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I’m a Northerner: I Get It.

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From the Sudbury Star: ‘I’m a Northerner. I get it’ — Sudbury MPP

I loved Glenn’s empathetic line about the pain caused by the high cost of electricity. He went on to promote (and take credit for) some good and showy ad-hoc policies to reduce the pain for lower income Ontarians.

1297642412922_originalNot cutting off electricity for poor people in winter is good. It should have been our policy long ago. It is just a politically-motivated very temporary patch, however. It doesn’t solve the real problem – the same poor people will be in the same position next year and they will probably not even be able to pay for their electricity once winter ends.

The policy shifts a debt from some consumers to the local electricity distribution companies. The unpaid bills have not gone away – they been temporarily hidden in various public accounts.

That suggests that Glenn doesn’t really “get it” at all. The electricity alligator will be back to bite him once the snows disappear.

Electricity rebates for low income households are another patented Glenn Thibeault touch. These rebates are a generous transfer to poorer Ontarians, something most of us probably agree with. What Glenn doesn’t seem to get is that they are costly to manage and inefficient. It is not a good way to subsidize poor people, it actually undermines the electricity pricing system, and it discourages carbon-reducing changes. Their only virtue is that they may reduce the political pressure on Glenn and the government. Glenn may feel the pain but, when it comes to developing good policies, he doesn’t really “get it.”

The right policy – and I did explain this to him during the election campaign (please ask him whether he remembers.) is to sell electricity at its true cost. Give poor people money if they need it, but don’t use the electricity system to do it.

Naturally politicians are afraid to charge the real price for electricity, and they are right to be afraid. Governments have fallen because consumers don’t want to pay the real cost of electricity (or health care or roads).

Even so, the electricity pricing system is seriously warped. For example, the province has a part-time excess of electricity at the current prices. That means the prices are too high. It almost certainly means that the government-negotiated producer prices are too high. Past governments made some bad deals, as it turns out, although at the time they may have seemed pretty good. Any normal business would have to take the loss and reduce its price to sell the surplus. Supplying electricity is not a normal business, however.

For many years the Province forced the electricity system to collect money to pay off debts incurred by previous governments. A decision 17 years ago to divide Ontario Hydro into several different companies resulted in a multibillion-dollar stranded debt and a new charge that’s still on all electricity bills.

This “stranded debt” stemmed from the 1999 breakup of the province’s giant electrical utility, which had $38.1 billion in debt, mostly from building nuclear plants in the 1970s and ’80s. Major mistakes were made by previous governments – primarily huge overruns in building nuclear plants that were caused largely by political dithering and changing plans. These losses would normally be written off in a private business – the company would go bankrupt, shareholders would lose value and a new buyer would begin selling electricity without the debt. The province can’t just go bankrupt and make the debt disappear.

So rather than simply add this stranded debt to other provincial debt, finance ministers decided to the exploit their monopoly power and collect the debt from electricity consumers. It made a certain kind of sense, since the debt was incurred on behalf of electricity consumers. Justified or not, however, the stranded debt has been one important cause of excessively high and distorted electricity prices. (The charge was eliminated for households in 2016, but will continue for others classes for a while)

Debt is debt. It doesn’t matter which debt account it is recorded in — except for one purely political fact: the debt is partially hidden in the electricity system. That means rather than paying for the debt out of taxes, the province could pay indirectly by making consumers pay through electricity charges.

That was a mistake economically. It meant electricity prices were too high, we lost some manufacturing jobs, poor people suffered unnecessarily and it was much harder to shift from fossil fuels to electricity, which we must do and will inevitably do.

Subsidies for green power are another politically motivated charge that should probably not be added to the bills, whether they were good policy or not. The subsidies were part of a plan to promote new industries, not a necessary cost of supplying electricity. They should have been charged to the Ministry of Industry and Innovation, or whatever it was called a the time.

Today Glenn’s politically motivated relief for consumers are actually slowing down the process of adapting to the 21st century. They won’t solve the problem of high electricity prices and they won’t solve – or even really help the problem of poverty in Ontario.

It isn’t enough for Glenn to show he understands our pain. He has to show he understands the system he is supposed to run. So far, it doesn’t look like he gets it at all.




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