The Ontario Provincial Government Budget, released November 5, included a plan to reduce electricity costs for industrial and commercial ratepayers.
The budget called for a suspension of 85% of Global Adjustment (GA) costs associated with long term contracts for solar, wind and biomass infrastructure. Those costs will now be funded by provincial taxpayers not provincial electricity users.
What are the benefits of this plan? According to the Ontario government, suspending these costs and referring them from rate payers to taxpayers will benefit larger industrial and commercial businesses with a 16% overall electricity cost reduction. Medium businesses are said to be facing a 14% cost reduction. With reduced electricity costs, the government expects Ontario business will be more competitive with other North American jurisdictions, enabling them to prosper, invest, and grow. The renewable energy costs will be managed over a different base of Ontarians and over an extended time period, lessening the direct costs and timing of the Green Energy contracts.
These cost reductions may achieve the desired results for business today. However, we should keep in mind that GA costs represent an overall investment in our long-term electricity infrastructure. While reducing some GA costs will help, the Ontario budget actions do not automatically mean that the remaining GA costs make Ontario as competitive as we want. The GA is a continuing expense without a clear line of sight for how it will respond to evolving technology.
We should continue to pursue policy and technology that allows Ontario and Canada to effectively compete in North America and abroad. While Ontario’s early investments in renewable solar, wind and biomass electricity were expensive, in today terms this should not cast a negative view on renewables going forward. Renewable electricity is now more cost competitive than natural gas and nuclear in other jurisdictions around the world. In Ontario, enabling more renewable electricity generation may actually help us reduce power costs, to say nothing of also helping us meet our carbon emissions reduction obligations.
Reducing our electricity costs is an important goal for individual businesses and for governments. We should keep in mind, that policies can change as governments change. That is why we should not be dependent on government direction and subsidies to manage energy costs. We energy consumers also have a responsibility to take actions under our own control to reduce electrical use and costs.
As individual businesses, we can moderate change and competitive impacts using energy knowledge, exercising control and taking actions – just like we do with any other input costs that impact our businesses and our lives.
