Chamber Report on Meeting with Parliamentary Assistant to Minister of Energy Friday, April 7, 2017
On April 7, the Stratford & District Chamber of Commerce hosted a roundtable discussion on Ontario’s Fair Hydro Plan, which addresses the Ontario government’s new cost reduction measures for residential and small business users. Following introductions, Brad Beatty, Chamber GM, led off by identifying two critical and linked concerns for businesses of all size in the province – hydro costs and the ability to stay competitive in a volatile North American economy.
The Parliamentary Assistant to the Minister of Energy, Bob Delaney, responded with a brief overview of the evolution of hydro in Ontario since 1945, stressing the investment by government in renewing infrastructure and transmission, particularly in the last 13 years when most other North American jurisdictions were “pushing the problems down the road”. He emphasized that government has spent nearly $50 billion, borrowing when interest rates have been at historic lows.
The result of this investment is infrastructure in place to last for the next 30-40 years, allowing the government to concentrate on conservation programs, nuclear power generator renewal and developing a new business model for hydro pricing. Delaney returned to concerns that Ontario hydro pricing was exorbitant, clarifying that Ontario is on a par with other jurisdictions in Eastern and Midwestern NA and much better prepared for the future.
Discussion then revolved around questions of pricing, manufacturing competitiveness, the sale of Hydro One, small business confidence in government policy going forward, transparency of pricing and supply, and allocation of social costs to hydro pricing.
What emerged was a consensus of concern about competiveness, pricing stability and predictability, further debt assumption for Hydro, the cost of increasing amortization on the debt, cost of delivery to rural customers and the effect of the continuing sell-off of Hydro to the private sector, especially foreign investors. Underlying all this was an expressed concern about the precarious situation in the USA.
Delaney underlined that the pricing procedure for hydro is complex and currently involves cost of hydro purchase, interest rates & inflation, capital expenditures (nuclear refurbishment costs make up about half of global adjustments) and people costs. Addressing the question of how, when and where to pay for the increased cost of hydro, the province is considering shifting the “social costs” (such as savings programs for seniors) from hydro pricing and allocate them to appropriate departments within the regular provincial budgeting.
Unfortunately, concerns raised by manufacturers in the room were not answered as any relief or structural changes for that sector would be in the upcoming budget which will not be released for two weeks. Manufacturers continue to underline their very real worries about global competitiveness; concerns driven by high labour and energy costs. These concerns affect decisions about investment in existing plants and whether companies will shift production to lower cost jurisdictions.
Many of the changes will roll out over the next twelve months and consumers – business and residential – will not be fully impacted until that roll-out is complete.
Delaney again stressed that every North American jurisdiction will need capital upgrades and “you’re either renewing your system or you’re not – Ontario is.” He shared his views that as other areas begin to lose nuclear, lose coal and have old transmission lines go down, it will become a question or who has power and who doesn’t. Ontario has stepped up to address these issues a decade before anyone else – “we’ve taken steps to ensure we have a future.”
Given the tortured history of energy in Ontario – cancelled gas plant scandals, Hydro One sales, high consumer billing and confusion over government policy – it is not surprising that many at the roundtable were skeptical about the outcome, but those in attendance were grateful for Delaney’s visit and his demonstrated willingness to listen.