Ontario government acting like small manufacturers' bad boyfriend

We are tripling the size of the cut we're making to people's hydro bills from 8% to an average of 25%. - Ontario Premier Kathleen Wynne

On March 2nd the Premier of Ontario announced "Fair Hydro Plan" actions "cutting electricity bills by 25 per cent." The announced actions cut no actual costs. To the contrary, interest expenses are expected to climb to $1.4 billion annually, perhaps totaling $25 billion in the fullness of time. Perhaps $40 billion.

My two previous posts have looked at rate components from a residential bill perspective, and an overall system supply cost perspective. I hope I have communicated that rates have risen substantially due to one small set of recently contracted supply, while nuclear and hydro provided the bulk of supply but little of the cost increases - and that not all consumer groups shared the burden of the rate increases. In this post I'll review the politics of recent electricity pricing policy decisions.

"We feel that a lot of manufacturers are the middle child that are completely left out...They saw almost nothing in the recent announcements." 

Jocelyn Bamford - Coalition of Concerned Manufacturers

It's been over 6 weeks since the government announced it's so-called "Fair Hydro Plan", and while some details will remain sketchy until enabling legislation/regulation is introduced, the overall intent is clear. Ontario governments reacting to increases in electricity prices with rash programs to calm the populace are nothing new, but the current government's targeting of rate reductions is.

Graphic originally from Ontario’s perceived electricity cost inflation

Significant previous actions include the rate freeze introduced in the early 1990's by the NDP government headed by Bob Rae, and a rate freeze introduced a decade later by the Progressive Conservative (PC) government headed by Ernie Eves. An article from November 2002 puts into perspective the long duration of the rate freeze:

Don't believe happy presentations of Ontario's renewables pain

In January Ontario's government is introducing a new price support program to help poorer households with electricity costs. The planning for the program reveals an expectation that 1 in 10 Ontario households can not longer bear rising electricity rates.

I am inspired to write by two events of November 30th:

1. Ontario's electricity system mandarins released an astronomical estimate indicating November rates will be 20% higher than ever before.
2. CBC's flagship news program broadcast a poorly researched segment, "Canada's clean energy race."

Examining the Samsung numbers for high-priced November might provide a simple explanation of what the global adjustment is, but some background is necessary to judge the value Samsung has delivered.

Chris Brown's CBC report included segments interviewing Tim Smitheman, once a public servant, now an employee of Korea's Samsung further aiding that company in siphoning money out of Ontario. Brown celebrated Samsung, but any investigation would have revealed he could not have picked a better subject to display the failure of Ontario's green energy foibles.

A brief history lesson is necessary to communicate how poorly Samsung has performed for Ontario. In 2008-09, Minister of Energy George Smitherman and his boss Dalton McGuinty wanted to make a big splash to kick off the glorious renewables future German politicians and David Suzuki had convinced them was imminent. In January 2010 the government inked a deal with a Korean Consortium that included Korea's electricity experts, KEPCO (since departed the Consortium), and Samsung. The deal, "would see the consortium receive preferential treatment from the province, in the form of priority access to the energy grid and higher-than-market rates for the renewable energy it creates as part of Ontario’s new feed-in-tariff (FIT) program." 

“It’s now a race to see which clean technologies will dominate, and wind and solar are off to a strong start” - Chris Brown, CBC, November 30, 2015

The Samsung deal has been a disaster. Hopes that expertise in LCD displays would lead to breakthroughs in solar panel manufacturing tech Samsung would base in Toronto disappeared, as did hopes expertise in shipbuilding would translate to breakthroughs in wind turbine design to be based in Ontario.
All those things were sub-contracted out.

Ontario's new electricity pricing program essentially taxes businesses to fund social program

The news of an electricity program leaked out Tuesday night: by Friday even the press most favourable to the government was aware that the government was gaming somebody. The news during the week noted program including the OCEB, OESP and DRC (I'll get to each), but didn't pay much attention to an equal number of customer classes, each of which is impacted differently by changes the government is making. Confusion continues to be built as new and changed programs continue to be introduced to counter the impact of other new and changed programs. In the end the sleight of hand this week disguised charges to businesses via their electricity bill to fund a government's social program.

The press release on the new program included:

Government graphic for new program - and old

Ontario is helping make electricity more affordable for families by removing the Debt Retirement Charge for all residential consumers and introducing the Ontario Electricity Support Program for low-income families.
The proposed program, administered through the Ontario Energy Board, would come into effect on January 1, 2016...
Qualifying individuals could be eligible for a $20 to $50 monthly credit based on the size of the household and income.
...
The proposed Ontario Energy Support Program would be ratepayer funded with an estimated charge of less than one dollar a month for a typical residential customer in 2016.

New program, new acronym: OESP.

New spin, old problem: honesty. While the OESP may be partially funded by "an estimated charge of less than one dollar a month for a typical residential customer," those types of ratepayers will be paying only a fraction of the full program cost