governments, in other places to live that actually offered a competitive price structure. Somewhere where freedom is valued and competition exists in everything. That's the idea behind the Seasteading Institute, explained in this short video for young people.
    

A sovereign debt and currency crisis?

Maybe I've been watching too many Peter Schiff videos lately, but I'm getting more concerned about our financial future. By "our", I mean North America, we are effectively a common market. The old joke about the Americans sneezing and Canada getting the flu is well know in these parts. Everyone says Canada is in good shape compared to our neighbour, but as I have said before if your biggest and best customer has money troubles, then how good is your business?
The stock market doesn't seem phased, it's been in rally mode this week - but with lower volume. I'm not an economist but I know volume can be a sign of conviction and enthusiasm. The lack of volume says something else, or it could just be the end of summer.
I know I said I wasn't an economist but I have managed my family affairs so that we have no debt and some savings. I always thought that debt was something you wanted to reduce as quickly as possible, and there really is no such thing as good debt (contrary to what many advisors will say) even if it is a mortgage or business loan. Debt means you are not in control of your future - the debt holder is. The more debt the less control you have, so getting rid of debt is always a good idea for individual, families and governments.
So when the financial crisis of 2008-09 occurred, as a result of excessive debt it wasn't a surprise. Peter Schiff was right. The debt owed by homeowners became more expensive because interest rates rose. Many found the new rates beyond their ability to pay, sold or abandoned their homes and the rest is history. Prices for US homes fell significantly for the very first time. The resulting recession, according to several knowledgeable people (including Peter Schiff) is just the beginning. That argument is clearly explained in the following video which is about 45 minutes long but well worth your time.