Subsidizing Ontario's electricity is not the answer

Kathleen Wynne's liberal government has compounded her earlier foolishness (in reducing Ontario's residential electricity prices by 8% by exempting it from provincial sales tax, a foolishness I have already commented on in this blog) by vowing to cut residential and small business electricity prices by a further 17%. With this overall 25% reduction, she hopes to revive her flagging hopes of re-election in the provincial elections next year.

Electricity prices in Ontario have doubled over the last decade of Liberal rule, and they have been flagged as a hot-button issue for the next election. Certainly, both the Conservatives and the NDP have spent hours in recent months needling the Premier about them, as though the price increases are her fault, and as though they themselves have a better plan to rein them in.

The national and local press have also had a field day on the issue, with scarcely a day passing without the appearance of some kind of article on the subject, usually prefaced by a heart-felt account of a hard-pressed rural Ontarian who can no longer pay his/her hydro bills. As with the majority of comments by provincial Conservative politicians, many of these press articles erroneously blame the increases on Dalton McGuinty's well-meaning attempt to drag the province into the 21st century by stimulating investment in renewable energy. One notable exception to this common trope, an extended and well-researched feature article on Ontario's  electricity prices in the Globe and Mail (which I thought I had blogged about but apparently didn't), actually laid the blame for Ontario's hydro bill increases largely on expensive nuclear cost overruns and refurbishments, longer (20-year) contracts with suppliers to fulfill consumers' demands for a more secure electricity supply, and some long-overdue and necessary improvements to electricity infrastructure after decades of disastrous laissez-faire. Renewable power has had very little to do with it, and, for that matter, neither has the ill-advised decision to privatize Hydro One, as the NDP claims.

Either way, Kathleen Wynne is not going to win the next election by throwing money (and we are talking about an estimated $1.4 billion here) at electricity prices. All this does is take from tax-payers (and future tax payers) with one hand, and give to those who use the most electricity with the other. It does nothing to fix the underlying problem (if problem it actually is). Distorting the already distorted electricity market still further, and passing the problem on to future generations is no kind of solution.

I think people need to realize that they have been underpaying for electricity for decades, and that this is the new reality. One of the few honest and cogent articles I have seen on this issue in recent weeks actually appeared in the Toronto Star, a news outlet I usually have little time for. Written by Bruce Lourie (president of the Canadian charity The Ivey Foundation), the article is entitled "No one can make electricity cheap again", and it is well worth a read.