What you need to know, no nonsense

The rubbish about energy in Ontario is usually expressed in terms that are simple, emotional, and wrong. The truth about energy can be complex, requires some understanding, and is right. Many of the issues people ask about revolve around a few basic questions.

Q: Why do electricity prices keep going up?

A: The price of electricity is governed by four main factors:

  1. The capital cost of building and modernizing generating stations and transmission lines;
  2. The cost of the people that operate the system;
  3. The cost of fuel;
  4. Inflation and interest rates.

Power prices will only not rise if you are not building anything, not paying people more each year, and if fuel costs are nearly zero and interest rates stable over the long term. In Ontario, the Province is renewing the power generation and transmission system each year. Those costs are financed over the 30-year to 50-year lifetime of what is built, and that ongoing expense moves costs up.

The cost of people has risen roughly with inflation and with employment growth in the sector as it too expands to cope with a growing demand for energy. Fuel costs in Ontario are nearly zero. The Province no longer burns coal to produce electricity. The cost of falling water in power dams and the wind and sunshine powering renewable energy are nearly zero. Uranium costs are very low for the enormous energy that Ontario Candu reactors generate. Interest rates have been low and stable for some years, and are projected to remain so for some more years.

The main cost driver for electricity is the continuing investment in the ability to generate and transmit electricity. Ontario has invested $35 billion in building and renewing electricity generation and transmission during the past dozen years. In our neighbouring jurisdictions, they have not made this investment, meaning costs for electricity, already higher in most U.S. states than in Ontario, will rise even faster.

Q: How come prices are lower in Quebec and Manitoba?

A: Because Quebec and Manitoba, generations ago, overbuilt electricity generation capacity from hydroelectric dams, and have not needed to greatly expand their generation capacity. The same is also true for British Columbia and Washington State. Few other places in North America have fully-paid-for power generation in excess of what they need locally.

Q: Aren’t electricity prices lower in the United States?

A: Generally, no. Converted to Canadian cents per kilowatt-hour, the cities around the GTA have the lowest, or nearly the lowest, electricity prices in the Great Lakes basin. See for yourself. Remember that the prices you are looking at have not been converted to their equivalents in Canadian dollars, and even at that, they are higher.

A commonly-repeated piece of ‘fake-news’ is that Ontario has the highest electricity prices in North America. This is completely false. The highest electricity prices in North America are in the U.S. New England states.

In places where electricity costs are lower, one is normally looking at places in which the economy has not been growing, and little investment has been made in electricity generation and transmission. In general, if you want to be near a metropolitan area, and with a growing economy, your electricity prices will be lowest in Ontario.

Q: Has Ontario already paid some electricity bills that America has not?

A: Yes, and important ones too. Ontario no longer burns coal at all to produce electricity. All of the U.S. states around Ontario, representing North America’s industrial heartland, rely heavily on coal! None is as far along as is Ontario in refurbishing their nuclear reactors. As America is a signatory to the 2015 Paris Climate Change Accord, the surrounding U.S. states will need to turn off all of their coal, and do it quickly. Ontario has, in effect, bought tomorrow’s electricity system, spending yesterday’s money, and financed it at interest rates of nearly zero. In the USA, they will need to catch up, and buy today’s electricity system, spending tomorrow’s money, and finance it at interest rates that have nowhere to go but up. The sharpest pressure on rising electricity rates will come from south of the Canada-U.S. border.

Q: Why is Ontario selling part of Hydro One?

A: To partly finance the transit system we need to have to get more cars off the road. See the story on this web site on Hydro One.

Q: Why are electricity delivery charges higher in some areas?

A: The cost of delivering electricity depends on the amount of wire that needs to be strung, and the number of delivery stations to distribute the electricity. In urban areas, there are ‘more customers than poles.’ By contrast in rural areas, there are ‘more poles than customers.’ In addition, wing to the sheer distance between rural electricity customers, the infrastructure cost is higher. In essence, urban dwellers pay lower distribution costs because they are dividing a smaller cost by a larger number of customers. Rural costs are higher because they are dividing a larger cost by a smaller number of customers.

Q: Where does Ontario’s electricity come from?

A: About 60 percent from Ontario’s 18 operating nuclear reactors; about 25 percent from hydroelectric dams; about 10 percent from natural gas; and around 5 percent from renewable energy, which includes wind and solar photovoltaic power. The actual numbers fluctuate a bit from season to season.

Q: Should I install solar collector panels on my roof?

A: Generally, no. The good weather is the season in which the door-to-door vendors will ring your doorbell, and say that “the government” has something to do with it. This is false. Neither the Province of Ontario nor Enersource (our local electricity distributor) authorize anyone to go door-to-door in their name. The roof on your home was almost certainly not built to bear the weight, or the wind stress, of the solar panels that the door-to-door vendors are trying to sell. Read the full story here.