Rob Granatstein: Toronto hydro rates are skyrocketing and politics are to blame
Toronto has a dearth of power plants and an aging grid. By the end of 2013, we’ll have the highest hydro rates on the continent. And the reasons are purely political
Toronto is on the verge of a major energy crisis. With our limited supply and decrepit distribution system, we’re more vulnerable to outages than any other large urban centre in North America—especially during peak summer periods. The problem is most acute in the booming southwest GTA, where electricity demand has doubled in recent years, while the area’s power generation has been cut in half.
Keeping the lights on isn’t the only problem. Ontario’s power plan has been bungled so badly that by the end of next year, we’ll have some of the highest electricity rates on the continent. By 2010, the price of hydro had already doubled under Dalton McGuinty’s Liberals, and it was expected to go up another 46 per cent by 2015, largely thanks to the government’s green energy plan. Given the inextricable link between electricity prices and economic performance, and the fact that the province is already struggling with an enormous debt load, the projected increase is perilous.
The Liberals have pushed a green ideology from the start of their reign. It began with their noble but ill-fated promise to shut down all of Ontario’s coal-fired plants by 2007 (since revised to 2014—maybe). The lost coal power was to be partly replaced by natural gas, wind and solar. McGuinty introduced his Green Energy Act to help ensure these new projects got off the ground, but according to the latest Auditor General’s report, the measures have not only been extremely costly, but they were also implemented without proper consultation, auditing or business plans.
In 2009, McGuinty changed the rules that dictate how the province buys power in order to ensure his green dreams came true. Without consulting his power agency execs, he signed agreements with alternative energy companies—including a sole-sourced $7-billion deal with South Korea’s Samsung—guaranteeing the province would use expensive wind power first, even when there was an abundance of cheap, two- to three-cent-per-kilowatt-hour hydroelectric power available. So we’re forfeiting clean, green, renewable, naturally occurring hydro power just to pay offshore interests five times more for wind power. That’s sinful.
McGuinty’s haste to go green also led him to pay rich premiums for everything from wind farms to household solar generation. Green power producers are paid higher prices as long as some of the equipment they use is sourced in Ontario. The cost to taxpayers, according to the Auditor, is $4.4 billion over 20 years. In other words, those 20-year contracts have green investors—both large and small—making out like bandits. I know first-hand. I put solar panels on my roof because the Dalton dollars were too rich to ignore. Every two months, I receive a cheque in exchange for my contribution to the grid.
Both the Auditor General and Don Drummond—the economist behind the jarring report on the province’s finances—took the premier to task for these massive premiums, and this spring McGuinty finally relented, slashing the payout for new wind and solar installations. Too late. And really too little.
The only reason Ontarians haven’t yet felt the full effect of these costly contracts is that the Liberals are buying us off with our own money. The $1-billion-a-year Clean Energy Benefit—that 10 per cent refund on your hydro bill—has lulled us into a false sense of security about our electricity costs. Drummond also accused McGuinty of distorting the true cost of electricity and warned of the “considerable price shock” ratepayers will experience when the benefit is stopped in 2015. He recommended cutting the program right away, but the premier refused.
Meanwhile, much of our lost coal power has yet to be replaced. The Liberals have cancelled three gas-fired GTA power plants in recent years, all for political reasons—and this in a booming region in dire need of local power generation. After McGuinty shut down the 1,150-megawatt coal-fired Lakeview station in Mississauga, he proposed building a new gas-fired plant on the same site. It was a perfect location given the existing industrial footprint, the link-ups to transmission lines, and a neighbouring sewage plant that made it less than ideal for development. But a minor NIMBY uprising ensued, and McGuinty zapped the idea.
He then set his sights on Oakville, the home riding of Liberal MPP Kevin Flynn. The Liberals made plans for a $1.2-billion 900-megawatt generator in an industrial stretch next to the Ford plant, and not too far from pricey neighbourhoods. The plant would help replace lost coal power and provide much-needed augmentation for wind and solar. More NIMBYism ensued, and McGuinty once again cancelled the contract.
Then, two weeks before voters went to the polls in the hotly contested 2011 provincial election, the premier announced he was cancelling a gas-fired power plant near Sherway Gardens, on the border of the Liberal riding of Mississauga South. The plant had been in the works for nearly five years, and construction was well underway. But local opposition, led by a group called the Coalition of Homeowners for Intelligent Power, had been fierce, and the Conservative and NDP candidates were sympathetic to their cause. Just when it looked like the Liberal MPP Charles Sousa might lose his seat, McGuinty caved to public pressure.
Sousa kept his seat, but for nearly two months following the election, construction at the plant continued: giant steel frames were erected; concrete footings were poured; a massive generator was delivered. The PCs ran web photos of the progress and demanded to know what was happening. Finally, on November 21, the work stopped. Now the lawsuits are starting to roll in, including a $300-million claim by the U.S. company financing the building of the plant.
The Liberals’ power plant blunders are a prime example of political interference at its worst, with campaign strategists making risky decisions about our energy in order to win a seat or two. The year before McGuinty cancelled the Oakville plant, the Ontario Power Authority reported that the power infrastructure servicing the western GTA would fall short by 2o15 or sooner. And yet, the Energy Ministr y assures us everything is fine—that not only has demand fallen sharply, but the province has added 9,000 new megawatts of power to the grid since 2003. Both claims are true—sort of. Demand is down because the recession hit, wiping out much of our industrial sector and taking a good chunk of the province’s energy demand with it. (Ironically, many of Ontario’s industrial plants, especially in the north, were shuttered partly as a result of our already exorbitant electricity prices—but I digress.) And new power has been added between Niagara Falls and Halton Hills, but not in the area immediately west of Toronto. That means electricity must travel a long way over aging power lines to get to the GTA.
How dire is this situation? Some of the power travelling to the western part of our city moves along wires that are more than 60 years old. Toronto has only two major transmission lines and is desperate for a third; energy experts say the grid is just one ice storm away from a complete meltdown. The city suffers more power outages and for longer durations than most other G8 cities. In 2011, Toronto Hydro had 1,387 unplanned outages, 82 of which were longer than 12 hours. New York fixed its supply issue after a massive blackout in August of 1977, which resulted in widespread looting, arson and violence. Now 80 per cent of that city’s power comes from within the five boroughs. Toronto, by comparison, gets only 10 per cent of its power supply locally.
The first step toward fixing our supply issue is to put a gas plant at the old Lakeview generation site. Unfortunately, Mississauga now sees the area as the key to its waterfront redevelopment plans, but this is one time McGuinty should stand up to local opposition. In 2006, he managed to push through construction of the 550-megawatt Portlands Energy Centre in downtown Toronto, despite an uproar from neighbouring residents and the local NDP MPP. It’s not an impossible task—at least in non-Liberal ridings.
Now an energy sector review is underway, but don’t expect to hear any hard truths coming from Ontario’s richly paid power authority CEOs. They don’t want to cross the Liberals for fear their organization will be the next one whacked by the deficit-laden government. This has to stop.
As long as politicians are calling the shots on our energy strategy, the power plan for the southwest GTA will continue to lurch back and forth according to the ideology of the day—and the Tories and the NDP haven’t proven any better on the energy file. If McGuinty is lucky, he’ll be out of Queen’s Park before our electricity system melts down. “But it’s a gamble,” says one power industry exec. “You’re only as good as the weakest link.” If I were in McGuinty’s shoes, I’d be praying nightly by candlelight for an impossibly cool, windy, sunny summer.