First I want to thank the members of this committee for the opportunity to provide my insight and thoughts on the proposed study.
We've provided a brief background of my work and that of the Consumer Policy Institute, the Toronto-based organization of which I am the executive director.
The organization's overriding mandate is to advocate for the rights of consumers, ensuring that they receive reliable services at the lowest cost, particularly within public service institutions. In recent years we have focused primarily on Ontario's energy sector, which has been transformed under increasingly active political management. I've appeared many time before Ontario's energy regulator, the Ontario Energy Board, as well as in many media outlets.
Let me be clear at the outset of this study that the term “clean energy” to me is a loaded one and assumes that technologies labelled “clean” have no environmental impact. There's ample evidence showing this to be demonstrably untrue; nonetheless, I urge this committee to look no further than Ontario for a clear presentation of the dangers of getting it wrong when it comes to clean energy policy.
Over the past decade and a half, Ontario has embarked on one of the most aggressive clean energy policies not just in Canada but anywhere in the world. As part of Ontario's clean energy push, Queen's Park undertook a number of dramatic policies, including the forced closure of the province's coal plants, subsidizing industrial wind turbines and solar panels to the tune of tens of billions of dollars, over-ruling the rights of local municipalities, and undermining and ultimately destroying the province's electricity market by providing guaranteed rates to favoured renewable energy generators.
The result of those policies for Ontario consumers, businesses, and the province's energy sector has been a disaster. The average household ratepayer in Ontario has seen the cost of power increase in some cases as much as 155% over the past decade. That's nearly eight times the rate of inflation this province has seen. Many customers in Ontario have seen the fastest rate of hydro bill increases of any jurisdiction in North America. In just the last two years, the price of power that we pay during so-called peak hours has increased by nearly 30%, or more than 10 times the rate of inflation.
These dramatic price increases have seen hydro bills transform into one of the leading concerns among Ontario residents, leapfrogging concerns about traditional government services such as health care and education. The provincial government now finds itself facing unhappy ratepayers at every turn.
Utility bills, which were often considered a fairly boring and benign topic, are now front and centre in dinner table conversations across this province. The policies implemented in Ontario have seen many households struggle to pay their monthly bill. Across Ontario the number of homes behind on their hydro bills has increased by 20% from 2013 to 2015. The number of low-income households—those who are already struggling to get by—that are behind in their hydro bills has increased by more than 40% over that time.
Businesses both large and small have warned that these rate increases are making them uncompetitive. Just this past December, for example, an Ontario-based manufacturer with more than 200 workers cited soaring hydro rates as the main reason to expand its operations in the U.S. rather than in Ontario. There are many other similar stories.
In recent years the province has tried to ease public concern over soaring hydro bills by issuing a number of band-aid solutions, but unlike a traditional Band-Aid, which helps a wound heal, these Band-Aids provided no healing, as they often came in the form of rebates that didn't address the real reason for soaring hydro rates. At one point these rebates were simply moving more than a billion dollars annually out of general revenues to subsidize hydro rates. Taxpayers were bailing out ratepayers.
In short, Ontario's soaring electricity prices, which are a direct result of its energy policies, have imposed an unprecedented burden on households and businesses and have garnered thousands of headlines.
I hope this crisis will be top of mind for this committee when it writes its report on trying to de-risk the cost of clean energy. If de-risking means tabling generous subsidies in an effort to support the renewable energy industry, Ontario offers a precautionary tale on what not to do. Transferring risk from the companies receiving those subsidies to the consumers who ultimately have to pick up the tab is a poor policy no matter which way you look at it.
But Ontario's renewable energy experiment holds another crucial lesson, for both policy makers and the resource sector. That lesson is that the power market as a whole has been systematically destroyed in Ontario. The electricity sector has become a playground for political machinations, not the economic management of an essential service, and the reason the market was destroyed is largely that misguided energy policies were applied.
When Ontario Hydro went bankrupt in the late nineties, Ontario attempted to move itself towards a market-based system of power. That was a model that had worked successfully in jurisdictions around the world. A competitive and well-regulated market would match the supply of power to that of demand and take the politics out of the whole sector.
The market reforms introduced in the wake of the breakup of Ontario Hydro were intended to ensure that generators, industrial users, and small energy consumers would make decisions on energy production and consumption based on real market principles, signals, and environmental laws. The province would focus on regulating the energy sector, not micromanaging it.
Under this market-based system, competition and efficiency, hallmarks of well-regulated and functioning markets around the world, would be the norm. Consumers would benefit from lower prices—if possible—and the industry as a whole would remain financially viable and avoid the need for public handouts and bailouts.
To this day, we need look no further than Ontario's natural gas sector, which is regulated by the same regulatory body that oversees the electricity sector, to see these principles in action. Gas customers have paid reasonable prices, have received reliable gas service and, more important, have done so without any public subsidies or ratepayer subsidies.
In the electricity sector, these principles were undermined by a politically driven push for clean technologies at any cost. Federal legislators should not want to see this play out across Canada. Queen's Park ultimately took it upon itself to use the legislature to set prices. In doing so, it offered lucrative contracts to produce non-fossil-fuel energy in Ontario and downplayed the cost of these contracts to the public.
The politically determined gold rush for so-called clean energy saw market dynamics completely undermined. The supply of energy ballooned, but so too, thanks to these subsidies, did the cost of that energy. The result was a soaring of electricity rates in a time of shrinking demand: the exact opposite of what would occur in any well-functioning market.
The system has become so perverse that businesses, industries, and households across this province are now paying some of the highest electricity rates in Canada for power that is, at many hours of the day, worthless by any market criterion. The province, realizing that the sector as it's currently being managed is unsustainable, is now looking for a way out.
We hope that Ontario serves as an example to this committee of how de-risking the clean energy industry through a barrage of subsidies can have perverse side effects. The best move that federal legislators could make would be to allow the benefits of competition and markets that have served Canadians so well, in so many other areas of the economy, to be the driving force behind clean energy adoption in the resource sector. The government's best role is to regulate the market, ensuring that it's fair and enlightened, not to micromanage it.
Thank you.