Auditor general’s report latest evidence Ontarians are overpaying for power

Most Ontarians already know that electricity prices have soared in recent years. Last week, a report from the province’s auditor general showed just how much those higher electricity prices are costing us, and showed that public policy failures are a primary reason consumers and businesses are facing such high prices. 

Perhaps the most important problem flagged in the report is Ontario’s use of “feed-in-tariffs” to support the use of wind and solar power. The tariffs, created in 2009 as a result of the Green Energy Act, ensure that the government purchases electricity from renewable sources (wind, solar) at guaranteed above-market rates. And it’s not just a small price increase: the AG report found that in 2014 Ontario’s guaranteed prices for renewable energy were double the current average cost in the United States for wind, and more than three times the current average cost for solar energy.

The auditor general did not mince words in describing the results of the government’s approach to renewables, stating it has resulted in the procurement of “too many renewable projects, too quickly, and at too high a cost.”

This report provides further confirmation of a growing body of research demonstrating that Ontario’s approach to electricity generation, which has shifted away from traditional power-generation sources (coal, gas, hydro, and nuclear) to wind and solar power, has been staggeringly expensive. For example, one recent analysis by the Fraser Institute found that in 2013 wind and solar power provided just four per cent of electricity in Ontario while accounting for about 20 per cent of the average commodity cost that year. That’s an awful lot of money for very little power.

What makes Ontario’s costly experiment in renewable electricity generation particularly disappointing is that these high costs have been largely a waste because they have not resulted in the environmental benefits hoped for by their architects.

In fact, another recent study by University of Guelph professor Ross McKitrick, found that all of the environmental benefits of the Green Energy Act (which, again, created the feed-in-tariffs) could have been achieved simply by continuing with ongoing retrofits to coal plants. And here’s the kicker—these benefits would have been achieved at just one tenth the cost. The same report concluded it is unlikely the Green Energy Act will yield any environmental improvements “other than those that would have happened anyway” under pre-existing policy and technology trends.

So how much have Ontario’s electricity policy failures cost Ontarians? The answer to this question takes us back to the auditor general’s report, which estimates Ontarians have paid more than $37 billion above market prices for electricity over the past eight years.

For context, that’s approximately $2,800 for every man, woman and child in the province—or $11,200 for a family of four.  

Soaring electricity prices don’t just place pressure on household budgets, they also make it harder for businesses to compete and prosper. One recent survey found that 38 per cent of surveyed business owners expect to see their bottom lines shrink because of high electricity prices. This will result in delayed or cancelled investment.

Sadly, the electricity price increases of recent years were at least partly avoidable, as policy choices have been a major contributing factor. Last week’s auditor general’s report is just the latest evidence that the Ontario’s approach to electricity, and renewables in particular, has produced substantial economic pain but precious little environmental gain.