Ontario’s high electricity costs could cripple families

By Taylor Jackson,
Ashley Stedman,
and Elmira Aliakbari
The Fraser Institute

Ontarians are all too familiar with the rising cost of electricity. They see it on their hydro bills every month. But just how much have prices increased and how do those bills compare to other Canadian cities?

We analyzed electricity prices across Canada since 2008 to provide some context.

Taylor Jackson

According to data from Statistics Canada, from 2008 to 2016 electricity prices in Ontario grew by 71 per cent – the fastest growth of any province – compared to the national average of 34 per cent.

Toronto and Ottawa now have the highest average monthly electricity bills of major cities across the country.

Consider a comparison of monthly electricity bills from Toronto and Montreal, Canada’s two largest cities. In 2016, the estimated average monthly electricity bill (including taxes) for Torontonians was $201, or roughly $2,400 for the year. Montreal residents paid an estimated $83 a month or $1,000 that year. So Montrealers had an extra $1,400 to spend on other things because of lower electricity prices.

Torontonians also paid an estimated $1,000 more per year for electricity than Vancouver and Calgary residents (Alberta bills have actually decreased in recent years).

Electricity prices in Ontario increased 2.5 times faster than household disposable income (income left after taxes are paid) between 2010 and 2015. So Ontarians have contribute a greater share of their income to electricity expenses over those five years.

Ashley Stedman

It’s clear Ontario’s electricity prices have grown dramatically and that this growth is not the norm across Canada.

But what’s behind the price increases?

In large part it’s because of poor policy choices by the provincial government. Such choices include the badly-structured long-term contracts for renewable energy generation (wind, solar, etc.). These contracts place ever-increasing costs on consumers, although renewables accounted for only 6.8 per cent of electricity generation in 2016.

The province’s phase-out of coal-fired electricity has also proved costly and unnecessary. Environmental economist Ross McKitrick found that Ontario could have achieved the same environmental benefits of the phase-out (at one-10th the cost) by simply completing the retrofitting of Ontario’s coal-fired plants.

Elmira
Aliakbari

Another issue is the imbalance between the supply and demand of electricity. When the province’s energy generation exceeds demand, it must be exported – often at a loss – leaving Ontario ratepayers to cover the difference.

Costly cancellations of natural gas plants, and necessary investments in transmission and distribution also add to the province’s rising electricity costs.

What’s most unfortunate is the toll the rising bills take on Ontario families. If electricity prices keep rising, the trade-offs that families have to make will become increasingly difficult to manage.

Taylor Jackson, Ashley Stedman and Elmira Aliakbari are the co-authors of Evaluating Electricity Price Growth in Ontario.

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